Exhibit 10.41 Subscription Agreement 2-13-06


     

    EXHIBIT
      10.41

     

     

    SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of February 13, 2006, by and among Dalrada Financial Corp. (formerly Imaging
      Technologies Corporation), a Delaware corporation (the “Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

    WHEREAS,
      the
      Company and the Subscribers are executing and delivering this Agreement in
      reliance upon an exemption from securities registration afforded by the
      provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“Commission”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase up to Five Million Dollars
      ($5,000,000) and an additional amount that may be issued on the Closing Date
      as
      set forth on the signature pages hereto in exchange for outstanding obligations
      of the Company, subject to the approval of the Subscribers (the "Purchase
      Price")
      of
      principal amount of promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A,
      convertible into shares of the Company's common stock, $0.005 par value (the
      "Common
      Stock")
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”);
      and
      share purchase warrants (the “Warrants”),
      in
      the form annexed hereto as Exhibit
      B,
      to
      purchase shares of Common Stock (the “Warrant
      Shares”).
      The
      Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      "Securities";
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
      shall be held in escrow pursuant to the terms of a Funds Escrow Agreement to
      be
      executed by the parties substantially in the form attached hereto as
Exhibit
      C
      (the
      "Escrow
      Agreement").

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Subscribers hereby agree as follows:

     

    1. Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Closing Date, each Subscriber shall purchase and the Company shall sell
      to
      each Subscriber a Note in the principal amount designated on the signature
      page
      hereto. The aggregate amount of the Notes to be purchased by the Subscribers
      on
      the Closing Date shall, in the aggregate, be equal to the Closing Purchase
      Price. The “Closing
      Date”
shall
      be the date that subscriber funds representing the net amount due the Company
      from the Closing Purchase Price of the Offering [as defined in Section 8(b)]
      is
      transmitted by wire transfer or otherwise to or for the benefit of the Company.
      The consummation of the transactions contemplated herein for all Closings shall
      take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue,
      Suite 1601, New York, New York 10176, upon the satisfaction of all conditions
      to
      Closing set forth in this Agreement.

     

    2. Warrants.
      On the
      Closing Date, the Company will issue and deliver Class A Warrants to the
      Subscribers. Class A Warrants representing the right of all Subscribers to
      purchase, in the aggregate, and in proportion to the Notes purchased hereunder,
      Warrant Shares, equal to 65% of the Fully-Diluted Outstanding Common Stock
      of
      the Company as of the Closing Date. “Fully-Diluted Outstanding Common Stock”
means the sum of (i) the total number of then issued and outstanding shares
      of
      Common stock and all other classes of capital stock of the Company, plus (ii)
      the total number of shares of all Common Stock and all other classes of capital
      stock of the Company into which all then issued and outstanding and fully-vested
      Common Stock Equivalents and other securities are convertible, exchangeable
      or
      otherwise into other classes of capital stock of the Company may be converted,
      exchangeable or otherwise. The per Warrant Share exercise price to acquire
      a
      Warrant Share upon exercise of the Class A Warrant shall be $0.005 until the
      Approval [as defined in Section 9(s)] is obtained, and $0.105 thereafter. The
      Class A Warrants shall be exercisable until seven (7) years after the Actual
      Effective Date [as defined in Section 11.1(iv)].

     

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    3. Security
      Interest.
      The
      Subscribers will be granted a security interest in all the assets of the
      Company, including ownership of Subsidiaries, as defined in Section 5(a) of
      this
      Agreement, and in the assets of the Subsidiaries to be memorialized in a
“Security
      Agreement”,
      a form
      of which is annexed hereto as Exhibit
      D.
      Each
      Subsidiary will execute and deliver to the Subscribers a form of “Guaranty”
      annexed
      hereto as Exhibit
      E.
      The
      Company will execute such other agreements, documents and financing statements
      reasonably requested by Subscribers, which will be filed at the Company’s
      expense with the jurisdictions, states and counties designated by the
      Subscribers. The
      Company will also execute all such documents reasonably necessary in the opinion
      of Subscriber to memorialize and further protect the security interest described
      herein. The Subscribers will appoint a Collateral Agent to represent them
      collectively in connection with the security interest to be granted to the
      Subscribers. The appointment will be pursuant to a “Collateral
      Agent Agreement”,
      a form
      of which is annexed hereto as Exhibit
      F.

    


    4. Subscriber's
      Representations and Warranties.
      Each
      Subscriber hereby represents and warrants to and agrees with the Company only
      as
      to such Subscriber that:

    (a) Organization
      and Standing of the Subscribers.
      If the
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or
      organization.

    


    (b) Authorization
      and Power.
      Each
      Subscriber has the requisite power and authority to enter into and perform
      this
      Agreement and to purchase the Notes and Warrants being sold to it hereunder.
      The
      execution, delivery and performance of this Agreement by such Subscriber and
      the
      consummation by it of the transactions contemplated hereby and thereby have
      been
      duly authorized by all necessary corporate or partnership action, and no further
      consent or authorization of such Subscriber or its Board of Directors,
      stockholders, partners, members, as the case may be, is required. This Agreement
      has been duly authorized, executed and delivered by such Subscriber and
      constitutes, or shall constitute when executed and delivered, a valid and
      binding obligation of the Subscriber enforceable against the Subscriber in
      accordance with the terms thereof.

     

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the consummation
      by
      such Subscriber of the transactions contemplated hereby or relating hereto
      do
      not and will not (i) result in a violation of such Subscriber’s charter
      documents or bylaws or other organizational documents or (ii) conflict with,
      or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of any agreement, indenture or
      instrument or obligation to which such Subscriber is a party or by which its
      properties or assets are bound, or result in a violation of any law, rule,
      or
      regulation, or any order, judgment or decree of any court or governmental agency
      applicable to such Subscriber or its properties (except for such conflicts,
      defaults and violations as would not, individually or in the aggregate, have
      a
      material adverse effect on such Subscriber). Such Subscriber is not required
      to
      obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency in order for it to execute,
      deliver or perform any of its obligations under this Agreement or to purchase
      the Notes or acquire the Warrants in accordance with the terms hereof, provided
      that for purposes of the representation made in this sentence, such Subscriber
      is assuming and relying upon the accuracy of the relevant representations and
      agreements of the Company herein.

     

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    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB for the year ended June 30, 2006 and
      all
      periodic reports filed with the Commission thereafter (hereinafter referred
      to
      as the "Reports").
      In
      addition, the Subscriber has received in writing from the Company such other
      information concerning its operations, financial condition and other matters
      as
      the Subscriber has requested in writing (such other information is collectively,
      the "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. 

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Notes and
      exercise of the Warrants, an "accredited investor", as such term is defined
      in
      Regulation D promulgated by the Commission under the 1933 Act, is experienced
      in
      investments and business matters, has made investments of a speculative nature
      and has purchased securities of United States publicly-owned companies in
      private placements in the past and, with its representatives, has such knowledge
      and experience in financial, tax and other business matters as to enable the
      Subscriber to utilize the information made available by the Company to evaluate
      the merits and risks of and to make an informed investment decision with respect
      to the proposed purchase, which represents a speculative investment. The
      Subscriber has the authority and is duly and legally qualified to purchase
      and
      own the Securities. The Subscriber is able to bear the risk of such investment
      for an indefinite period and to afford a complete loss thereof. The information
      set forth on the signature page hereto regarding the Subscriber is
      accurate.

    (f) Purchase
      of Notes and Warrants.
      On the
      Closing Date, the Subscriber will purchase the Notes and Warrants as principal
      for its own account for investment only and not with a view toward, or for
      resale in connection with, the public sale or any distribution
      thereof.

    (g) Compliance
      with Securities Act.
      The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt
      from such registration.

     

     (h) Shares
      Legend.
      The
      Shares and the Warrant Shares shall bear the following or similar
      legend:

     

    "THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
      OR AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO DALRADA FINANCIAL CORP. THAT
      SUCH
      REGISTRATION IS NOT REQUIRED."

     

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    (i) Warrants
      Legend.
      The
      Warrants shall bear the following 

     

    or
      similar legend:

     

    "THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
      AND
      THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE
      STATE
      SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DALRADA
      FINANCIAL CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

    


    (j) Note
      Legend.
      The
      Note shall bear the following legend:

     

    "THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
      FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO DALRADA FINANCIAL CORP. THAT SUCH REGISTRATION IS NOT
      REQUIRED."

     

    (k) Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to the Subscriber by
      the
      Company. At no time was the Subscriber presented with or solicited by any
      leaflet, newspaper or magazine article, radio or television advertisement,
      or
      any other form of general advertising or solicited or invited to attend a
      promotional meeting otherwise than in connection and concurrently with such
      communicated offer.

     

    (l) Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by the
      Subscriber and are valid and binding agreements enforceable in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity;
      and Subscriber has full corporate power and authority necessary to enter into
      this Agreement and such other agreements and to perform its obligations
      hereunder and under all other agreements entered into by the Subscriber relating
      hereto.

    


    (m) Restricted
      Securities.
      Subscriber understands that the Securities have not been registered under the
      1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
      hypothecate or otherwise transfer any of the Securities unless pursuant to
      an
      effective registration statement under the 1933 Act. Notwithstanding anything
      to
      the contrary contained in this Agreement, such Subscriber may transfer (without
      restriction and without the need for an opinion of counsel) the Securities
      to
      its Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D and such Affiliate agrees to be bound
      by the terms and conditions of this Agreement. 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 when employed in connection with the Company
      includes each Subsidiary [as defined in Section 5(a)] of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

     

                                                                                    
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    (n) No
      Governmental Review.
      Each
      Subscriber understands that no United States federal or state agency or any
      other governmental or state agency has passed on or made recommendations or
      endorsement of the Securities or the suitability of the investment in the
      Securities nor have such authorities passed upon or endorsed the merits of
      the
      offering of the Securities.

    


    (o) Correctness
      of Representations.
      Each
      Subscriber represents as to such Subscriber that the foregoing representations
      and warranties are true and correct as of the date hereof and, unless a
      Subscriber otherwise notifies the Company prior to the Closing Date shall be
      true and correct as of the Closing Date.

    


    (p) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date until
      three years after the Closing Date.

     

    5. Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber that except
      as set forth in the Reports and as otherwise qualified in the Transaction
      Documents:

     

    (a) Due
      Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has the requisite
      corporate power to own its properties and to carry on its business is disclosed
      in the Reports.
      The
      Company is duly qualified as a foreign corporation to do business and is in
      good
      standing in each jurisdiction where the nature of the business conducted or
      property owned by it makes such qualification necessary, other than those
      jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purpose of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company taken as a whole. For purposes
      of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity) of which more than 50% of (i) the
      outstanding capital stock having (in the absence of contingencies) ordinary
      voting power to elect a majority of the board of directors or other managing
      body of such entity, (ii) in the case of a partnership or limited liability
      company, the interest in the capital or profits of such partnership or limited
      liability company or (iii) in the case of a trust, estate, association,
      joint venture or other entity, the beneficial interest in such trust, estate,
      association or other entity business is, at the time of determination, owned
      or
      controlled directly or indirectly through one or more intermediaries, by such
      entity. All the Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a)
      hereto.


     

    (b) Outstanding
      Stock.
      All
      issued and outstanding shares of capital stock of the Company have been duly
      authorized and validly issued and are fully paid and nonassessable.

     

    (c) Authority;
      Enforceability.
      This
      Agreement, the Note, the Warrants, the Escrow Agreement, Security Agreement,
      Guaranty, and Collateral Agent Agreement, and any other agreements delivered
      together with this Agreement or in connection herewith (collectively
“Transaction
      Documents”)
      have
      been duly authorized, executed and delivered by the Company and are valid and
      binding agreements enforceable in accordance with their terms, subject to
      bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
      similar laws of general applicability relating to or affecting creditors' rights
      generally and to general principles of equity. The Company has full corporate
      power and authority necessary to enter into and deliver the Transaction
      Documents and to perform its obligations thereunder.

     

    (d) Additional
      Issuances.
      There
      are no outstanding agreements or preemptive or similar rights affecting the
      Company's common stock or equity and no outstanding rights, warrants or options
      to acquire, or instruments convertible into or exchangeable for, or agreements
      or understandings with respect to the sale or issuance of any shares of common
      stock or equity of the Company or other equity interest in any of the
      Subsidiaries of the Company except as described on Schedule
      5(d).
      The
      Common stock of the Company on a fully diluted basis outstanding as of the
      last
      trading day preceding the Closing Date is set forth on Schedule
      5(d).

     

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    (e) Consents.
      No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, any Principal Market (as defined in Section 9(b) of this Agreement),
      nor the Company's shareholders is required for the execution by the Company
      of
      the Transaction Documents and compliance and performance by the Company of
      its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities.

     

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 4
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      agreements entered into by the Company relating thereto by the Company
      will:

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default in any material respect) of a material nature
      under (A) the articles or certificate of incorporation, charter or bylaws of
      the
      Company, (B) to the Company's knowledge, any decree, judgment, order, law,
      treaty, rule, regulation or determination applicable to the Company of any
      court, governmental agency or body, or arbitrator having jurisdiction over
      the
      Company or over the properties or assets of the Company or any of its
      Affiliates, (C) the terms of any bond, debenture, note or any other evidence
      of
      indebtedness, or any agreement, stock option or other similar plan, indenture,
      lease, mortgage, deed of trust or other instrument to which the Company or
      any
      of its Affiliates is a party, by which the Company or any of its Affiliates
      is
      bound, or to which any of the properties of the Company or any of its Affiliates
      is subject, or (D) the terms of any "lock-up" or similar provision of any
      underwriting or similar agreement to which the Company, or any of its Affiliates
      is a party except the violation, conflict, breach, or default of which would
      not
      have a Material Adverse Effect;
      or

     

    (ii) result
      in
      the creation or imposition of any lien, charge or encumbrance upon the
      Securities or any of the assets of the Company or any of its Affiliates;
      or

     

    (iii) result
      in
      the activation of any anti-dilution rights or a reset or repricing of any debt
      or security instrument of any other creditor or equity holder of the Company,
      nor result in the acceleration of the due date of any obligation of the Company;
      or

     

    (iv) result
      in
      the activation of any piggy-back registration rights of any person or entity
      holding securities or debt of the Company or having the right to receive or
      purchase securities of the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

    (i) are,
      or
      will be, free and clear of any security interests, liens, claims or other
      encumbrances, subject to restrictions upon transfer under the 1933 Act and
      any
      applicable state securities laws;

    


    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares and upon exercise of the Warrants, the Shares and Warrant Shares will
      be
      duly and validly issued, fully paid and nonassessable or if registered pursuant
      to the 1933 Act, and resold pursuant to an effective registration statement
      will
      be free trading and unrestricted;

     

    (iii) will
      not
      have been issued or sold in violation of any preemptive or other similar rights
      of the holders of any securities of the Company;

     

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    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders provided Subscriber’s representations herein are true and accurate and
      Subscribers take no actions or fail to take any actions required for their
      purchase of the Securities to be in compliance with all applicable laws and
      regulations; and

     

    (v) will
      have
      been issued in reliance upon an exemption from the registration requirements
      of
      and will not result in a violation of Section 5 under the 1933 Act.

     

    (h) Litigation.
      There
      is no pending or, to the best knowledge of the Company, threatened action,
      suit,
      proceeding or investigation before any court, governmental agency or body,
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates that
      would affect the execution by the Company or the performance by the Company
      of
      its obligations under the Transaction Documents. Except as disclosed on
Schedule
      5(h),
      there
      is no pending or, to the best knowledge of the Company, basis for or threatened
      action, suit, proceeding or investigation before any court, governmental agency
      or body, or arbitrator having jurisdiction over the Company, or any of its
      Affiliates which litigation if adversely determined would have a Material
      Adverse Effect.

     

    (i) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13 of the Securities Exchange Act of 1934 (the “1934
      Act”)
      and
      has a
      class of common shares registered pursuant to Section 12(g) of the 1934 Act.
      Pursuant to the provisions of the 1934 Act, the Company has timely filed all
      reports and other materials required to be filed thereunder with the Commission
      during the preceding twelve months.

     

    (j) No
      Market Manipulation.
      The
      Company and its Affiliates have 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 to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold, provided, however, that this provision
      shall
      not prevent the Company from engaging in investor relations/public relations
      activities consistent with past practices.

     

    (k) Information
      Concerning Company.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition as of their respective dates and all the
      information required to be disclosed therein. Since the last day of the fiscal
      year of the most recent audited financial statements included in the Reports
      (“Latest
      Financial Date”),
      and
      except as modified in the Other Written Information or in the Schedules hereto,
      there has been no Material Adverse Event relating to the Company's business,
      financial condition or affairs not disclosed in the Reports. The Reports do
      not
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein not
      misleading in light of the circumstances when made.

     

    (l) Stop
      Transfer.
      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 Subscriber.

     

    (m) Defaults.
      The
      Company is not in violation of its articles of incorporation or bylaws. The
      Company is (i) not in default under or in violation of any other material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect,
      (ii)
      not in default with respect to any order of any court, arbitrator or
      governmental body or subject to or party to any order of any court or
      governmental authority arising out of any action, suit or proceeding under
      any
      statute or other law respecting antitrust, monopoly, restraint of trade, unfair
      competition or similar matters, or (iii) to the Company’s knowledge not in
      violation of any statute, rule or regulation of any governmental authority
      which
      violation would have a Material Adverse Effect.

     

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    (n) Not
      an
      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 cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the OTC Bulletin Board (“Bulletin
      Board”)
      which
      would impair the exemptions relied upon in this Offering or the Company’s
      ability to timely comply with its obligations hereunder including the filing
      and
      obtaining the effectiveness of any registration statement. Nor will the Company
      or any of its Affiliates take any action or steps that would cause the offer
      or
      issuance of the Securities to be integrated with other offerings which would
      impair the exemptions relied upon in this Offering or the Company’s ability to
      timely comply with its obligations hereunder including the filing and obtaining
      the effectiveness of any registration statement. The Company will not conduct
      any offering other than the transactions contemplated hereby that will be
      integrated with the offer or issuance of the Securities, which would impair
      the
      exemptions relied upon in this Offering or the Company’s ability to timely
      comply with its obligations hereunder including the filing and obtaining the
      effectiveness of any registration statement.

     

    (o) No
      General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor to its knowledge, any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the 1933 Act)
      in
      connection with the offer or sale of the Securities.

     

    (p) Listing.
      The
      Company's common stock is quoted on the Bulletin Board. The Company has not
      received any oral or written notice that its common stock is not eligible nor
      will become ineligible for quotation on the Bulletin Board nor that its common
      stock does not meet all requirements for the continuation of such quotation.
      The
      Company satisfies all the requirements for the continued quotation of its common
      stock on the Bulletin Board.

     

    (q) Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, except
      as
      disclosed on Schedule
      5(q). Schedule
      5(q)
      contains
      a complete and accurate list of all liabilities of the Company by category
      including taxes and assessments, vendor charges, settlement payouts, and
      regulatory required payments.

     

    (r) No
      Undisclosed Events or Circumstances.
      Since
      the Latest Financial Date, 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.

     

    (s)  Capitalization.
      The
      authorized and outstanding capital stock of the Company and Subsidiaries as
      of
      the date of this Agreement and the Closing Date (not including the Securities)
      are set forth on Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries. All of the outstanding shares of Common Stock of the Company
      have
      been duly and validly authorized and issued and are fully paid and
      nonassessable.

     

    (t)  Dilution.
      The
      Company's executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Notes, and the Warrant Shares upon exercise of the Warrants
      is
      binding upon the Company and enforceable regardless of the dilution such
      issuance may have on the ownership interests of other shareholders of the
      Company or parties entitled to receive equity of the Company.

     

    8

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (u)  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.

    


    (v) 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 transfer agent of the Common Stock is set forth
      on Schedule
      5(v)
      hereto.

    


    (w) Investment
      Company.
      Neither
      the Company nor any Affiliate is an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended.

    


    (x) Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 5(a), (b),
      (d),
      (e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as same
      relate to each Subsidiary of the Company.

    


    (y) Company
      Predecessor.
      All
      representations made by or relating to the Company of a historical or
      prospective nature and all undertakings described in Sections 9(g) through
      9(l)
      shall relate, apply and refer to the Company, its predecessors, and the
      Subsidiaries.

    


    (z) Employment
      Agreement.
      A true
      and correct copy of the employment agreement effective as of the Closing Date
      between the Company and Brian Bonar has been delivered to Subscribers. Such
      employment agreement will not be amended without the consent of the
      Subscribers.

    


    (AA) Officers
      and Directors.
      Schedule
      AA
      hereto
      sets forth the officers and directors of the Company and each Subsidiary as
      of
      the Closing Date and the remaining term of their positions as officers and
      directors.

    


    (BB) Correctness
      of Representations.
      The
      Company represents that the foregoing representations and warranties are true
      and correct as of the date hereof in all material respects, and, unless the
      Company otherwise notifies the Subscribers prior to the Closing Date, shall
      be
      true and correct in all material respects as of the Closing Date.

     

    (CC) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date.

     

    6. Regulation
      D Offering.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company's legal counsel opining
      on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. A form of the legal opinion is annexed hereto as
      Exhibit
      G.
      The
      Company will provide, at the Company's expense, such other legal opinions in
      the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon conversion of the Notes and exercise of the Warrants
      pursuant to an effective registration statement. Subscriber agrees that any
      legal opinions required hereunder or under any other Transaction Documents
      may
      be supplied by the Company’s in house General Counsel.

     

    9

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7.1. Conversion
      of Note.

    


    (a) Upon
      the
      conversion of a Note or part thereof, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its nominee) or such other persons
      as
      designated by Subscriber and in such denominations to be specified at conversion
      representing the number of shares of Common Stock issuable upon such conversion.
      The Company warrants that no instructions other than these instructions have
      been or will be given to the transfer agent of the Company's Common Stock and
      that, unless waived by the Subscriber, the Shares will be free-trading, and
      freely transferable, and will not contain a legend restricting the resale or
      transferability of the Shares provided the Shares are being sold pursuant to
      an
      effective registration statement covering the Shares or are otherwise exempt
      from registration. 

    


    (b) Subscriber
      will give notice of its decision to exercise its right to convert the Note,
      interest, any sum due to the Subscriber under the Transaction Documents
      including Liquidated Damages, or part thereof by telecopying an executed and
      completed Notice
      of Conversion
      (a form
      of which is annexed as Exhibit
      A
      to the
      Note) to the Company via confirmed telecopier transmission or otherwise pursuant
      to Section 14(a) of this Agreement. The Subscriber will not be
      required to surrender the Note
      until
      the Note has been fully converted or satisfied. Each date on which a Notice
      of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      shall be deemed a Conversion
      Date.
      The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company's Common Stock certificates representing the Shares issuable upon
      conversion of the Note to the Subscriber via express courier for receipt by
      such
      Subscriber within three (3) business days after receipt by the Company of the
      Notice of Conversion (such third day being the "Delivery
      Date").
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber
      and the Subscriber has complied with all applicable securities laws in
      connection with the sale of the Common Stock, including, without limitation,
      the
      prospectus delivery requirements. A Note representing the balance of the Note
      not so converted will be provided by the Company to the Subscriber if requested
      by Subscriber, provided the Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion, the
      Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note. “Business
      day”
and
      “trading
      day”
as
      employed in the Transaction Documents is a day that the New York Stock Exchange
      is open for trading for three or more hours.

     

        
         
(c) The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
      described in Section 7.2 hereof, respectively after the Delivery Date or the
      Mandatory Redemption Payment Date (as hereinafter defined) could result in
      economic loss to the Subscriber. As compensation to the Subscriber for such
      loss, the Company agrees to pay (as liquidated damages and not as a penalty)
      to
      the Subscriber for late issuance of Shares in the form required pursuant to
      Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
      business day after the Delivery Date for each $10,000 of Note principal amount
      being converted of the corresponding Shares which are not timely delivered.
      The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand. Furthermore, in addition to any other remedies
      which may be available to the Subscriber, in the event that the Company fails
      for any reason to effect delivery of the Shares by the Delivery Date or make
      payment by the Mandatory Redemption Payment Date, the Subscriber may revoke
      all
      or part of the relevant Notice of Conversion or rescind all or part of the
      notice of Mandatory Redemption by delivery of a notice to such effect to the
      Company whereupon the Company and the Subscriber shall each be restored to
      their
      respective positions immediately prior to the delivery of such notice, except
      that the liquidated damages described above shall be payable through the date
      notice of revocation or rescission is given to the Company.

     

    11

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (d) Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Subscriber and thus refunded to the Company.

    


    7.2. Mandatory
      Redemption at Subscriber’s Election.
      In the
      event (i) the Company is prohibited from issuing Shares, (ii) the Company fails
      to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of any
      other Event of Default (as defined in the Note or in this Agreement), (iv)
      of
      the liquidation, dissolution or winding up of the Company, or (v) a Change
      of
      Control (as defined below) any of which that continues for more than ten days,
      then at the Subscriber's election, the Company must pay to the Subscriber ten
      (10) business days after request by the Subscriber, a sum of money determined
      by
      multiplying up to the outstanding principal amount of the Note designated by
      the
      Subscriber by 120%, together with accrued but unpaid interest thereon
      ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by the Subscriber on the same
      date
      as the Company Shares otherwise deliverable or within ten (10) business days
      after request, whichever is sooner ("Mandatory
      Redemption Payment Date").
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Note principal
      and interest will be deemed paid and no longer outstanding. Liquidated damages
      calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
      for
      the twenty day period prior to the actual receipt of the Mandatory Redemption
      Payment by the Subscriber shall be credited against the Mandatory Redemption
      Payment. For purposes of this Section 7.2, “Change
      in Control”
shall
      mean (i) the Company no longer having a class of shares publicly traded or
      listed on a Principal Market, (ii) the Company becoming a Subsidiary of another
      entity, (iii) a majority of the board of directors of the Company as of the
      Closing Date no longer serving as directors of the Company except due to natural
      causes, (iv) if the holders of the Company’s Common Stock as of the Closing Date
      beneficially own at any time after the Closing Date less than forty percent
      of
      the Common stock owned by them on the Closing Date, not including any reduction
      attributable to conversion of the Notes or exercise of any Class A Warrants
      issued to the Subscriber or Consultant [as defined in Section
      9(v)].

    


    7.3. Maximum
      Conversion.
      The
      Subscriber shall not be entitled to convert on a Conversion Date that amount
      of
      the Note in connection with that number of shares of Common Stock which would
      be
      in excess of the sum of (i) the number of shares of common stock beneficially
      owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Subscriber
      and its Affiliates of more than 9.99% of the outstanding shares of common stock
      of the Company on such Conversion Date. Beneficial ownership shall be determined
      in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
      Subscriber shall not be limited to aggregate conversions of only 9.99% and
      aggregate conversions by the Subscriber may exceed 9.99%. The Subscriber may
      waive the conversion limitation described in this Section 7.3, in whole or
      in
      part, upon and effective after 61 days prior written notice to the Company.
      The
      Subscriber may decide whether to convert a Note or exercise Warrants to achieve
      an actual 9.99% ownership position.

    


    7.4. Injunction
      Posting of Bond.
      In the
      event a Subscriber shall elect to convert a Note or part thereof or exercise
      the
      Warrant in whole or in part, the Company may not refuse conversion or exercise
      based on any claim that such Subscriber or any one associated or affiliated
      with
      such Subscriber has been engaged in any violation of law, or for any other
      reason, unless, an injunction from a court, on notice, restraining and or
      enjoining conversion of all or part of such Note or exercise of all or part
      of
      such Warrant shall have been sought and obtained by the Company and
      the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the outstanding principal and interest of the Note, or
      aggregate purchase price of the Warrant Shares which are sought to be subject
      to
      the injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment. Notwithstanding
      the foregoing, if the Company receives an order restraining it from converting
      from a court or administration agency of competent jurisdiction, it shall comply
      without a bond requirement.

    


    7.5. Buy-In.
      In
      addition to any other rights available to the Subscriber, if the Company fails
      to deliver to the Subscriber such shares issuable upon conversion of a Note
      by
      the Delivery Date and if after seven (7) business days after the Delivery Date
      the Subscriber purchases (in an open market transaction or otherwise) shares
      of
      Common Stock to deliver in satisfaction of a sale by such Subscriber of the
      Common Stock which the Subscriber was entitled to receive upon such conversion
      (a "Buy-In"),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of Common Stock so purchased exceeds (B) the aggregate principal
      and/or interest amount of the Note for which such conversion was not timely
      honored,
      together with interest thereon at a rate of 15% per annum, accruing until such
      amount and any accrued interest thereon is paid in full (which amount shall
      be
      paid as liquidated damages and not as a penalty). For
      example, if the Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to an attempted
      conversion of $10,000 of note principal and/or interest, the Company shall
      be
      required to pay the Subscriber $1,000,
      plus interest. The
      Subscriber shall provide the Company written notice indicating the amounts
      payable to the Subscriber in respect of the Buy-In.

    


    7.6 Adjustments.
      The
      Conversion Price, Warrant exercise price and amount of Shares issuable upon
      conversion of the Notes and exercise of the Warrants shall be adjusted as
      described in this Agreement, the Notes and Warrants.

     

    7.7. Redemption.
      The
      Note and Warrants shall not be redeemable or mandatorily convertible except
      as
      described in the Note and Warrants. 

    


    8. Finder/Legal
      Fees.

    


    (a)  Finder’s
      Commission.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agrees to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or similar
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby and arising out of such party’s actions. Anything in this
      Agreement to the contrary notwithstanding, each Subscriber is providing
      indemnification only for such Subscriber’s own actions and not for any action of
      any other Subscriber. Each Subscriber’s liability hereunder is several and not
      joint.

     

    (b)  Due
      Diligence Fee.
      The
      Company will pay a due diligence fee equal to $300,000 (“Due
      Diligence Fee”)
      to
      the party identified on Schedule
      8
      hereto.
      The Due Diligence Fee will be payable out of funds held pursuant to the Escrow
      Agreement.

     

    (c) Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C. (“Subscriber’s
      counsel”)
      the
      fees described on Schedule
      8
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes and Warrants (the “Offering”).
      The
      Legal Fees and reimbursement for estimated UCC searches and filing fees (less
      any amounts paid prior to a Closing Date) will be payable on the Closing Date
      out of funds held pursuant to the Escrow Agreement.

     

    12

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    9. Covenants
      of the Company.
      The
      Company covenants and agrees with the Subscribers as follows:

     

    (a) Stop
      Orders.
      The
      Company will advise the Subscribers, within two hours after the Company receives
      notice of issuance by the Commission, any state securities commission or any
      other regulatory authority of any stop order or of any order preventing or
      suspending any offering of any securities of the Company, or of the suspension
      of the qualification of the Common Stock of the Company for offering or sale
      in
      any jurisdiction, or the initiation of any proceeding for any such
      purpose.

     

    (b) Listing.
      The
      Company shall promptly secure the listing of the shares of Common Stock and
      the
      Warrant Shares upon each national securities exchange, or electronic or
      automated quotation system upon which they are or become eligible for listing
      and shall maintain such listing so long as any Notes or Warrants are
      outstanding. The Company will maintain the listing of its Common Stock on the
      American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System,
      Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at
      the
      time the principal trading exchange or market for the Common Stock (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 Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement, the Bulletin Board
      is the Principal Market.

     

    (c) Market
      Regulations.
      The
      Company shall notify the Commission, the Principal Market and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the
      Subscribers and promptly provide copies thereof to Subscriber.

     

    (d) Filing
      Requirements.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      (A)
      cause its Common Stock to continue to be registered under Section 12(b) or
      12(g)
      of the 1934 Act, (B) comply in all respects with its reporting and filing
      obligations under the 1934 Act, (C) voluntarily comply with all reporting
      requirements that are applicable to an issuer with a class of shares registered
      pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
      reporting requirements, and (D) comply with all requirements related to any
      registration statement filed pursuant to this Agreement. The Company will use
      its best efforts not to take any action or file any document (whether or not
      permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
      or suspend such registration or to terminate or suspend its reporting and filing
      obligations under said acts until two (2) years after the Closing Date. Until
      the earlier of the resale of the Common Stock and the Warrant Shares by each
      Subscriber or two (2) years after the Warrants have been exercised, the Company
      will use its best efforts to continue the listing or quotation of the Common
      Stock on a Principal Market and will comply in all respects with the Company's
      reporting, filing and other obligations under the bylaws or rules of the
      Principal Market. The Company agrees to timely file a Form D with respect to
      the
      Securities if required under Regulation D and to provide a copy thereof to
      each
      Subscriber promptly after such filing.

     

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.
      Except as set forth on Schedule
      9(e),
      the
      Purchase Price may not and will not be used for accrued and unpaid officer
      and
      director salaries, payment of financing related debt, redemption of outstanding
      notes or equity instruments of the Company, litigation related expenses or
      settlements, brokerage fees, nor non-trade obligations outstanding on a Closing
      Date. For so long as any Notes are outstanding, the Company will not prepay
      any
      financing related debt obligations nor redeem any equity instruments of the
      Company. 

     

    13

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (f) Reservation.
      Prior
      to the Closing Date, the Company undertakes to reserve, pro rata,
      on
      behalf of the Subscribers from its authorized but unissued common stock not
      less
      than 300,000,000 shares of Common Stock for issuance upon conversion of the
      Notes and exercise of the Warrants. After the Approval is obtained, the Company
      will reserve pro rata
      on
      behalf of the Subscribers, a number of common shares equal to 200%
      of
      the amount of Common Stock necessary to allow each Subscriber to be able to
      convert all Notes issuable pursuant to this Agreement and interest thereon
      and
      reserve 100% of the amount of Warrant Shares issuable upon exercise of the
      Warrants. The Company will reserve, from time to time, additional shares of
      Common Stock to maintain the aforedescribed percentages. The Company will not
      remove the “reserved” status of any shares of Common Stock reserved on behalf of
      the Subscribers until the Notes are fully paid or converted or until the
      Warrants are fully exercised or expired. Failure to have sufficient shares
      reserved pursuant to this Section 9(f) for five (5) consecutive business days
      or
      fifteen (15) days in the aggregate shall be a material default of the Company’s
      obligations under this Agreement and an Event of Default under the
      Note.

     

    (g) Taxes.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      promptly pay and discharge, or cause to be paid and discharged, when due and
      payable, all lawful taxes, assessments and governmental charges or levies
      imposed upon the income, profits, property or business of the Company; provided,
      however, that any such tax, assessment, charge or levy need not be paid if
      the
      validity thereof shall currently be contested in good faith by appropriate
      proceedings and if the Company shall have set aside on its books adequate
      reserves with respect thereto, and provided, further, that the Company will
      pay
      all such taxes, assessments, charges or levies forthwith upon the commencement
      of proceedings to foreclose any lien which may have attached as security
      therefore. Schedule
      5(q)
      contains
      an accurate and complete description of all of the items described in this
      Section 9(g) as of the Closing Date.

     

    (h) Insurance.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      keep its assets which are of an insurable character insured by financially
      sound
      and reputable insurers against loss or damage by fire, explosion and other
      risks
      customarily insured against by companies in the Company’s line of business, in
      amounts sufficient to prevent the Company from becoming a co-insurer and not
      in
      any event less than one hundred percent (100%) of the insurable value of the
      property insured less reasonable deductible amounts; and the Company will
      maintain, with financially sound and reputable insurers, insurance against
      other
      hazards and risks and liability to persons and property to the extent and in
      the
      manner customary for companies in similar businesses similarly situated and
      to
      the extent available on commercially reasonable terms.

     

    (i) Books
      and Records.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      keep true records and books of account in which full, true and correct entries
      will be made of all dealings or transactions in relation to its business and
      affairs in accordance with generally accepted accounting principles applied
      on a
      consistent basis.

     

    (j) Governmental
      Authorities.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company shall
      duly observe and conform in all material respects to all valid requirements
      of
      governmental authorities relating to the conduct of its business or to its
      properties or assets.

     

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    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company shall
      maintain in full force and effect its corporate existence, rights and franchises
      and all licenses and other rights to use intellectual property owned or
      possessed by it and reasonably deemed to be necessary to the conduct of its
      business, unless it is sold for value.

     

    (l) Properties.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      (as
      defined in Section 11.1(iv) hereof) or pursuant to Rule 144, without regard
      to
      volume limitations, the Company will keep its properties in good repair, working
      order and condition, reasonable wear and tear excepted, and from time to time
      make all necessary and proper repairs, renewals, replacements, additions and
      improvements thereto; and the Company will at all times comply with each
      provision of all leases to which it is a party or under which it occupies
      property if the breach of such provision could reasonably be expected to have
      a
      Material Adverse Effect.

     

    (m) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company agrees
      that except in connection with a Form 8-K or the Registration Statement or
      as
      otherwise required in any other Commission filing, it will not disclose publicly
      or privately the identity of the Subscribers unless expressly agreed to in
      writing by a Subscriber, only to the extent required by law and then only upon
      five days prior notice to Subscriber. In any event and subject to the foregoing,
      the Company shall file
      a
      Form 8-K or make a public announcement describing the Offering not later than
      the first business day after each Closing Date. In the Form 8-K or public
      announcement, the Company will specifically disclose the amount of common stock
      outstanding immediately after the Closing. A form of the proposed Form 8-K
      or
      public announcement to be employed in connection with the Closing is annexed
      hereto as Exhibit
      H.

     

    (n) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement, and as set forth on Schedule
      11.1
      hereto,
      the Company will not file any registration statements or amend any registration
      statement filed with the Commission or with state regulatory authorities
      including but not limited to Forms S-8 without the consent of the Subscriber
      until the expiration of the “Exclusion
      Period”,
      which
      shall be defined as the sooner of (i) the Registration Statement shall have
      been
      current and available for use in connection with the resale of the Registrable
      Securities (as defined in Section 11.1(i) for a period of 365 days, or (ii)
      until all the Notes are no longer outstanding and the Shares and Warrant Shares
      have been resold or transferred by the Subscribers pursuant to the Registration
      Statement or Rule 144, without regard to volume limitations. The Exclusion
      Period will be tolled during the pendency of an Event of Default as defined
      in
      the Note.

     

    (o) Blackout.
      The
      Company undertakes and covenants that until the end of the Exclusion Period,
      the
      Company will not enter into any acquisition, merger, exchange or sale or other
      transaction that could have the effect of delaying the effectiveness of any
      pending registration statement or causing an already effective registration
      statement to no longer be effective or current.

     

    (p) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company.

     

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    (q) Limited
      Standstill.
      The
      Company will deliver to the Subscribers on or before the Closing Date and
      enforce the provisions of irrevocable standstill agreements (“Limited
      Standstill Agreements”)
      in the
      form annexed hereto as Exhibit
      I,
      with
      the parties identified on Schedule
      9(q)
      hereto.

     

    (r) Offering
      Restrictions.
      Until
      the expiration of the Exclusion Period and during the pendency of an Event
      of
      Default, except for the Excepted Issuances, the Company will not enter into
      an
      agreement to nor issue any equity, convertible debt or other securities
      convertible into common stock or equity of the Company nor modify any of the
      foregoing which may be outstanding at anytime, without the prior written consent
      of the Subscriber, which consent may be withheld for any reason. For so long
      as
      not less than five percent of the initial principal amount of the Notes is
      outstanding, the Company will not enter into any equity line of credit or
      similar agreement, nor issue nor agree to issue any floating or variable priced
      equity linked instruments nor any of the foregoing or equity with price reset
      rights.

     

    (s) Approval.
      The
      Company undertakes to file a preliminary proxy report with the Commission not
      later than fifteen (15) days after the Closing Date (“Proxy
      Filing Date”)
      for a
      meeting of the Company’s shareholders. The Company covenants to use its best
      efforts to solicit the approval of the Company’s shareholders in the Proxy
      Statement to decrease the par value of the Common Stock to zero and for a
      reverse split of the Common Stock of 100 for 1 (the “Resolutions”)
      and
      thereafter effectuate the Resolutions (such effectuation the “Approval”).
      The
      Company will hold a meeting of its shareholders to obtain their consent and
      approval of the Resolutions upon the soonest to occur of (i) 60 days after
      the
      Closing Date if the Proxy is not reviewed by the Commission, (ii) 95 days after
      the Closing Date if the Proxy is reviewed by the Commission, or (iii) 60 days
      after the Commission indicates orally or in writing that it has no further
      comments on the Proxy Statement or that all comments have been responded to
      satisfactorily (the earliest of which is the “Required
      Meeting Date”).
      Each
      of (x) failure to file the proxy by the Proxy Filing Date, (y) conduct the
      meeting of shareholders by the Required Meeting Date, or (z) if the Resolutions
      are approved by the shareholders but not effectuated within three (3) days
      after
      the meeting of shareholders (each of which is an “Approval
      Default”)
      is an
      Event of Default under the Note for which liquidated damages will accrue at
      the
      rate of two percent (2%) for each thirty (30) days, or pro rata portion thereof
      during the pendency of such default. Liquidated damages for an Approval Default
      that accrue at the same time as liquidated damages for a Non-Registration Event
      (as defined in Section 11.4 hereof) shall be limited to the greater of the
      amount of such damages which may accrue. In the event the meeting of
      shareholders (“Initial
      Meeting”)
      is
      held and the shareholders do not approve the Resolutions, then within five
      (5)
      days after such meeting, the Company will file a proxy statement to solicit
      approval of the Company’s shareholders to increase the authorized Common stock
      to not less than Nine Billion shares of Common Stock. Failure to timely file
      such proxy statement or effectuate the above described increase in the
      authorized Common Stock or reserve the maximum amount of shares of Common Stock
      as described in Section 9(f) within sixty days after the Initial Meeting is
      a
      default, after the occurrence of which each Holder of a Note may accelerate
      the
      Maturity Date (as defined in the Note) to one year after the Closing Date.
      Not
      later than five business days prior to filing any proxy statement described
      in
      this Section 9(s), the Company must submit the proxy statement to the
      Subscribers for their approval.

     

    (t) Board
      Approval.
      Anything to the contrary notwithstanding in the Company’s Articles of
      Incorporation or Bylaws, the Company agrees that the approval of not less than
      seventy-five percent (75%) of the directors is required for the expenditure
      of
      more than $100,000 for a single or related purpose.

     

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    (u) Negative
      Pledge.
      Until
      the expiration of the Exclusion Period, the
      Company shall not, and shall cause each of its Subsidiaries not to, create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired other than (i)
      for
      the Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens
      imposed by law for taxes that are not yet due or are being contested in good
      faith and for which adequate reserves have been established in accordance with
      generally accepted accounting principles; (b) carriers’, warehousemen’s,
      mechanics’, material men’s, repairmen’s and other like Liens imposed by law,
      arising in the ordinary course of business and securing obligations that are
      not
      overdue by more than 30 days or that are being contested in good faith and
      by
      appropriate proceedings; (c) pledges and deposits made in the ordinary course
      of
      business in compliance with workers’ compensation, unemployment insurance and
      other social security laws or regulations; (d) deposits to secure the
      performance of bids, trade contracts, leases, statutory obligations, surety
      and
      appeal bonds, performance bonds and other obligations of a like nature, in
      each
      case in the ordinary course of business; (e) Liens created with respect to
      the
      financing of the purchase of new property in the ordinary course of the
      Company’s business up to the amount of the purchase price of such property, or
      (f) easements, zoning restrictions, rights-of-way and similar encumbrances
      on
      real property imposed by law or arising in the ordinary course of business
      that
      do not secure any monetary obligations and do not materially detract from the
      value of the affected property (each of (a) through (f), a “Permitted
      Lien”)
      and
      (iii) indebtedness for borrowed money which is not senior or pari passu in
      right
      of payment to the Notes.

     

    (v) Consulting
      Agreement.
      As of
      the Closing Date, the Company will have entered into a consulting agreement
      with
      Ghillie Finanz, S.A. in the form of Exhibit
      J
      hereto.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a) The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
      persons, and principal shareholders, against any claim, cost, expense,
      liability, obligation, loss or damage (including reasonable legal fees) of
      any
      nature, incurred by or imposed upon the Subscriber or any such person which
      results, arises out of or is based upon (i) any material misrepresentation
      by
      Company or material breach of any warranty by Company in this Agreement or
      in
      any Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any material
      breach or default in performance by the Company of any covenant or undertaking
      to be performed by the Company hereunder, or any other agreement entered into
      by
      the Company and Subscriber relating hereto.

     

    (b) Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons against any claim, cost, expense, liability, obligation, loss or damage
      (including reasonable legal fees) of any nature, incurred by or imposed upon
      the
      Company or any such person which results, arises out of or is based upon (i)
      any
      material misrepresentation by such Subscriber in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any material
      breach or default in performance by such Subscriber of any covenant or
      undertaking to be performed by such Subscriber hereunder, or any other agreement
      entered into by the Company and Subscribers, relating hereto.

     

    (c) In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of Registrable Securities
      (as
      defined herein).

     

    (d) The
      procedures set forth in Section 11.6 shall apply to the indemnification set
      forth in Sections 10(a) and 10(b) above.

     

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    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities.

     

    (i) On
      one
      occasion, for a period commencing one hundred and fifty-six (156) days after
      the
      Closing Date, but not later than two (2) years after the Closing Date, upon
      a
      written request therefor from any record holder or holders of more than 50%
      of
      the Shares issued and issuable upon conversion of the outstanding Notes and
      outstanding Warrant Shares, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering the
      Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
      subject of such request for unrestricted public resale by the holder thereof.
      For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall
      not
      include Securities which are (A) registered for resale in an effective
      registration statement, (B) included for registration in a pending registration
      statement, or (C) which have been issued without further transfer restrictions
      after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
      receipt of such request, the Company shall promptly give written notice to
      all
      other record holders of the Registrable Securities that such registration
      statement is to be filed and shall include in such registration statement
      Registrable Securities for which it has received written requests within ten
      (10) days after the Company gives such written notice. Such other requesting
      record holders shall be deemed to have exercised their demand registration
      right
      under this Section 11.1(i).

     

    (ii) If
      the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Registrable
      Securities for sale to the public, provided the Registrable Securities are
      not
      otherwise registered for resale by the Subscribers or Holder pursuant to an
      effective registration statement, each such time it will give at least fifteen
      (15) days' prior written notice to the record holder of the Registrable
      Securities of its intention so to do. Upon the written request of the holder,
      received by the Company within ten (10) days after the giving of any such notice
      by the Company, to register any of the Registrable Securities not previously
      registered, the Company will cause such Registrable Securities as to which
      registration shall have been so requested to be included with the securities
      to
      be covered by the registration statement proposed to be filed by the Company,
      all to the extent required to permit the sale or other disposition of the
      Registrable Securities so registered by the holder of such Registrable
      Securities (the “Seller”
or
      “Sellers”).
      In
      the event that any registration pursuant to this Section 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(i), the Company has determined to proceed with the
      actual preparation and filing of a registration statement under the 1933 Act
      in
      connection with the proposed offer and sale for cash of any of its securities
      for the Company's own account and the Company actually does file such other
      registration statement, such written request shall be deemed to have been given
      pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

     

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    (iv) The
      Company shall file with the Commission a Form SB-2 registration statement (the
      “Registration
      Statement”)
      (or
      such other form that it is eligible to use) in order to register the Registrable
      Securities for resale and distribution under the 1933 Act within thirty (30)
      calendar days after the Required Meeting Date (the
      “Filing
      Date”),
      and
      cause to be declared effective not
      later
      than ninety (90) calendar days after the Closing Date (the
      “Effective
      Date”).
      The
      Company will register not less than a number of shares of common stock in the
      aforedescribed registration statement that is equal to 200%
      of
      the Shares issuable upon conversion of all of the Notes issuable to the
      Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement
      upon exercise of the Warrants and Finder’s Warrants (collectively the
“Registrable
      Securities”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber and Warrant holder, pro rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber and
      Warrantholders. The Registration Statement will immediately be amended or
      additional registration statements will be immediately filed by the Company
      as
      necessary to register additional shares of Common Stock to allow the public
      resale of all Common Stock included in and issuable by virtue of the Registrable
      Securities. Except with the written consent of the Subscriber, or as described
      on Schedule
      11.1
      hereto,
      no securities of the Company other than the Registrable Securities will be
      included in the Registration Statement. It shall be deemed a Non-Registration
      Event if at any time after the date the Registration Statement is declared
      effective by the Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Subscribers
      fewer than 150%
      of
      the amount of Common Shares issuable upon full conversion of all sums due under
      the Notes and 100% of the Warrant Shares issuable upon exercise of the
      Warrants.

     

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii),
      or (iv) to effect the registration of any Registrable Securities under the
      1933
      Act, the Company will, as expeditiously as possible: 

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Registrable Securities copies of all filings and Commission letters of comment
      and notify Subscribers (by telecopier and by e-mail addresses provided by
      Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com)
      on or
      before 6:00 PM EST on the same business day that the Company receives notice
      that (i) the Commission has no comments or no further comments on the
      Registration Statement, and (ii) the registration statement has been declared
      effective (failure to timely provide notice as required by this Section 11.2(a)
      shall be a material breach of the Company’s obligation and an Event of Default
      as defined in the Notes
      and
      a Non-Registration Event as defined in Section 11.4 of this Agreement);


     

    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period; 

     

    (c) furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available; 

     

    (d) use
      its
commercially
      reasonable best efforts to register or qualify the Registrable Securities
      covered by such registration statement under the securities or “blue sky” laws
      of New York and such jurisdictions as the Sellers shall request in writing,
      provided, however, that the Company shall not for any such purpose be required
      to qualify generally to transact business as a foreign corporation in any
      jurisdiction where it is not so qualified or to consent to general service
      of
      process in any such jurisdiction; 

     

    19

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (e) if
      applicable, list the Registrable Securities covered by such registration
      statement with any securities exchange on which the Common Stock of the Company
      is then listed; 

     

    (f) notify
      the Subscribers within two hours of the Company’s becoming aware that a
      prospectus relating thereto is required to be delivered under the 1933 Act,
      of
      the happening of any event of which the Company has knowledge as a result of
      which the prospectus contained in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing or which
      becomes subject to a Commission, state or other governmental order suspending
      the effectiveness of the registration statement covering any of the Shares;
      and

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, make available for inspection by the Sellers, and any attorney, accountant
      or other agent retained by the Seller or underwriter, all publicly available,
      non-confidential financial and other records, pertinent corporate documents
      and
      properties of the Company, and cause the Company's officers, directors and
      employees to supply all publicly available, non-confidential information
      reasonably requested by the seller, attorney, accountant or agent in connection
      with such registration statement. 

     

    11.3. Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws. 

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1(i) or 11.1(ii) is not filed within 60
      days
      after written request and declared effective by the Commission within 120 days
      after such request, and maintained in the manner and within the time periods
      contemplated by Section 11 hereof, and it would not be feasible to ascertain
      the
      extent of such damages with precision. Accordingly, if (A) the Registration
      Statement is not filed on or before the Filing Date, (B) is not declared
      effective on or before the Effective Date, (C) due to the action or inaction
      of
      the Company the Registration Statement is not declared effective within three
      (3) business days after receipt by the Company or its attorneys of a written
      or
      oral communication from the Commission that the Registration Statement will
      not
      be reviewed or that the Commission has no further comments, (D) if the
      registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
      within 60 days after such written request, or is not declared effective within
      120 days after such written request, or (E) any registration statement described
      in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but
      shall thereafter cease to be effective without being succeeded within fifteen
      (15) business days by an effective replacement or amended registration statement
      or for a period of time which shall exceed 30 days in the aggregate per year
      (defined as a period of 365 days commencing on the Actual Effective Date (each
      such event referred to in clauses A through E of this Section 11.4 is referred
      to herein as a "Non-Registration Event"), then the Company shall deliver to
      the
      holder of Registrable Securities, as Liquidated Damages, an amount equal to
      two
      percent (2%) for each thirty (30) days or part thereof of the Purchase Price
      of
      the Notes remaining unconverted and purchase price of Shares issued upon
      conversion of the Notes owned of record by such holder which are subject to
      such
      Non-Registration Event. The Company must pay the Liquidated Damages in cash
      or
      at the Company’s election with registered shares of Common stock valued at
      one-half of the Conversion Price in effect on the first trading day of each
      thirty day or shorter period for which liquidated damages are payable. The
      Liquidated Damages must be paid within ten (10) days after the end of each
      thirty (30) day period or shorter part thereof for which Liquidated Damages
      are
      payable. In the event a Registration Statement is filed by the Filing Date
      but
      is withdrawn prior to being declared effective by the Commission, then such
      Registration Statement will be deemed to have not been filed. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      ten (10) business days after receipt of comments from the Commission.
      Failure
      to
      timely respond to Commission comments is a Non-Registration Event for which
      Liquidated Damages shall accrue and be payable by the Company to the holders
      of
      Registrable Securities at the same rate set forth above. Notwithstanding the
      foregoing, the Company shall not be liable to the Subscriber under this Section
      11.4 for any events or delays occurring as a consequence of the acts or
      omissions of the Subscribers contrary to the obligations undertaken by
      Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable
      pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to
      have occurred for times during which Registrable Securities are transferable
      by
      the holder of Registrable Securities pursuant to Rule 144(k) under the 1933
      Act.
The
      Company acknowledges that it is a Non-Registration Event if the Company does
      not
      have sufficient shares as required by this Agreement included in a Registration
      Statement prior to or after effectiveness of the Registration
      Statement.

     

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    11.5. Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses (if
      required), fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the National Association of Securities Dealers, Inc., transfer taxes, and fees
      of transfer agents and registrars, are called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities are called "Selling
      Expenses."
      The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    11.6. Indemnification
      and Contribution.

     

    (a) In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to Section 11, the Company will, to the extent permitted by law,
      indemnify and hold harmless the Seller, each officer of the Seller, each
      director of the Seller, each underwriter of such Registrable Securities
      thereunder and each other person, if any, who controls such Seller or
      underwriter within the meaning of the 1933 Act, against any losses, claims,
      damages or liabilities, joint or several, to which the Seller, or such
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any registration statement
      under which such Registrable Securities was registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading
      in light of the circumstances when made, and will subject to the provisions
      of
      Section 11.6(c) reimburse the Seller, each such underwriter and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company shall not be liable
      to
      the Seller to the extent that any such damages arise out of or are based upon
      an
      untrue statement or omission made in any preliminary prospectus if (i) the
      Seller failed to send or deliver a copy of the final prospectus delivered by
      the
      Company to the Seller with or prior to the delivery of written confirmation
      of
      the sale by the Seller to the person asserting the claim from which such damages
      arise, (ii) the final prospectus would have corrected such untrue statement
      or
      alleged untrue statement or such omission or alleged omission, or (iii) to
      the
      extent that any such loss, claim, damage or liability arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or alleged
      omission so made in conformity with information furnished by any such Seller,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus. 

     

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    (b) In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading,
      and will reimburse the Company and each such officer, director, underwriter
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action, provided, however, that the Seller will be liable hereunder
      in any such case if and only to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission made in reliance upon and in
      conformity with information pertaining to such Seller, as such, furnished in
      writing to the Company by such Seller specifically for use in such registration
      statement or prospectus, and provided, further, however, that the liability
      of
      the Seller hereunder shall be limited to the net proceeds actually received
      by
      the Seller from the sale of Registrable Securities covered by such registration
      statement.

     

    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses 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 parties,
      as a group, 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.

     

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    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation.

     

    11.7. Delivery
      of Unlegended Shares.

     

    (a) Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Shares
      or
      Warrant Shares or any other Common Stock held by a Subscriber have been sold
      pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii)
      a
      representation that the prospectus delivery requirements, or the requirements
      of
      Rule 144, as applicable and if required, have been satisfied, and (iii) the
      original share certificates representing the shares of Common Stock that have
      been sold, and (iv) in the case of sales under Rule 144, customary
      representation letters of the Subscriber and/or Subscriber’s broker regarding
      compliance with the requirements of Rule 144, the Company at its expense, (y)
      shall deliver, and shall cause legal counsel selected by the Company to deliver
      to its transfer agent (with copies to Subscriber) an appropriate instruction
      and
      opinion of such counsel, directing the delivery of shares of Common Stock
      without any legends including the legend set forth in Section 4(h)
      above,
      reissuable pursuant to any effective and current Registration Statement
      described in Section 11 of this Agreement or pursuant to Rule 144 under the
      1933
      Act (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Shares certificate, if any, to the Subscriber at the address specified
      in the notice of sale, via express courier, by electronic transfer or otherwise
      on or before the Unlegended Shares Delivery Date. 

     

    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, upon request of a Subscriber, so long
      as
      the certificates therefor do not bear a legend and the Subscriber is not
      obligated to return such certificate for the placement of a legend thereon,
      the
      Company shall cause its transfer agent to electronically transmit the Unlegended
      Shares by crediting the account of Subscriber’s prime Broker with DTC through
      its Deposit Withdrawal Agent Commission system. Such delivery must be made
      on or
      before the Unlegended Shares Delivery Date.

    


    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof later than two business days after the Unlegended
      Shares Delivery Date could result in economic loss to a Subscriber. As
      compensation to a Subscriber for such loss, the Company agrees to pay late
      payment fees (as liquidated damages and not as a penalty) to the Subscriber
      for
      late delivery of Unlegended Shares in the amount of $100 per business day after
      the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
      subject to the delivery default. If during any 360 day period, the Company
      fails
      to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
      of thirty (30) days, then each Subscriber or assignee holding Securities subject
      to such default may, at its option, require the Company to redeem all or any
      portion of the Shares and Warrant Shares subject to such default at a price
      per
      share equal to 120% of the Purchase Price of such Common Stock and Warrant
      Shares (“Unlegended
      Redemption Amount”).
      The
      amount of the aforedescribed liquidated damages that have accrued or been paid
      for the twenty day period prior to the receipt by the Subscriber of the
      Unlegended Redemption Amount shall be credited against the Unlegended Redemption
      Amount. The Company shall pay any payments incurred under this Section in
      immediately available funds upon demand.

     

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    (d) In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber Unlegended Shares as required pursuant to this
      Agreement, within seven (7) business days after the Unlegended Shares Delivery
      Date and the Subscriber purchases (in an open market transaction or otherwise)
      shares of common stock to deliver in satisfaction of a sale by such Subscriber
      of the shares of Common Stock which the Subscriber was entitled to receive
      from
      the Company (a "Buy-In"),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of common stock so purchased exceeds (B) the aggregate purchase
      price
      of the shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares  together
      with interest thereon at a rate of 15% per annum, accruing until such amount
      and
      any accrued interest thereon is paid in full (which amount shall be paid as
      liquidated damages and not as a penalty). For
      example, if a Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
      price of shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares, the Company shall be required to pay the Subscriber
      $1,000,
      plus interest. The
      Subscriber shall provide the Company written notice indicating the amounts
      payable to the Subscriber in respect of the Buy-In.

     

    (e) In
      the
      event a Subscriber shall request delivery of Unlegended Shares as described
      in
      Section 11.7 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares or exercise of all or part of said Warrant shall have been sought and
      obtained
      and the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the amount of the aggregate purchase price of the Common
      Stock
      and Warrant Shares which are subject to the injunction or temporary restraining
      order, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.

    


    12. (a) Right
      of First Refusal.
      Until
      the end of the Exclusion Period, the Subscribers shall be given not less than
      fourteen (14) business days prior written notice of any proposed sale by the
      Company of its common stock or other securities or debt obligations, except
      in
      connection with (i) full or partial consideration in connection with a strategic
      merger, acquisition, consolidation or purchase of substantially all of the
      securities or assets of corporation or other entity which holders of such
      securities or debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital which
      holders of such securities or debt are not at any time granted registration
      rights,
      (iii)
      the Company’s issuance of Common Stock or the issuances or grants of options to
      purchase Common Stock pursuant to stock option plans and employee stock purchase
      plans described on Schedule 5(d) hereto, (iv) as a result of the exercise of
      Warrants or conversion of Notes which are granted or issued pursuant to this
      Agreement, (v) the payment of any interest on the Notes and liquidated damages
      or other damages pursuant to the Transaction Documents, (vi) as
      has
      been described in the Reports or Other Written Information filed with the
      Commission not later than three Business Days before the Closing Date, and
      (vii)
      up to $1,500,000 of Notes on substantially the same terms as the Offering,
      provided the Subscribers to such other Notes are the Subscribers to the cash
      portion of the Offering (collectively the foregoing are “Excepted
      Issuances”).
      Issuance of the Excepted Issuances are subject to the Subscribers’ prior written
      approval, which will not be unreasonably withheld. The Subscribers who exercise
      their rights pursuant to this Section 12(a) shall have the right during the
      fourteen (14) business days following receipt of the notice to purchase such
      offered common stock, debt or other securities in accordance with the terms
      and
      conditions set forth in the notice of sale in the same proportion to each other
      as their purchase of Notes in the Offering. In the event such terms and
      conditions are modified during the notice period, the Subscribers shall be
      given
      prompt notice of such modification and shall have the right during the fourteen
      (14) business days following the notice of modification to exercise such right.
      Payment to be made upon exercise of the rights described in this Section 12(a)
      may be made by tender of amounts due on outstanding Notes.

     

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    (b) Favored
      Nations Provision.
      Other
      than in connection with the Excepted Issuances, if at any time Notes or Warrants
      are outstanding the Company shall offer, issue or agree to issue any common
      stock or securities convertible into or exercisable for shares of common stock
      (or modify any of the foregoing which may be outstanding) to any person or
      entity at a price per share or conversion or exercise price per share which
      shall be less than the Conversion Price in respect of the Shares, or if less
      than the Warrant exercise price in respect of the Warrant Shares, without the
      consent of each Subscriber holding Notes, Shares, Warrants, or Warrant Shares,
      then the Company shall issue, for each such occasion, additional shares of
      Common Stock to each Subscriber so that the average per share purchase price
      of
      the shares of Common Stock issued to the Subscriber (of only the Common Stock
      or
      Warrant Shares still owned by the Subscriber) is equal to such other lower
      price
      per share and the Conversion Price and Warrant exercise price shall
      automatically be adjusted as provided in the Notes and the Warrants. The average
      Purchase Price of the Shares and average exercise price in relation to the
      Warrant Shares shall be calculated separately for the Shares and Warrant Shares.
      The foregoing calculation and issuance shall be made separately for Shares
      received upon conversion and separately for Warrant Shares. The delivery to
      the
      Subscriber of the additional shares of Common Stock shall be not later than
      the
      closing date of the transaction giving rise to the requirement to issue
      additional shares of Common Stock. The Subscriber is granted the registration
      rights described in Section 11 hereof in relation to such additional shares
      of
      Common Stock except that the Filing Date and Effective Date vis-à-vis such
      additional common shares shall be, respectively, the thirtieth (30th)
      and
      sixtieth (60th)
      date
      after the closing date giving rise to the requirement to issue the additional
      shares of Common Stock. For purposes of the issuance and adjustment described
      in
      this paragraph, the issuance of any security of the Company carrying the right
      to convert such security into shares of Common Stock or of any warrant, right
      or
      option to purchase Common Stock shall result in the issuance of the additional
      shares of Common Stock upon the sooner of the agreement to or actual issuance
      of
      such convertible security, warrant, right or option and again at any time upon
      any subsequent issuances of shares of Common Stock upon exercise of such
      conversion or purchase rights if such issuance is at a price lower than the
      Conversion Price or Warrant exercise price in effect upon such issuance. The
      rights of the Subscriber set forth in this Section 12 are in addition to any
      other rights the Subscriber has pursuant to this Agreement, the Note, any
      Transaction Document, and any other agreement referred to or entered into in
      connection herewith. 

     

    (c) Paid
      In Kind.
      The
      Subscriber may demand that some or all of the sums payable to the Subscriber
      pursuant to Sections 7.1(c), 7.2, 7.5, 11.4, 11.7(c), 11.7(d) and 11.7(e) that
      are not paid within ten business days of the required payment date be paid
      in
      shares of Common Stock valued at the Conversion Price in effect at the time
      Subscriber makes such demand or, at the Subscriber’s election, at such other
      valuation described in the Transaction Documents. In addition to any other
      rights granted to the Subscriber herein, the Subscriber is also granted the
      registration rights set forth in Section 11.1(ii) hereof in relation to the
      aforedescribed shares of Common Stock.

     

    (d) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Sections 12(a), 12(b) and 12(c)
      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 Subscriber calculated in
      the
      manner described in Section 7.3 of this Agreement, then the issuance of such
      additional shares of Common Stock of the Company to such Subscriber will be
      deferred in whole or in part until such time as such Subscriber is able to
      beneficially own such Common Stock without exceeding the maximum amount set
      forth calculated in the manner described in Section 7.3 of this Agreement.
      The
      determination of when such Common Stock may be issued shall be made by each
      Subscriber as to only such Subscriber.

     

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    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: Dalrada
      Financial Corp., 9449 Balboa Avenue, Suite 211, San Diego, CA 92123, Attn:
      Brian
      Bonar, CEO,
      telecopier: (858) 613-1311, with a copy by telecopier only to: Owen M.
      Naccarato, Esq., Naccarato & Associates, 18301 Von Karman Avenue, Suite 430,
      Irvine, CA 92612, telecopier: (949) 851-9262, and (ii) if to the Subscriber,
      to:
      the one or more addresses and telecopier numbers indicated on the signature
      pages hereto, with an additional copy by telecopier only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
      telecopier number: (212) 697-3575.

     

    (b) Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers. 

     

    (c) 
      Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts
      of laws principles
      that would result in the application of the substantive laws of another
      jurisdiction. Any action brought by either party against the other concerning
      the transactions contemplated by this Agreement shall be brought only in the
      civil or state courts of New York or in the federal courts located in New York
      County. The
      parties and the individuals executing this Agreement and other agreements
      referred to herein or delivered in connection herewith on behalf of the Company
      agree to submit to the jurisdiction of such courts and waive trial by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

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    (e) Specific
      Enforcement, Consent to Jurisdiction.
      To the
      extent permitted by law, the Company and Subscriber acknowledge and agree that
      irreparable damage would occur in the event that any of the provisions of this
      Agreement were not performed in accordance with their specific terms or were
      otherwise breached. It is accordingly agreed that the parties shall be entitled
      to one or more preliminary and final injunctions to prevent or cure breaches
      of
      the provisions of this Agreement and to enforce specifically the terms and
      provisions hereof, this being in addition to any other remedy to which any
      of
      them may be entitled by law or equity. Subject to Section 13(d) hereof, each
      of
      the Company, Subscriber and any signator hereto in his personal capacity hereby
      waives, and agrees not to assert in any such suit, action or proceeding, any
      claim that it is not personally subject to the jurisdiction in New York of
      such
      court, that the suit, action or proceeding is brought in an inconvenient forum
      or that the venue of the suit, action or proceeding is improper. Nothing in
      this
      Section shall affect or limit any right to serve process in any other manner
      permitted by law.

     

    (f) Damages.
      In the
      event the Subscriber is entitled to receive any liquidated damages pursuant
      to
      the Transactions, the Subscriber may elect to receive the greater of actual
      damages or such liquidated damages.

     

    (g) Independent
      Nature of Subscribers.  
        The
      Company acknowledges that the obligations of each Subscriber under the
      Transaction Documents are several and not joint with the obligations of any
      other Subscriber, and no Subscriber shall be responsible in any way for the
      performance of the obligations of any other Subscriber under the Transaction
      Documents. The
      Company acknowledges that each Subscriber has represented that the decision
      of
      each Subscriber to purchase Securities has been made by such Subscriber
      independently of any other Subscriber and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company which may have been made or given by
      any
      other Subscriber or by any agent or employee of any other Subscriber, and no
      Subscriber or any of its agents or employees shall have any liability to any
      Subscriber (or any other person) relating to or arising from any such
      information, materials, statements or opinions.  The
      Company acknowledges that nothing contained in any Transaction Document, and
      no
      action taken by any Subscriber pursuant hereto or thereto (including, but not
      limited to, the (i) inclusion of a Subscriber in the Registration Statement
      and
      (ii) review by, and consent to, such Registration Statement by a Subscriber)
      shall be deemed to constitute the Subscribers as a partnership, an association,
      a joint venture or any other kind of entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or the transactions contemplated by the Transaction Documents. 
The Company acknowledges that each Subscriber shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of the Transaction Documents, and it shall not be necessary for
      any other Subscriber to be joined as an additional party in any proceeding
      for
      such purpose.  The Company acknowledges that it has elected to provide all
      Subscribers with the same terms and Transaction Documents for the convenience
      of
      the Company and not because Company was required or requested to do so by the
      Subscribers.  The Company acknowledges that such procedure with respect to
      the Transaction Documents in no way creates a presumption that the Subscribers
      are in any way acting in concert or as a group with respect to the Transaction
      Documents or the transactions contemplated thereby.

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 80% of the total of the Shares issued and
      issuable upon conversion of outstanding Notes owned by Subscribers on the date
      consent is requested.

     

    (i) Inducements.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered and paid to all the parties to the
      Transaction Documents.


    
      
        27

        


         

      

      
         

        
          

        

      

      
         

      

    


     

    (j) Pre-Split.
      All of
      the figures employed in the Transaction documents in connection with Common
      Stock and par value, unless otherwise indicated, do not reflect the impact
      of
      the Approval, which, unless otherwise indicated will be applied on an equitable
      basis after the Approval is obtained.

     

    (k) Business/Calendar
      Day.
      All
      references to “days” in the Transaction Documents shall mean calendar days
      unless indicated otherwise.

     

    


     

    


     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    


     

    



    
      
        
          28

          


        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

    


    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL *

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              LONGVIEW
                FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

               

               

               

               

               

              /s/
                P. Benz

              ________________________________________

              (Signature)

              By:
                

            	
              $3,871,707.00

            	
              51.35%
                representing 693,768,501 Warrant
                Shares

            


    

    


    *
      The
      Purchase Price payable by Longview fund, L.P. is payable by delivery of a
      General Release relating in part to the exchange of outstanding obligations
      of
      the Company owed to Longview Fund; and the cancellation of a Promissory Note
      issued by the Company to Longview Fund L.P. on December 22, 2005, in the
      principal amount of $600,000 and $15,200 interest accrued thereon through
      February 13, 2006 and the cash payment of $$2,884,800.00.

    


    29



    
      
         

      

      
         

        
          

        

      

      
         

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

    


    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              LONGVIEW
                EQUITY FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

               

               

               

               

               

              /s/
                P. Benz

              ________________________________________

              (Signature)

              By:
                

            	
              $1,005,000.00

            	
              13.72%
                representing 180,085,255 Warrant
                Shares

            


    

    

30

    
      
         

      

      
         

        
          

        

      

      
         

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (C)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

    


    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              LONGVIEW
                INTERNATIONAL EQUITY FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

               

               

               

               

               

              /s/
                P. Benz

              ________________________________________

              (Signature)

              By:
                

            	
              $495,000.00

            	
              6.76%
                representing 88,698,708 Warrant
                Shares

            


    

    


    31



    
      
         

      

      
         

        
          

        

      

      
         

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (D)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

    


    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL *

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              ALPHA
                CAPITAL AKTIENGESELLSCHAFT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

              /s/
                C. Ackerman

              ________________________________________

              (Signature)

              By:
                

            	
              $492,426.00

            	
              5.22%
                representing 88,237,475 Warrant
                Shares

            


    

    


    *
      The
      Purchase Price payable by the above Subscriber is payable by delivery of a
      General Release relating in part to the exchange of outstanding obligations
      owed
      by the Company to the above Subscriber.

    


    32

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (E)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

    


    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL *

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              BALMORE,
                S.A.

              P.O.
                Box 146, Road Town

              Tortola,
                BVI

              Fax:

               

               

               

              /s/
                F. Morax

              ________________________________________

              (Signature)

              By:
                

            	
              $1,380,960.00

            	
              18.85%
                representing 247,453,268 Warrant
                Shares

            


    

    


    *
      The
      Purchase Price payable by the above Subscriber is payable by delivery of a
      General Release relating in part to the exchange of outstanding obligations
      owed
      by the Company to the above Subscriber.

     

    33



    
      
         

      

      
         

        
          

        

      

      
         

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (F)

     

    


    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    


    DALRADA
      FINANCIAL CORP.

    a
      Delaware corporation

    


    


    /s/
      Brian
      Bonar

     

    By:_________________________________

    Name:
      Brian Bonar

    Title:
      CEO

    


    Dated:
      February 13, 2006

    


    


    


    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL *

            	
              PERCENT
                OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A
                WARRANT

            
	
              HOWARD
                SCHRAUB

              c/o
                G. Howard Associates

              525
                East 72nd
                Street

              New
                York, NY 10021

              Fax:
                (212) 737-7467

               

               

               

              /s/
                H. Schraub

              ________________________________________

              (Signature)

              By:
                

            	
              $300,000.00

            	
              4.1%
                representing 53,756,793 Warrant
                Shares

            


    

    


    *
      The
      Purchase Price payable by the above Subscriber is payable by delivery of a
      General Release relating in part to the exchange of outstanding obligations
      owed
      by the Company to the above Subscriber.

    


    


    34