SUBSCRIPTION
        AGREEMENT

       

      THIS
        SUBSCRIPTION AGREEMENT
        (this
“Agreement”),
        is
        dated as of September ____, 2008, by and among Attitude Drinks Inc., 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
        "SEC"
        and/or
“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 Subscriber, as provided herein,
        and the Subscribers in the aggregate, shall purchase for up to $300,000 (the
        "Purchase
        Price")
        of
        principal amount promissory notes of the Company (“Note”
or
        “Notes”)
        in the
        principal amount of up to $365,000 (“Note
        Principal”),
        in
        the form annexed hereto as Exhibit
        A;
        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 and Shares of the Company’s Common Stock, $.001 par value (the
“Common
        Stock”)
        issuable upon conversion of the Notes (“Shares”),
        the
        Warrants and the Warrant Shares issuable upon exercise of the Warrants are
        collectively referred to herein as the “Securities”;
        and

       

      WHEREAS,
        the
        aggregate proceeds of the sale of the Notes 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 annexed 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 Subscriber hereby agree as follows:

       

      1. Closing.
        Subject
        to the satisfaction or waiver of the terms and conditions of this Agreement,
        on
        the Closing Date, Subscriber shall purchase and the Company shall sell to
        the
        Subscribers Notes in the principal amount of up to $365,000. The “Closing
        Date”
shall
        be the date that subscriber funds representing the net amount due the Company
        from the Purchase Price is transmitted by wire transfer or otherwise to or
        for
        the benefit of the Company.

      


      2. Security
        Interest.
        On or
        about October 23, 2007, certain lenders were granted a security interest
        in the
        assets of the Company, including ownership of the Subsidiaries (as defined
        in
        Section 5(a) of this Agreement) and in the assets of the Subsidiaries,
        which security interest was memorialized in a “Security
        Agreement”
and
        “Collateral
        Agent Agreement”
dated
        October 23, 2007, as amended on or about January 8, 2008. The Subsidiaries
        guaranteed the Company’s obligations under the Transaction Documents [as defined
        in Section 5(c)]. Such guaranties were memorialized in a “Subsidiary
        Guaranty”.
        The
        Security Agreement and Collateral Agent Agreement are hereby amended to include
        the Subscribers and the Company agrees that the Subscribers are hereby made
        parts to the Security Agreement and Collateral Agent Agreement as Lenders
        therein and their interests in the Obligations (as defined in the Security
        Agreement) are pari pasu in proportion to their specific Obligation amounts
        and
        of equal priority with each other. The Company will execute such other
        agreements, documents and financing statements reasonably requested by the
        Subscribers to memorialize and further protect the security interest described
        herein, 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 Subscribers to
        memorialize and further protect the security interest described
        herein.


      
        
           

        

        
          1

          
            

          

        

        
           

        

      


      3. Warrants.
        On
        the
        Closing Date, the Company will issue and deliver an aggregate of 850,000
        Class A
        Warrants to the Subscribers. The exercise price to acquire a Warrant Share
        upon
        exercise of a Class A Warrant shall be equal to $0.50, subject to reduction
        as
        described in the Class A Warrant. Upon exercise of a Class A Warrant, the
        holder
        of the Warrant shall receive one Warrant Share and Class B Warrant. The exercise
        price of such Class B Warrant shall be equal to 150% of the exercise price
        of
        the Class A Warrant in effect at the time of such exercise, subject to reduction
        as described in the Class B Warrant. The Warrants shall be exercisable until
        five years after the issue date of the Warrants. Each holder of the Warrants
        is
        granted the registration rights set forth in this Agreement. The Warrant
        exercise price and number of Warrant Shares issuable upon exercise of the
        Warrants shall be equitably adjusted to offset the effect of stock splits,
        stock
        dividends, and similar events, and as otherwise described in this Agreement
        and
        the Warrant. 

      


      4. Subscriber
        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 such
        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.
        Such
        Subscriber has the requisite power and authority to enter into and perform
        this
        Agreement and the other Transaction Documents and to purchase the Notes being
        sold to it hereunder. The execution, delivery and performance of this Agreement
        and the other Transaction Documents 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 and the
        other
        Transaction Documents have been duly authorized, executed and delivered by
        such
        Subscriber and constitutes, or shall constitute when executed and delivered,
        a
        valid and binding obligation of such Subscriber enforceable against such
        Subscriber in accordance with the terms thereof.

      (c) No
        Conflicts.
        The
        execution, delivery and performance of this Agreement and the other Transaction
        Documents and the consummation by such Subscriber of the transactions
        contemplated hereby and thereby 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 and the other Transaction Documents or to
        purchase the Securities 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.

      


      (d) Information
        on Company.
        Such
        Subscriber has been furnished with or has had access at the EDGAR Website
        of the
        Commission to the Company's audited financial statements for the period ended
        March 31, 2008 (hereinafter referred to collectively as the "Reports").
        Such
        financial statements were prepared pursuant to Generally Accepted Accounting
        Principles in the United States and fairly present in all material respects
        the
        financial position of the Company and its consolidated subsidiaries, if any,
        as
        of and for the dates thereof and the results of operations and cash flows
        for
        the periods then ended, subject to normal, immaterial adjustments. In addition,
        such
        Subscriber may have received in writing from the Company such other information
        concerning its operations, financial condition and other matters as such
        Subscriber has requested in writing, identified thereon as OTHER WRITTEN
        INFORMATION (such other information is collectively, the "Other
        Written Information"),
        and
        considered all factors such
        Subscriber deems material in deciding on the advisability of investing in
        the
        Securities. 


      
        
           

        

        
          2

          
            

          

        

        
           

        

      


      (e) Information
        on Subscriber.
        Such
        Subscriber is, and will be at the time of the conversion of the Notes, 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 such
        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.
        Such
        Subscriber has the authority and is duly and legally qualified to purchase
        and
        own the Securities. Such
        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 such
        Subscriber is accurate.

       

      (f) Purchase
        of Notes and Warrants.
        On the
        Closing Date, such
        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.
        Such
        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
such
        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.
        Such
        Subscriber will comply with all applicable rules and regulations in connection
        with the sales of the Securities including laws relating to short
        sales.

       

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

       

      "THE
        ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
        BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
        SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
        OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
        FOR
        THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
        OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
        ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
        UNLESS
        SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
        FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
        ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
        SECURITIES."


      
        
           

        

        
          3

          
            

          

        

        
           

        

      


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

      or
        similar legend:

       

      "NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
        (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
        FORM,
        THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
        TO
        RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
        SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
        OTHER
        LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."

      


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

       

      "NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
        (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
        FORM,
        THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
        TO
        RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
        SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
        OTHER
        LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
        "

       

      (k) Communication
        of Offer.
        The
        offer to sell the Securities was directly communicated to such Subscriber
        by the
        Company. At no time was such 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.


      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      (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
        such
        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 such Subscriber has full 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 such Subscriber relating
        hereto.

      


      (m) Restricted
        Securities.
        Such
        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, or unless an exemption
        from
        registration is available. 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 includes each Subsidiary 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.

      


      (n) No
        Governmental Review.
        Such
        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 only as to such Subscriber that the foregoing
        representations and warranties are true and correct as of the date hereof
        and,
        unless such 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.

       

      (q) Mandatory
        Conversion Representations.
        In
        connection with Section 2.1 of the Note, Subscriber makes all of the customary
        Subscriber representations to the Company.

       

      5. Company
        Representations and Warranties.
        The
        Company represents and warrants to and agrees with each Subscriber
        that:

       

      (a) Due
        Incorporation.
        The
        Company is a corporation or other entity duly incorporated or organized,
        validly
        existing and in good standing under the laws of the jurisdiction of its
        incorporation or organization and has the requisite corporate power to own
        its
        properties and to carry on its business as presently
        conducted. The Company is duly qualified as a foreign corporation to do business
        and is in good standing in each jurisdiction where the nature of the business
        conducted or property owned by it makes such qualification necessary, other
        than
        those jurisdictions in which the failure to so qualify would not have a Material
        Adverse Effect. For purposes of this Agreement, a “Material
        Adverse Effect”
shall
        mean a material adverse effect on the financial condition, results of
        operations, prospects, properties or business of the Company and its
        Subsidiaries 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 30% 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. The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
        5(a).

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

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

       

      (c) Authority;
        Enforceability.
        This
        Agreement, the Note, the Warrants, Escrow 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 Subsidiaries
        (as applicable) and are valid and binding agreements of the Company and
        Subsidiaries, and are 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 Subsidiaries or other equity interest in
        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
        Business Day preceding the Closing Date is set forth on Schedule
        5(d).

       

      (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, or 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. The Transaction Documents
        and the Company’s performance of its obligations thereunder has been unanimously
        approved by the Company’s Board of Directors.

       

      (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) 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

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (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 except
        as described herein; or

       

      (iii) except
        as
        described in Schedule
        5(d),
        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) will
        result in the triggering of any piggy-back registration rights of any person
        or
        entity holding securities of the Company or having the right to receive
        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 upon exercise of the
        Warrants, the Warrant Shares will be duly and validly issued, fully paid
        and
        non-assessable;

       

      (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;

       

      (iv) will
        not
        subject the holders thereof to personal liability by reason of being such
        holders; and

       

      (v) assuming
        the representations warranties of the Subscribers as set forth in Section
        4
        hereof are true and correct, 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 in the
        Reports, 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) 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.

       

      (j) Information
        Concerning Company.
        The
        Reports and Other Written Information contain all material information relating
        to the Company and its operations and financial condition as of their respective
        dates which information is required to be disclosed therein. Since the date
        of
        the financial statements included in the Reports, 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 and Other Written Information 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,
        taken
        as a whole, not misleading in light of the circumstances when
        made.


      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      (k) 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 if so required only if
        contemporaneous notice of such instruction is given to the
        Subscriber.

       

      (l) 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) not in violation of any statute,
        rule
        or regulation of any governmental authority which violation would have a
        Material Adverse Effect.

       

      (m) No
        Integrated Offering.
        Neither
        the Company, nor any of its Affiliates, nor any person acting on its or their
        behalf, has directly or indirectly made any offers or sales of any security
        or
        solicited any offers to buy any security under circumstances that would 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. Neither the Company
        nor
        any of its Affiliates will take any action or steps that would cause the
        offer
        or issuance of the Securities to be integrated with other offerings or issuances
        which would impair the exemptions relied upon in this Offering or the Company’s
        ability to timely comply with its obligations hereunder. 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 that would impair
        the
        exemptions relied upon in this Offering or the Company’s ability to timely
        comply with its obligations hereunder.

       

      (n) 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.

       

      (o) No
        Undisclosed Liabilities.
        The
        Company has no liabilities or obligations which are material, individually
        or in
        the aggregate, other than those incurred in the ordinary course of the Company
        businesses since the date of the most recent financial statements of the
        Company
        contained in the Reports and which, individually or in the aggregate, would
        reasonably be expected to have a Material Adverse Effect,
        except
        as disclosed in the Reports or on Schedule
        5(o).

       

      (p) No
        Undisclosed Events or Circumstances.
        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.

       

      (q) 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 in the Reports or 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.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      (r) 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.

       

      (s) No
        Disagreements with Accountants and Lawyers.
        There
        are no material disagreements of any kind presently existing, or reasonably
        anticipated by the Company to arise between the Company and the accountants
        and
        lawyers presently employed by the Company, including but not limited to disputes
        or conflicts over payment owed to such accountants and lawyers, nor have
        there
        been any such disagreements during the two years prior to the Closing
        Date.

      


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

       

      (u) Foreign
        Corrupt Practices.
        Neither
        the Company, nor to the knowledge of the Company, any agent or other person
        acting on behalf of the Company, has (i) directly or indirectly, used any
        funds
        for unlawful contributions, gifts, entertainment or other unlawful expenses
        related to foreign or domestic political activity, (ii) made any unlawful
        payment to foreign or domestic government officials or employees or to any
        foreign or domestic political parties or campaigns from corporate funds,
        (iii)
        failed to disclose fully any contribution made by the Company (or made by
        any
        person acting on its behalf of which the Company is aware) which is in violation
        of law, or (iv) violated in any material respect any provision of the Foreign
        Corrupt Practices Act of 1977, as amended.

      


      (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 Company transfer agent is set forth on
Schedule
        5(v)
        hereto.

      


      (w) Reporting
        Company.
        The
        Company is a publicly-held company subject to reporting obligations pursuant
        to
        Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
        Act")
        and
        has a class of Common Stock registered pursuant to Section 12(g) of the 1934
        Act. The Company is not a “shell company” as that term is employed in the 1933
        Act.

      


      (x) Solvency.
        Based
        on the financial condition of the Company as of the Closing Date after giving
        effect to the receipt by the Company of the proceeds from the sale of the
        Notes
        hereunder, (i) the Company’s fair saleable value of its assets exceeds the
        amount that will be required to be paid on or in respect of the Company’s
        existing debts and other liabilities (including known contingent liabilities)
        as
        they mature; (ii) the Company’s assets do not constitute unreasonably small
        capital to carry on its business for the current fiscal year as now conducted
        and as proposed to be conducted including its capital needs taking into account
        the particular capital requirements of the business conducted by the Company,
        and projected capital requirements and capital availability thereof; and
        (iii)
        the current cash flow of the Company, together with the proceeds the Company
        would receive, were it to liquidate all of its assets, after taking into
        account
        all anticipated uses of the cash, would be sufficient to pay all amounts
        on or
        in respect of its debt when such amounts are required to be paid. The Company
        does not intend to incur debts beyond its ability to pay such debts as they
        mature (taking into account the timing and amounts of cash to be payable
        on or
        in respect of its debt).

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      


      (y) Company
        Predecessor and Subsidiaries.
        The
        Company makes each of the representations contained in Sections 5(a), (b),
        (c),
        (d), (e), (f), (h), (j), (l), (o), (p), (q), (s), (t), and (u) of this
        Agreement, as same relate to the Subsidiary of the Company. 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 and its predecessors. The Company represents that it
        owns
        100% of the outstanding equity of the Subsidiaries and rights to receive
        equity
        of the Subsidiaries free and clear of all liens, encumbrances and claims,
        except
        as set forth on Schedule
        5(d).
        No
        person or entity other than the Company has the right to receive any equity
        interest in the Subsidiaries.

      


      (z) 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.

       

      (AA) Survival.
        The
        foregoing representations and warranties shall survive the Closing
        Date.

       

      6. Regulation
        D Offering/Legal Opinion.
        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 the Subscribers 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
        D.
        The
        Company will provide, at the Company's expense, such other legal opinions,
        if
        any, as are reasonably necessary in each Subscriber’s opinion for the issuance
        and resale of the Common Stock issuable upon exercise of the Warrants pursuant
        to an effective registration statement, Rule 144 under the 1933 Act or an
        exemption from registration.

       

      7. Redemption.
        The
        Notes shall not be redeemable or callable by the Company except as described
        in
        the Note. 

      


      8. Commissions/Due
        Diligence Fee/Legal Fees.

      


      (a)  Commissions.
        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 except as described on Schedule
        8(a)
        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. The Company represents that there are no parties entitled
        to receive fees, commissions, or similar payments in connection with the
        offering described in this Agreement except as described on Schedule
        8(a)
        hereto.

       

      (b) Due
        Diligence Fee.
        The
        Company will pay a due diligence fee (“Due
        Diligence Fee”)
        to the
        lead investor or its designees (each a “Due
        Diligence Fee Recipient”)
        as
        described on Schedule
        8(b).
        The
        aggregate Due Diligence Fee shall be equal to ten percent (10%) of the Purchase
        Price. The Due Diligence Fee will be payable in the form of a Note substantially
        similar to the Notes issued to Subscribers.

       

      (c) Subscriber’s
        Legal Fees.
        The
        Company shall pay to Grushko & Mittman, P.C., a cash fee of $7,500
        (“Cash
        Legal Fees”)
        as
        reimbursement for services rendered to the Subscribers in connection with
        this
        Agreement and the purchase and sale of the Notes (the “Offering”).
        The
        Subscribers’ Legal Fees and expenses will be payable out of funds held pursuant
        to the Escrow Agreement on the Closing Date. Grushko & Mittman, P.C. will be
        reimbursed on the Closing Date for all lien searches, filing fees, and printing
        and shipping costs for the closing statements to be delivered to
        Subscribers.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      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 twenty-four hours after it 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/Quotation.
        The
        Company shall promptly secure the quotation or listing of the Shares and
        Warrant
        Shares upon the Principal Market each national securities exchange, or automated
        quotation system upon which they are or become eligible for quotation or
        listing
        (subject to official notice of issuance) and shall maintain same so long
        as any
        Securities are outstanding. The Company will maintain the quotation or listing
        of its Common Stock on the American Stock Exchange, Nasdaq Capital Market,
        Nasdaq Global Select Market, Nasdaq Global Market, the 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 and the Closing
        Date, the Bulletin Board is and will be 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 the Subscribers.

       

      (d) Filing
        Requirements.
        From
        the
        date of this Agreement and until the last to occur of (i) two (2) years after
        the Closing Date, (ii) until all the Shares and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to a registration statement
        or
        pursuant to Rule 144(b)(1), or (iii) the Notes are no longer outstanding
        (the
        date of occurrence of the last such event being the “End
        Date”),
        the
        Company will (A) cause its Common Stock 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, and (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. The Company will not 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 its reporting and filing obligations
        under
        said acts until the End Date. Until the End Date, the Company will 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 as described on
        Schedule
        9(e).
        Except
        as described 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 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.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      (f) DTC
        Program.
        At all
        times that Notes and Warrants are outstanding, the Company will employ as
        the
        transfer agent for the Common Stock a participant in the Depository Trust
        Company Automated Securities Transfer Program.

       

      (g) Taxes.
        From
        the date of this Agreement and until the End Date, 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.

       

      (h) Insurance.
        From
        the date of this Agreement and until the End Date, 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 End Date, 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 End Date, 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.

       

      (k) Intellectual
        Property.
        From
        the date of this Agreement and until the End Date, 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 End Date, 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 End Date, the Company agrees that except
        in
        connection with a Form 8-K and the registration statement or statements
        regarding the Subscribers’ securities or in correspondence with the SEC
        regarding same, it will not disclose publicly or privately the identity of
        the
        Subscribers unless expressly agreed to in writing by a Subscriber or 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 undertakes to file
        a Form
        10-SB, Form 8-K or make a public announcement describing the Offering not
        later
        than the business day after the Closing Date. Prior to filing or announcement,
        such Form 10-SB, Form 8-K or public announcement will be provided to Subscribers
        for their review and approval. In the Form 10-SB, Form 8-K or public
        announcement, the Company will specifically disclose the amount of Common
        Stock
        outstanding immediately after the Closing. Upon  delivery by the
        Company to the Subscribers after the Closing Date of any notice or information,
        in writing, electronically or otherwise, and while a Note is held by such
        Subscribers, unless the  Company has in good faith determined that the
        matters relating to such notice do not constitute material, nonpublic
        information relating to the Company or
        Subsidiaries, the Company  shall within one business day after
        any such delivery publicly disclose such  material,  nonpublic 
information on a Report on Form 10-SB, Form 8-K or
        otherwise. In
        the event that the Company believes that a
        notice or communication to a Subscriber contains material, nonpublic
        information, relating to the Company or Subsidiaries, the Company shall so
        indicate to such Subscriber contemporaneously with delivery of such notice
        or
        information. In the absence of any such indication, such Subscriber shall
        be allowed to presume that all matters relating to such notice and information
        do not constitute material, nonpublic information relating to the Company
        or its Subsidiaries.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      (n) Non-Public
        Information.
        The
        Company covenants and agrees that except for the Reports, Other Written
        Information and schedules and exhibits to this Agreement, neither it nor
        any
        other person acting on its behalf will at any time 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 keep such information in confidence. The Company
        understands and confirms that each Subscriber shall be relying on the foregoing
        representations in effecting transactions in securities of the
        Company.

      (o) Negative
        Covenants.
        So long
        as a Note is outstanding, without the consent of the Subscribers, the Company
        will not and will not permit any of its Subsidiaries to directly or
        indirectly:

      


      (i) 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 except for:
        (A) the
        Excepted Issuances (as defined in Section 12 hereof), and (B) (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; and (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”);

      



      
        
           

        

        
          13

          
            

          

        

        
           

        

      


      (ii) amend
        its
        certificate of incorporation, bylaws or its charter documents so as to
        materially and adversely affect any rights of the Subscriber;

      


      (iii) repay,
        repurchase or offer to repay, repurchase or otherwise acquire or make any
        dividend or distribution in respect of any of its Common Stock, preferred
        stock,
        or other equity securities other than to the extent permitted or required
        under
        the Transaction Documents.

       

      (iv) engage
        in
        any transactions with any officer, director, employee or any Affiliate of
        the
        Company, including any contract, agreement or other arrangement providing
        for
        the furnishing of services to or by, providing for rental of real or personal
        property to or from, or otherwise requiring payments to or from any officer,
        director or such employee or, to the knowledge of the Company, any entity
        in
        which any officer, director, or any such employee has a substantial interest
        or
        is an officer, director, trustee or partner, in each case in excess of $100,000
        other than (i) for payment of salary or consulting fees for services rendered,
        (ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
        for
        other employee benefits, including stock option agreements under any stock
        option plan of the Company; or

       

      (v) prepay
        or
        redeem any financing related debt or past due obligations outstanding as
        of the
        Closing Date.     

       

      (p) Seniority.
        Except
        for Permitted Liens and as otherwise provided for herein, until the Notes
        are
        fully satisfied or converted, the Company shall not grant nor allow any security
        interest to be taken in the assets of the Company or any Subsidiary; nor
        issue
        any debt, equity or other instrument which would give the holder thereof
        directly or indirectly, a right in any assets of the Company or any Subsidiary,
        superior to any right of the holder of a Note in or to such assets.

       

      (q) Notices.
        For so
        long as the Subscribers hold any Securities, the Company will maintain as
        United
        States address and United States fax number for notices purposes under the
        Transaction Documents.

       

      10. Covenants
        of the Company Regarding Indemnification.
        The
        Company agrees to indemnify, hold harmless, reimburse and defend the
        Subscribers, the Subscribers' officers, directors, agents, Affiliates, members,
        managers, 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 breach of any representation or 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 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.

       

      11.1. Delivery
        of Unlegended Shares.

       

      (a) Within
        seven business days (such seventh 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 a registration statement, if any, or Rule 144, (ii) a representation
        that the prospectus delivery requirements, or the requirements of Rule 144,
        as
        applicable and if required, have been satisfied, (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 a 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(i) above (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 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. In the event that the Shares
        are
        sold in a manner that complies with an exemption from registration, the Company
        will promptly instruct its counsel to issue to the Company’s transfer agent an
        opinion permitting removal of the legend indefinitely if pursuant to Rule
        144(b)(1).


      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      (b) In
        lieu
        of delivering physical certificates representing the Unlegended Shares, 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 will cause its transfer agent
        to
        electronically transmit the Unlegended Shares by crediting the account of
        Subscriber’s prime broker with the Depository Trust Company through its Deposit
        Withdrawal Agent Commission system, if such transfer agent participates in
        such
        DWAC 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 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. In the event damages are payable pursuant to the foregoing sentence,
        then the Subscriber may elect to receive liquidated damages under this Section
        11.1(c) or Section 12(g) below. If during any 360 day period, the Company
        fails
        to deliver Unlegended Shares as required by this Section 11.1 for an aggregate
        of 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 the greater of (i) 120%, or (ii) a fraction in which the numerator is
        the
        highest closing price of the Common Stock during the aforedescribed 30 day
        period and the denominator of which is the purchase price of the Shares or
        exercise price of such Warrant Shares during such 30 day period, multiplied
        by
        the purchase price of the Shares or exercise price of such Warrant Shares
        (“Unlegended
        Redemption Amount”).
        The
        Company shall pay any payments incurred under this Section in immediately
        available funds upon demand.

      


      (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 three business days after the Unlegended Shares Delivery
        Date
        and the Subscriber or a broker on the Subscriber’s behalf, 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.

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      


      (e) In
        the
        event a Subscriber shall request delivery of Unlegended Shares as described
        in
        Section 11.1 or Warrant Shares upon exercise of Warrants and the Company
        is
        required to deliver such Unlegended Shares pursuant to Section 11.1 or the
        Warrant Shares pursuant to the Warrant, the Company may not refuse to deliver
        Unlegended Shares or Warrant 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 by the Company or at the Company’s request or with the
        Company’s assistance,
        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 Shares
        and
        Warrant Shares which are subject to the injunction or temporary restraining
        order, which bond shall remain in effect until the final unappealable
        disposition of the 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.

       

      11.2. In
        the
        event commencing one hundred and eighty-one (181) days after the Closing
        Date
        and ending five years thereafter, the Subscriber is not permitted to resell
        any
        of the Shares or Warrant Shares without any restrictive legend or if such
        sales
        are permitted but subject to volume limitations or further restrictions on
        resale as a result of the unavailability to Subscriber of Rule 144(b)(1)
        under
        the 1933 Act or any successor rule (a “144
        Default”),
        for
        any reason except for Subscriber’s status as an Affiliate or “control person” of
        the Company, then the Company shall pay such Subscriber as liquidated damages
        (“Liquidated
        Damages”)
        and
        not as a penalty an amount equal to one percent (1%) for the first day of
        such
        occurrence and one percent (1%) for each thirty (30) days (or such lesser
        pro-rata amount for any period less than thirty (30) days) thereafter of
        the
        purchase price of the Shares or Warrant Shares owned by the Subscriber during
        the pendency of the 144 Default.

       

      12. 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: Attitude Drinks Inc.,
        11300
        U.S. Highway
        1, Suite 207, North Palm Beach, Florida 33408, Attn: Roy Warren, CEO and
        President, telecopier: (561) 799-5039, with a copy by telecopier only to:
        Weed
& Co., LLP, 4695 MacArthur Court, Suite 1430, Newport Beach, CA 92660, Attn:
        Rick Weed, Esq., telecopier number: (949) 475-9087, 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: (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. 

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      


       

      (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 principles of conflicts of laws. Any
        action
        brought by either party against the other concerning the transactions
        contemplated by this Agreement shall be brought only in the state courts
        of New
        York or in the federal courts located in the state and county of New York.
        The
        parties to this Agreement hereby irrevocably waive any objection to jurisdiction
        and venue of any action instituted hereunder and shall not assert any defense
        based on lack of jurisdiction or venue or based upon forum
        non conveniens.
        The
        parties executing this Agreement and other agreements referred to herein
        or
        delivered in connection herewith on behalf of the Company agree to submit
        to the
        in personam jurisdiction of such courts and hereby irrevocably 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.
        Each party hereby irrevocably waives personal service of process and consents
        to
        process being served in any suit, action or proceeding in connection with
        this
        Agreement or any other Transaction Document by mailing a copy thereof via
        registered or certified mail or overnight delivery (with evidence of delivery)
        to such party at the address in effect for notices to it under this Agreement
        and agrees that such service shall constitute good and sufficient service
        of
        process and notice thereof. Nothing contained herein shall be deemed to limit
        in
        any way any right to serve process in any other manner permitted by
        law.

       

      (e) Specific
        Enforcement, Consent to Jurisdiction.
        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 seek an injunction
        or
        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 12(d) hereof, the Company hereby irrevocably 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) 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 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.


      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      (g) 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.

       

      (h) Consent.
        As used
        in the Agreement, “consent of the Subscribers” or similar language means the
        consent of holders of not less than 75% of the total of the Shares issued
        and
        issuable upon conversion of outstanding Notes owned by Subscribers on the
        date
        consent is requested.

       

      (i) Limit
        on Liability.
        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 Shares.

       

      (j) Equal
        Treatment.
        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 Subscribers and their
        permitted successors and assigns.

       

      (k) Maximum
        Payments.
        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.

       

      (l) Calendar
        Days.
        All
        references to “days” in the Transaction Documents shall mean calendar days
        unless otherwise stated. The terms “business days” and “trading days” shall mean
        days that the New York Stock Exchange is open for trading for three or more
        hours. Time periods shall be determined as if the relevant action, calculation
        or time period were occurring in New York City. Any deadline that falls on
        a
        non-business day in any of the Transaction Documents shall be automatically
        extended to the next business day and interest, if any, shall be calculated
        and
        payable through such extended period.

       

      (m) Successor
        Laws.
        References in the Transaction Documents to laws, rules, regulations and forms
        shall also include successors to and functionally equivalent replacements
        of
        such laws, rules, regulations and forms. A successor rule to 144(b)(1)(i)
        shall
        include any rule that would be available to a non-Affiliate of the Company
        for
        the sale of Common Stock not subject to volume restrictions and after a six
        month holding period. 

       

      [THIS
        SPACE INTENTIONALLY LEFT BLANK]


      
        
           

        

        
          18

          
            

          

        

        
           

        

      


       

      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.

      

        
          	 	
                  ATTITUDE
                    DRINKS INC.

                
	 	
                  a
                    Delaware corporation

                
	 	 	 	 
	 	 	 	 
	 	
                  By:

                	    
	 
	 	
                  Name:
                    

                
	 	
                  Title:
                    

                
	 	 	 	 
	 	
                  Dated:
                    September ____, 2008

                


        

         

      

      


      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              
	
                ALPHA
                  CAPITAL ANSTALT

                Pradafant
                  7

                9490
                  Furstentums

                Vaduz,
                  Lichtenstein

                Fax:
                  011-42-32323196

                 

                 

                 

                 

                _______________________________________________

                (Signature)

                By:
                  

              	 	
                $200,000.00

              


      

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      


       

      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.

       

      
        	 	
                ATTITUDE
                  DRINKS INC.

              
	 	
                a
                  Delaware corporation

              
	 	 	 	 
	 	 	 	 
	 	
                By:

              	    
	 
	 	
                Name:
                  

              
	 	
                Title:
                  

              
	 	 	 	 
	 	
                Dated:
                  September ____, 2008

              


      

       

      


      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              
	
                Name
                  of Subscriber:

                ______________________________________________

                Address:
                  _______________________________________________

                 

                _______________________________________________

                 

                Fax
                  No.: _______________________________________________

                 

                Taxpayer
                  ID# (if applicable): ______________________

                 

                 

                 

                _______________________________________________

                (Signature)

                By:
                  

              	 	 


      

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      


      LIST
        OF EXHIBITS AND SCHEDULES

      

        
          	
                  Exhibit
                    A

                	
                  Form
                    of Note

                
	
                   

                  Exhibit
                    B

                	
                   

                  Form
                    of Warrant

                
	
                   

                  Exhibit
                    C

                	
                   

                  Escrow
                    Agreement

                
	
                   

                  Exhibit
                    D

                	
                   

                  Form
                    of Legal Opinion

                
	
                   

                  Schedule
                    5(a)

                	
                   

                  Subsidiaries

                
	
                   

                  Schedule
                    5(d)

                	
                   

                  Additional
                    Issuances / Capitalization / Reset Rights

                
	
                   

                  Schedule
                    5(o)

                	
                   

                  Undisclosed
                    Liabilities

                
	
                   

                  Schedule
                    5(v)

                	
                   

                  Transfer
                    Agent

                
	
                   

                  Schedule
                    8(a)

                	
                   

                  Placement
                    Fees

                
	
                   

                  Schedule
                    8(b)

                	
                   

                  Due
                    Diligence Fee

                
	
                   

                  Schedule
                    9(e)

                	
                   

                  Use
                    of Proceeds

                


        

      

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

       

      SCHEDULES

       

      Schedule
        5(a) Subsidiaries

      


      Attitude
        Drink Company, Inc.,
        a
        Delaware corporation, is a wholly owned subsidiary and has 50,000,000 shares
        of
        common stock, $.001 par value, of which 100,000 shares are issued and
        outstanding and held of record by the Company 

       

       

      SCHEDULE
        5(d) Additional Issuances / Capitalization / Reset Rights

      


      Capital
        Structure

      


      As
        of
        September 19, 2008, the Company has 120,000,000 shares consisting of 100,000,000
        shares of common stock, $.001 par value, of which 11,065,488 shares are issued
        and outstanding and 20,000,000 shares of preferred stock, $.001 par value,
        of
        which no shares are issued and outstanding.

      


      The
        Company created the 2007 Stock Compensation and Incentive Plan and reserved
        1,000,000 shares of its common stock for issuance in the form of stock options
        or shares to employees, consultants and advisors that perform services for
        the
        Company. As of September 19, 2008, 813,888 shares have been issued from this
        plan, leaving 186,112 shares to be issued in the future based on the approval
        of
        the Board of Directors. In addition, the Company issued 350,000 stock options
        at
        an exercise price of $.65 to Nutraceutical Discoveries as part of a sub-license
        agreement.

      


      The
        Company has a binding agreement with an NHRA drag race team for the 2008
        NHRA
        racing season in which the company will pay the racing team a total of
        $1,300,000 with $300,000 in cash and the rest to be paid in shares of common
        stock. To date, 1,000,000 shares have been issued towards payment of this
        commitment. Additional shares may be issued to meet the company’s obligations at
        the end of the current racing season (November, 2008).

      


      Common
        Stock Warrants:

       

      As
        of
        September 19, 2008, the Company had the following outstanding
        warrants:

      


      
        	
                 

              	 	
                Grant Date

              	 	
                Expiration Date

              	 	
                Warrants/

                Options

                Granted

              	 	
                Exercise Price

              	 
	
                Issued
                  Class A Warrants:

              	 	
                 

              	 	
                 

              	 	
                 

              	 	
                 

              	 
	
                October,
                  2007 Convertible Notes Financing

              	 	 	
                10/23/2007

              	 	 	
                10/22/2012

              	 	 	
                2,818,181

              	 	 	
                0.50

              	 
	
                January,
                  2008 Investment Banker Agreement

              	 	 	
                1/1/2008

              	 	 	
                12/31/2012

              	 	 	
                125,000

              	 	 	
                0.50

              	 
	
                February,
                  2008 Convertible Notes Financing

              	 	 	
                2/15/2008

              	 	 	
                2/14/2013

              	 	 	
                1,515,151

              	 	 	
                0.50

              	 
	
                April,
                  2008 Bridge Loans Financing

              	 	 	
                4/2-15/2008

              	 	 	
                4/1-13/2011

              	 	 	
                500,000

              	 	 	
                0.50

              	 
	
                April,
                  2008 Finders Fees

              	 	 	
                4/14/2008

              	 	 	
                4/13/2013

              	 	 	
                62,500

              	 	 	
                0.50

              	 
	
                May,
                  2008 Investment Banker Fees

              	 	 	
                5/19/2008

              	 	 	
                5/18/2013

              	 	 	
                37,500

              	 	 	
                0.50

              	 
	
                May,
                  2008 Bridge Loan

              	 	 	
                5/19/2008

              	 	 	
                5/18/2011

              	 	 	
                100,000

              	 	 	
                0.50

              	 
	
                June,
                  2008 Debt Extensions

              	 	 	
                6/23/2008

              	 	 	
                6/22/2011

              	 	 	
                150,000

              	 	 	
                0.50

              	 
	
                June,
                  2008 Debt

              	 	 	
                6/26/2008

              	 	 	
                6/25/2013

              	 	 	
                303,030

              	 	 	
                0.50

              	 
	
                July
                  2008 - Steven Stock

              	 	 	
                7/14/2008

              	 	 	
                7/14/2011

              	 	 	
                100,000

              	 	 	
                0.50

              	 
	
                July
                  2008 - Allen Hawley

              	 	 	
                7/14/2008

              	 	 	
                7/14/2011

              	 	 	
                50,000

              	 	 	
                0.50

              	 
	
                August
                  2008 - H. John Buckman

              	 	 	
                8/8/2008

              	 	 	
                8/7/2011

              	 	 	
                100,000

              	 	 	
                0.50

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Total
                  issued Class A Warrants

              	 	 	

              	 	 	

              	 	 	
                5,861,362
                  

              	 	 	

              	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Other
                  Issued Warrants:

              	 	 	

              	 	 	

              	 	 	

              	 	 	

              	 
	
                Supply
                  Agreement

              	 	 	
                4/16/2008

              	 	 	
                4/15/2013

              	 	 	
                100,000

              	 	 	
                0.75

              	 


      

       

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

      
        
          	
                   

                	 	
                  Warrants/

                  Options

                  Granted

                	 	
                  Exercise Price

                	 
	
                  Unissued
                    Class B Warrants (i):

                	 	
                   

                	 	
                   

                	 
	
                  October,
                    2007 Convertible Notes Financing

                	 	 	
                  2,818,181

                	 	 	
                  0.75

                	 
	
                  January,
                    2008 Investment Banker Financing

                	 	 	
                  125,000

                	 	 	
                  0.75

                	 
	
                  February,
                    2008 Convertible Notes Financing

                	 	 	
                  1,515,151

                	 	 	
                  0.75

                	 
	
                  April,
                    2008 Bridge Loans Financing

                	 	 	
                  500,000

                	 	 	
                  0.75

                	 
	
                  April,
                    2008 Finders Fees

                	 	 	
                  62,500

                	 	 	
                  0.75

                	 
	
                  May,
                    2008 Investment Banker Fees

                	 	 	
                  37,500

                	 	 	
                  0.75

                	 
	
                  May,
                    2008 Bridge Loan

                	 	 	
                  100,000

                	 	 	
                  0.75

                	 
	
                  June,
                    2008 Debt Extensions

                	 	 	
                  150,000

                	 	 	
                  0.75

                	 
	
                  June,
                    2008 Debt

                	 	 	
                  303,030

                	 	 	
                  0.75

                	 
	
                  July
                    2008 - Steven Stock

                	 	 	
                  100,000

                	 	 	
                  0.75

                	 
	
                  July
                    2008 - Allen Hawley

                	 	 	
                  50,000

                	 	 	
                  0.75

                	 
	
                  August
                    2008 - H. John Buckman

                	 	 	
                  100,000

                	 	 	
                  0.75

                	 
	
                  Total
                    issued Class B Warrants

                	 	 	
                  5,861,362

                	 	 	

                	 


        

      

      


      (i)
        When
        Class A warrants are exercised, holders of these warrants will receive an
        equal
        number of Class B warrants with an exercise price of $.75.

       

      
        	
                
                  Other
                    Unissued Warrants-Engagement fees

                

              	 	 	
                
                  250,000

                

              	 	 	
                0.50

              	 
	 	 	 	 	 	 	
              	 
	
                TOTAL
                  WARRANTS

              	 	 	
                12,072,724

              	 	 	

              	 


      

      
         

      

      
        
           

        

        
          23

          
            

          

        

        
           

        

      


      SCHEDULE
        5(o) Undisclosed Liabilities

      


      None

      


      


      SCHEDULE
        5(v) Transfer Agent

      


      The
        current transfer agent is 

      


      Florida
        Atlantic Stock Transfer

      Attention:
        Mr. Rene Garcia, President

      7130
        Nob
        Hill Road

      Tamarac,
        FL 33321

      


      Telephone
        954-726-4954

      Facsimile
        954-726-6305

      


      The
        transfer agent is NOT a participant in the DTC Automated Securities Transfer
        Program. See Section 9(f) of the Subscription Agreement.

       

       

      SCHEDULE
        8(a) Placement Fees

       

      None.

       

      SCHEDULE
        8(b) Due Diligence Fee

       

      10%
        of
        Purchase Price payable in the form of the Notes issued to
        Subscribers.

       

      SCHEDULE
        8(c) Subscriber’s Legal Fees

       

      $7,500,
        plus out of pocket for wires, lien search, shipping, etc.


      
        
           

        

        
          24

          
            

          

        

        
           

        

      

       

      SCHEDULE
        9(e) Use of Proceeds

       

      
        	
                Gross
                  Amount

              	
                Closing

              
	 	
                $300,000

              
	
                less
                  Due Diligence Fee

              	
                $0
                  paid by issuance of note 

              
	
                less
                  Subscriber’s Legal Fees

              	
                $7,500
                  

              
	 	 
	
                Net
                  to Company

              	
                $292,500

              
	
                Trade
                  Creditors

              	
                $192,500

              
	
                Working
                  Capital

              	
                $100,000

              


      

       

      
        
           

        

        
          25