investment_agreement.htm


    EXHIBIT
      10.1

     

    INVESTMENT
      AGREEMENT

     

    INVESTMENT
      AGREEMENT (this "AGREEMENT"),
      dated as of December 20, 2007 by and between Edgeline Holdings, Inc., a Nevada
      corporation (the "Company"), and Dutchess Private Equities Fund, Ltd., a Cayman
      Islands exempted company (the "Investor").

     

     

    WHEREAS,
      the parties desire that, upon
      the terms and subject to the conditions contained herein, the Investor shall
      invest up to Ten Million dollars ($10,000,000) to purchase the Company's Common
      Stock, $.08 par value per share (the "Common Stock");

     

     

    WHEREAS,
      such investments will be made
      in reliance upon the provisions of Section 4(2) under the Securities Act of
      1933, as amended (the "1933 Act"), Rule 506 of Regulation D, and the rules
      and
      regulations promulgated thereunder, and/or upon such other exemption from the
      registration requirements of the 1933 Act as may be available with respect
      to
      any or all of the investments in Common Stock to be made hereunder; and

     

     

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

     

     

    NOW
      THEREFORE, in consideration of the
      foregoing recitals, which shall be considered an integral part of this
      Agreement, the covenants and agreements set forth hereafter, and other good
      and
      valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the Company and the Investor hereby agree as follows:

     

     

    SECTION
      1. DEFINITIONS.

     

    As
      used
      in this Agreement, the following terms shall have the following meanings
      specified or indicated below, and such meanings shall be equally applicable
      to
      the singular and plural forms of such defined terms.

    


    “1933
      Act” shall have
      the meaning set forth in the preamble of this agreement.

    


    “1934
      Act” shall mean
      the Securities Exchange Act of 1934, as it may be amended.

    


    “Affiliate”
shall
      have
      the meaning specified in Section 5(H), below.

    


    “Agreement”
shall
      mean
      this Investment Agreement.

    “By-laws”
shall
      have the meaning specified
      in Section 4(C).

    


    “Certificate
      of Incorporation” shall
      have the meaning specified in Section 4(C).

    


    “Closing”
shall
      have
      the meaning specified in Section 2(G).

    


    “Closing
      Date” shall
      mean no more than seven (7) Trading Days following the Put Notice Date.

    


    “Common
      Stock” shall
      have the meaning set forth in the preamble of this Agreement.

    


    “Control”
or
“Controls”
shall
      have
      the meaning specified in Section 5(H).

    


    “Effective
      Date” shall
      mean the date the SEC declares effective under the 1933 Act the Registration
      Statement covering the Securities.

    


    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    “Environmental
      Laws”
shall have the meaning specified in Section 4(M).

    


    “Equity
      Line Transaction
      Documents” shall mean this Agreement, the Registration Rights
      Agreement.

    


    “Execution
      Date” shall
      mean the date indicated in the preamble to this Agreement.

    


    “Indemnities”
shall
      have the meaning specified in Section 11.

    


    “Indemnified
      Liabilities” shall have the meaning specified in Section 11.

    


    “Ineffective
      Period”
shall mean any period of time that the Registration Statement or any
      Supplemental Registration Statement (as defined in the Registration Rights
      Agreement between the parties) becomes ineffective or unavailable for use for
      the sale or resale, as applicable, of any or all of the Registrable Securities
      (as defined in the Registration Rights Agreement) for any reason (or in the
      event the prospectus under either of the above is not current and deliverable)
      during any time period required under the Registration Rights Agreement.

    


    “Investor”
shall
      have
      the meaning indicated in the preamble of this Agreement.

    


    “Material
      Adverse
      Effect” shall have the meaning specified in Section 4(A).

    


    “Maximum
      Common Stock
      Issuance” shall have the meaning specified in Section 2(H).

    


    “Minimum
      Acceptable
      Price” with respect to any Put Notice Date shall mean seventy-five
      percent (75%) of the lowest closing bid prices for the three (3) Trading Day
      period immediately preceding each Put Notice Date.”

    


     “Open
      Market Adjustment
      Amount” shall have the meaning specified in Section 2(I).

    


    "Open
      Market Purchase"
      shall have the meaning specified in Section 2(I)

    


    “Open
      Market Share
      Purchase” shall have the meaning specified in Section 2(I).

    


    “Open
      Period” shall
      mean the period beginning on and including the Trading Day immediately following
      the Effective Date and ending on the earlier to occur of (i) the date which is
      thirty-six (36) months from the Effective Date; or (ii) termination of the
      Agreement in accordance with Section 9, below.

    


    “Pricing
      Period” shall
      mean the period beginning on the Put Notice Date and ending on and including
      the
      date that is five (5) Trading Days after such Put Notice Date.

    


    “Principal
      Market”
shall mean the American Stock Exchange, Inc., the National Association
      of
      Securities Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National
      Market System or the NASDAQ SmallCap Market, whichever is the principal market
      on which the Common Stock is listed.

    


    “Prospectus”
shall
      mean the prospectus, preliminary prospectus and supplemental prospectus used
      in
      connection with the Registration Statement.

    


    “Purchase
      Amount”
shall mean the total amount being paid by the Investor on a particular
      Closing
      Date to purchase the Securities.

    


    “Purchase
      Price” shall
      mean ninety-six percent (96%) of the lowest VWAP, as defined below of the Common
      Stock during the Pricing Period.

    


    “Put”
shall
      have the meaning set forth
      in Section 2(B)(1) hereof.  

    


    “Put
      Amount” shall
      have the meaning set forth in Section 2(B)(1) hereof.

    


    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    “Put
      Notice” shall
      mean a written notice sent to the Investor by the Company stating the Put Amount
      in U.S. dollars the Company intends to sell to the Investor pursuant to the
      terms of the Agreement and stating the current number of Shares issued and
      outstanding on such date.

    


    “Put
      Notice Date”
shall mean the Trading Day, as set forth below, immediately following
      the day on
      which the Investor receives a Put Notice, however a Put Notice shall be deemed
      delivered on (a) the
      Trading Day it is received by facsimile or otherwise by the Investor if such
      notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding
      Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern
      Time on a Trading Day.  No Put Notice may be deemed delivered on a day
      that is not a Trading Day.

    


    “Put
      Restriction”
shall mean the days between the beginning of the Pricing Period and
      Closing
      Date.  During this time, the Company shall not be entitled to deliver
      another Put Notice.

    


    “Put
      Shares Due” shall
      have the meaning specified in Section 2(I).

    


    “Registration
      Period”
shall have the meaning specified in Section 5(C), below.

    


    “Registration
      Rights
      Agreement” shall have the meaning set forth in the recitals,
      above.

    


    “Registration
      Statement” means the registration statement of the Company filed under
      the 1933 Act covering the Common Stock issuable hereunder.

    


    “Related
      Party” shall
      have the meaning specified in Section 5(H).

    


    “Resolution”
shall
      have the meaning specified in Section 8(E).

    


    “SEC”
shall
      mean the
      U.S. Securities & Exchange Commission.

    


    “SEC
      Documents” shall
      have the meaning specified in Section 4(F).

    


    “Securities”
shall
      mean the shares of Common Stock issued pursuant to the terms of the
      Agreement.

    


    “Shares”
shall
      mean
      the shares of the Company’s Common Stock.

    


    “Subsidiaries”
shall
      have the meaning specified in Section 4(A).

    


    “Trading
      Day” shall
      mean any day on which the Principal Market for the Common Stock is open for
      trading, from the hours of 9:30 am until 4:00 pm Eastern time.

    


    “VWAP”  shall
      mean the Volume Weighted Average Price of the Common Stock.

     

    SECTION
      2. PURCHASE AND SALE OF COMMON
      STOCK.

     

     

    (A)
      PURCHASE AND SALE OF COMMON STOCK.
      Subject to the terms and conditions set forth herein, the Company shall issue
      and sell to the Investor, and the Investor shall purchase from the Company,
      up
      to that number of Shares having an aggregate Purchase Price of Ten Million
      dollars ($10,000,000).

     

     

    (B)
      DELIVERY OF PUT NOTICES.

     

     

    (1)
      Subject to the terms and conditions
      of the Equity Line Transaction Documents, and from time to time during the
      Open
      Period, the Company may, in its sole discretion, deliver a Put Notice to the
      Investor which states the dollar amount (designated in U.S. Dollars) (the "Put
      Amount"), which the Company intends to sell to the Investor on a Closing Date
      (the "Put"). The Put Notice shall be in the form attached hereto as Exhibit
      C
      and incorporated herein by reference. The amount that the Company shall be
      entitled to Put to the Investor (the "Put Amount") shall be equal to, at the
      Company's election, either: (A) up to Two Hundred percent (200%) of the average
      daily volume (U.S. market only) of the Common Stock for the three (3) Trading
      Days prior to the applicable Put Notice Date, multiplied by the average of
      the
      three (3) daily closing prices immediately preceding the Put Date, or (B) up
      to
      two hundred fifty thousand dollars ($250,000). During the Open Period, the
      Company shall not be entitled to submit a Put Notice until after the
previous Closing has been completed. The Purchase Price for the Common
      Stock identified in the Put Notice shall be equal to ninety-six percent (96%)
      of
      the lowest VWAP of the Common Stock during the Pricing Period.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

     (C)
COMPANY’S
      RIGHT TO
      WITHDRAWAL. The Company shall reserve the right, but not the obligation, to
      withdraw that portion of each Put that is below the Minimum Acceptable Price,
      by
      submitting to the Investor, in writing, a notice to cancel that portion
      Put.

     

     

    (D)
      CONDITIONS TO INVESTOR'S OBLIGATION
      TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement,
      the Company shall not be entitled to deliver a Put Notice and the Investor
      shall
      not be obligated to purchase any Shares at a Closing (as defined in Section
      2(G)) unless each of the following conditions are satisfied:

     

     

    (I)
      a Registration Statement shall have
      been declared effective and shall remain effective and available for the resale
      of all the Registrable Securities (as defined in the Registration Rights
      Agreement) at all times until the Closing with respect to the subject Put
      Notice;

     

     

    (II)
      at all times during the period
      beginning on the related Put Notice Date and ending on and including the related
      Closing Date, the Common Stock shall have been listed on the Principal Market
      and shall not have been suspended from trading thereon for a period of two
      (2)
      consecutive Trading Days during the Open Period and the Company shall not have
      been notified of any pending or threatened proceeding or other action to suspend
      the trading of the Common Stock;

     

     

    (III)
      the Company has complied with its
      obligations and is otherwise not in breach of or in default under, this
      Agreement, the Registration Rights Agreement or any other agreement executed
      in
      connection herewith which has not been cured prior to delivery of the Investor’s
      Put Notice Date;

     

     

    (IV)
      no injunction shall have been
      issued and remain in force, or action commenced by a governmental authority
      which has not been stayed or abandoned, prohibiting the purchase or the issuance
      of the Securities; and

     

     

    (V)
      the issuance of the Securities will
      not violate any shareholder approval requirements of the Principal
      Market.

     

     

    If
      any of the events described in
      clauses (I) through (V) above occurs during a Pricing Period, then the Investor
      shall have no obligation to purchase the Put Amount of Common Stock set forth
      in
      the applicable Put Notice.

     

    (E)
      RESERVED

     

    (F)
      MECHANICS OF PURCHASE OF SHARES BY
      INVESTOR. Subject to the satisfaction of the conditions set forth in Sections
      2(E), 7 and 8, the closing of the purchase by the Investor of Shares (a
      "Closing") shall occur on the date which is no later than seven (7) Trading
      Days
      following the applicable Put Notice Date (each a "Closing Date"). Prior to
      each
      Closing Date, (I) the Company shall deliver to the Investor pursuant to this
      Agreement, certificates representing the Shares to be issued to the Investor
      on
      such date and registered in the name of the Investor; and (II) the Investor
      shall deliver to the Company the Purchase Price to be paid for such Shares,
      determined as set forth in Section 2(B). In lieu of delivering physical
      certificates representing the Securities and provided that the Company's
      transfer agent then is participating in The Depository Trust Company ("DTC")
      Fast Automated Securities Transfer ("FAST") program, upon request of the
      Investor, the Company shall use all commercially reasonable efforts to cause
      its
      transfer agent to electronically transmit the Securities by crediting the
      account of the Investor's prime broker (as specified by the Investor within
      a
      reasonably in advance of the Investor's notice) with DTC through its Deposit
      Withdrawal Agent Commission ("DWAC") system.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    The
      Company understands that a delay in
      the issuance of Securities beyond the Closing Date could result in economic
      damage to the Investor. After the Effective Date, as compensation to the
      Investor for such loss, the Company agrees to make late payments to the Investor
      for late issuance of Securities (delivery of Securities after the applicable
      Closing Date) in accordance with the following schedule (where "No. of Days
      Late" is defined as the number of trading days beyond the Closing Date, with
      the
      Amounts being cumulative.):

     

    
      	
              LATE  PAYMENT  FOR  EACH

              NO.  OF  DAYS  LATE               $10,000
                WORTH OF COMMON  STOCK

              
              

                        1                                           $100

                        2                                           $200

                        3                                           $300

                        4                                           $400

                        5                                           $500

                        6                                           $600

                        7                                           $700

                        8                                           $800

                        9                                           $900

                        10                                       $1,000

                        Over  10                             $1,000  +  $200  for  each

                                                                    Business  Day  late  beyond  10  days

            


    

     

    The
      Company shall make any payments
      incurred under this Section in immediately available funds upon demand by the
      Investor. Nothing herein shall limit the Investor's right to pursue actual
      damages for the Company's failure to issue and deliver the Securities to the
      Investor, except that such late payments shall offset any such actual damages
      incurred by the Investor, and any Open Market Adjustment Amount, as set forth
      below.

     

     

     (G)
      OVERALL LIMIT ON COMMON STOCK
      ISSUABLE. Notwithstanding anything contained herein to the contrary, if during
      the Open Period the Company becomes listed on an exchange that limits the number
      of shares of Common Stock that may be issued without shareholder approval,
      then
      the number of Shares issuable by the Company and purchasable by the Investor,
      shall not exceed that number of the shares of Common Stock that may be issuable
      without shareholder approval (the "Maximum Common Stock
      Issuance").  If such issuance of shares of Common Stock could cause a
      delisting on the Principal Market, then the Maximum Common Stock Issuance shall
      first be approved by the Company's shareholders in accordance with applicable
      law and the By-laws and Amended and Restated Certificate of Incorporation of
      the
      Company, if such issuance of shares of Common Stock could cause a delisting
      on
      the Principal Market. The parties understand and agree that the Company's
      failure to seek or obtain such shareholder approval shall in no way adversely
      affect the validity and due authorization of the issuance and sale of Securities
      or the Investor's obligation in accordance with the terms and conditions hereof
      to purchase a number of Shares in the aggregate up to the Maximum Common Stock
      Issuance limitation, and that such approval pertains only to the applicability
      of the Maximum Common Stock Issuance limitation provided in this Section
      2(H).

     

     

    (H)  If,
      by the third (3rd)
      business day after the Closing Date, the Company fails to deliver any portion
      of
      the shares of the Put to the Investor (the "Put Shares Due") and the Investor
      purchases, in an open market transaction or otherwise, shares of Common Stock
      necessary to make delivery of shares which would have been delivered if the
      full
      amount of the shares to be delivered to the Investor by the Company (the "Open
      Market Share Purchase") , then the Company shall pay to the Investor, in
      addition to any other amounts due to Investor pursuant to the Put, and not
      in
      lieu thereof, the Open Market Adjustment Amount (as defined
      below).  The "Open Market Adjustment Amount" is the amount equal to
      the excess, if any, of (x) the Investor's total purchase price (including
      brokerage commissions, if any) for the Open Market Share Purchase minus (y)
      the
      net proceeds (after brokerage commissions, if any) received by the Investor
      from
      the sale of the Put Shares Due.  The Company shall pay the Open Market
      Adjustment Amount to the Investor in immediately available funds within five
      (5)
      business days of written demand by the Investor.  By way of
      illustration and not in limitation of the foregoing, if the Investor purchases
      shares of Common Stock having a total purchase price (including brokerage
      commissions) of $11,000 to cover an Open Market Purchase with respect to shares
      of Common Stock it sold for net proceeds of $10,000, the Open Market Purchase
      Adjustment Amount which the Company will be required to pay to the Investor
      will
      be $1,000.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (I)  LIMITATION
      ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this
      Agreement, in no event shall the Investor be entitled to purchase that number
      of
      Shares, which when added to the sum of the number of shares of Common Stock
      beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3
      of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares
      of
      Common Stock outstanding on the Closing Date, as determined in accordance with
      Rule 13d-1(j) of the 1934 Act.

     

    SECTION
      3. INVESTOR'S REPRESENTATIONS,
      WARRANTIES AND COVENANTS.

     

     

    The
      Investor represents and warrants to
      the Company, and covenants, that:

     

     

    (A)
      SOPHISTICATED INVESTOR. The Investor
      has, by reason of its business and financial experience, such knowledge,
      sophistication and experience in financial and business matters and in making
      investment decisions of this type that it is capable of (I) evaluating the
      merits and risks of an investment in the Securities and making an informed
      investment decision; (II) protecting its own interest; and (III) bearing the
      economic risk of such investment for an indefinite period of time.

     

     

    (B)
      AUTHORIZATION; ENFORCEMENT. This
      Agreement has been duly and validly authorized, executed and delivered on behalf
      of the Investor and is a valid and binding agreement of the Investor enforceable
      against the Investor in accordance with its terms, subject as to enforceability
      to general principles of equity and to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies.

     

     

    (C)
      SECTION 9 OF THE 1934 ACT. During
      the term of this Agreement, the Investor will comply with the provisions of
      Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect
      to
      transactions involving the Common Stock. The Investor agrees not to sell the
      Company's common stock short, either directly or indirectly through its
      affiliates, principals or advisors during the term of this Agreement.

     

     

    (D)
      ACCREDITED INVESTOR. Investor is an
      "Accredited Investor" as that term is defined in Rule 501(a) of Regulation
      D of
      the 1933 Act.

     

     

    (E)
      NO CONFLICTS. The execution,
      delivery and performance of the Transaction Documents by the Investor and the
      consummation by the Investor of the transactions contemplated hereby and thereby
      will not result in a violation of Partnership Agreement or other organizational
      documents of the Investor.

     

     

    (F)
      OPPORTUNITY TO DISCUSS. The Investor
      has received all materials relating to the Company's business, finance and
      operations which it has requested. The Investor has had an opportunity to
      discuss the business, management and financial affairs of the Company with
      the
      Company's management.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (G)
      INVESTMENT PURPOSES. The Investor is
      purchasing the Securities for its own account for investment purposes and not
      with a view towards distribution and agrees to resell or otherwise dispose
      of
      the Securities solely in accordance with the registration provisions of the
      1933
      Act (or pursuant to an exemption from such registration provisions).

     

     

    (H)
      NO REGISTRATION AS A DEALER. The
      Investor is not and will not be required to be registered as a "dealer" under
      the 1934 Act, either as a result of its execution and performance of its
      obligations under this Agreement or otherwise.

     

     

    (I)  GOOD
      STANDING.  The Investor is a Limited Partnership, duly
      organized, validly existing and in good standing in the Cayman Islands.

     

     

    (J)  TAX
      LIABILITIES.  The Investor understands that it is liable for its own
      tax liabilities.

     

     

    (K)
      REGULATION M.  The
      Investor will comply with Regulation M under the 1934 Act, if applicable.

     

     

    SECTION
      4. REPRESENTATIONS AND
      WARRANTIES OF THE COMPANY.

     

     

    Except
      as set forth in the Schedules
      attached hereto, or as disclosed on the Company's SEC Documents, the Company
      represents and warrants to the Investor that:

     

     

    (A)
      ORGANIZATION AND QUALIFICATION. The
      Company is a corporation duly organized and validly existing in good standing
      under the laws of the State of Nevada, and has the requisite
      corporate power
      and authorization to own its properties and to carry on its business as now
      being conducted. Both the Company and the companies it owns or controls
      (“Subsidiaries”) are duly qualified to do business and are in good standing in
      every jurisdiction in which its ownership of property or the nature of the
      business conducted by it makes such qualification necessary, except to the
      extent that the failure to be so qualified or be in good standing would not
      have
      a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
      means any material adverse effect on the business, properties, assets,
      operations, results of operations, financial condition or prospects of the
      Company and its Subsidiaries, if any, taken as a whole, or on the transactions
      contemplated hereby or by the agreements and instruments to be entered into
      in
      connection herewith, or on the authority or ability of the Company to perform
      its obligations under the Equity Line Transaction Documents (as defined in
      Section 1 and 4(B), below).

     

     

    (B)
      AUTHORIZATION; ENFORCEMENT;
      COMPLIANCE WITH OTHER INSTRUMENTS.

     

     

    (I)
      The Company has the requisite
      corporate power and authority to enter into and perform this Investment
      Agreement and the Registration Rights Agreement (collectively, the "Equity
      Line
      Transaction Documents"), and to issue the Securities in accordance with the
      terms hereof and thereof.

     

     

    (II)
      The execution and delivery of the
      Equity Line Transaction Documents by the Company and the consummation by it
      of
      the transactions contemplated hereby and thereby, including without limitation
      the reservation for issuance and the issuance of the Securities pursuant to
      this
      Agreement, have been duly and validly authorized by the Company's Board of
      Directors and no further consent or authorization is required by the Company,
      its Board of Directors, or its shareholders.

     

     

    (III)
      The Equity Line Transaction
      Documents have been duly and validly executed and delivered by the
      Company.

     

     

    (IV)
      The Equity Line Transaction
      Documents constitute the valid and binding obligations of the Company
      enforceable against the Company in accordance with their terms, except as such
      enforceability may be limited by general principles of equity or applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
      laws
      relating to, or affecting generally, the enforcement of creditors' rights and
      remedies.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (C)
      CAPITALIZATION. As of the date
      hereof, the authorized capital stock of the Company consists of 1,500,000,000
      shares of Common Stock, $.08 par value per share, of which as of the date
      hereof, 41,415,906shares
      are issued and outstanding; 25,000,000 shares of Preferred Stock authorized,
      none issued, par value $.001; as of September 30, 2007, and 6,000,000 shares
      reserved for issuance pursuant to options, warrants and other convertible
      securities. All of such outstanding shares have been, or upon issuance will
      be,
      validly issued and are fully paid and nonassessable.

     

     

    Except
      as disclosed in the Company's
      publicly available filings with the SEC:

     

     

     (I)
      no shares of the Company's
      capital stock are subject to preemptive rights or any other similar rights
      or
      any liens or encumbrances suffered or permitted by the Company; (II) there
      are
      no outstanding debt securities; (III) there are no outstanding shares of capital
      stock, options, warrants, scrip, rights to subscribe to, calls or commitments
      of
      any character whatsoever relating to, or securities or rights convertible into,
      any shares of capital stock of the Company or any of its Subsidiaries, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any of its Subsidiaries is or may become bound to issue additional shares of
      capital stock of the Company or any of its Subsidiaries or options, warrants,
      scrip, rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, any shares of capital
      stock of the Company or any of its Subsidiaries; (IV) there are no agreements
      or
      arrangements under which the Company or any of its Subsidiaries is obligated
      to
      register the sale of any of their securities under the 1933 Act (except the
      Registration Rights Agreement); (V) there are no outstanding securities of
      the
      Company or any of its Subsidiaries which contain any redemption or similar
      provisions, and there are no contracts, commitments, understandings or
      arrangements by which the Company or any of its Subsidiaries is or may become
      bound to redeem a security of the Company or any of its Subsidiaries; (VI)
      there
      are no securities or instruments containing anti-dilution or similar provisions
      that will be triggered by the issuance of the Securities as described in this
      Agreement; (VII) the Company does not have any stock appreciation rights or
      "phantom stock" plans or agreements or any similar plan or agreement; and (VIII)
      there is no dispute as to the classification of any shares of the Company's
      capital stock.

     

     

    The
      Company has furnished to the
      Investor, or the Investor has had access through EDGAR to, true and correct
      copies of the Company's Amended and Restated Certificate of Incorporation,
      as in
      effect on the date hereof (the "Certificate of Incorporation"), and the
      Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
      terms of all securities convertible into or exercisable for Common Stock and
      the
      material rights of the holders thereof in respect thereto.

     

     

    (D)
      ISSUANCE OF SHARES. The Company has
      reserved 15,000,000 Shares for issuance pursuant to this Agreement, which have
      been duly authorized and reserved those Shares for issuance (subject to
      adjustment pursuant to the Company's covenant set forth in Section 5(F) below)
      pursuant to this Agreement. Upon issuance in accordance with this Agreement,
      the
      Securities will be validly issued, fully paid for and non-assessable and free
      from all taxes, liens and charges with respect to the issue thereof. In the
      event the Company cannot register a sufficient number of Shares for issuance
      pursuant to this Agreement, the Company will use its best efforts to authorize
      and reserve for issuance the number of Shares required for the Company to
      perform its obligations hereunder as soon as reasonably practicable.

     

     

    (E)
      NO CONFLICTS. The execution,
      delivery and performance of the Equity Line Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby will not (I) result in a violation of the Certificate of Incorporation,
      any Certificate of Designations, Preferences and Rights of any outstanding
      series of preferred stock of the Company or the By-laws; or (II) conflict with,
      or constitute a material default (or an event which with notice or lapse of
      time
      or both would become a material default) under, or give to others any rights
      of
      termination, amendment, acceleration or cancellation of, any material agreement,
      contract, indenture mortgage, indebtedness or instrument to which the Company
      or
      any of its Subsidiaries is a party, or to the Company's knowledge result in
      a
      violation of any law, rule, regulation, order, judgment or decree (including
      United States federal and state securities laws and regulations and the rules
      and regulations of the Principal Market or principal securities exchange or
      trading market on which the Common Stock is traded or listed) applicable to
      the
      Company or any of its Subsidiaries or by which any property or asset of the
      Company or any of its Subsidiaries is bound or affected. Except as disclosed
      in
      Schedule 4(e), neither the Company nor its Subsidiaries is in violation of
      any
      term of, or in default under, the Certificate of Incorporation, any Certificate
      of Designations, Preferences and Rights of any outstanding series of preferred
      stock of the Company or the By-laws or their organizational charter or by-laws,
      respectively, or any contract, agreement, mortgage, indebtedness, indenture,
      instrument, judgment, decree or order or any statute, rule or regulation
      applicable to the Company or its Subsidiaries, except for possible conflicts,
      defaults, terminations, amendments, accelerations, cancellations and violations
      that would not individually or in the aggregate have or constitute a Material
      Adverse Effect. The business of the Company and its Subsidiaries is not being
      conducted, and shall not be conducted, in violation of any law, statute,
      ordinance, rule, order or regulation of any governmental authority or agency,
      regulatory or self-regulatory agency, or court, except for possible violations
      the sanctions for which either individually or in the aggregate would not have
      a
      Material Adverse Effect. Except as specifically contemplated by this Agreement
      and as required under the 1933 Act or any securities laws of any states, to
      the
      Company's knowledge, the Company is not required to obtain any consent,
      authorization, permit or order of, or make any filing or registration (except
      the filing of a registration statement as outlined in the Registration Rights
      Agreement between the Parties) with, any court, governmental authority or
      agency, regulatory or self-regulatory agency or other third party in order
      for
      it to execute, deliver or perform any of its obligations under, or contemplated
      by, the Equity Line Transaction Documents in accordance with the terms hereof
      or
      thereof. All consents, authorizations, permits, orders, filings and
      registrations which the Company is required to obtain pursuant to the preceding
      sentence have been obtained or effected on or prior to the date hereof and
      are
      in full force and effect as of the date hereof. Except as disclosed in Schedule
      4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
      which might give rise to any of the foregoing. The Company is not, and will
      not
      be, in violation of the listing requirements of the Principal Market as in
      effect on the date hereof and on each of the Closing Dates and is not aware
      of
      any facts which would reasonably lead to delisting of the Common Stock by the
      Principal Market in the foreseeable future.

     

    
      
         

      

      
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    (F)
      SEC DOCUMENTS; FINANCIAL STATEMENTS.
      As of the date hereof, the Company has filed all reports, schedules, forms,
      statements and other documents required to be filed by it with the SEC pursuant
      to the reporting requirements of the 1934 Act (all of the foregoing filed prior
      to the date hereof and all exhibits included therein and financial statements
      and schedules thereto and documents incorporated by reference therein being
      hereinafter referred to as the "SEC Documents"). The Company has delivered
      to
      the Investor or its representatives, or they have had access through EDGAR
      to,
      true and complete copies of the SEC Documents. As of their respective filing
      dates, the SEC Documents complied in all material respects with the requirements
      of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
      applicable to the SEC Documents, and none of the SEC Documents, at the time
      they
      were filed with the SEC, contained any untrue statement of a material fact
      or
      omitted to state a material fact required to be stated therein or necessary
      to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading. As of their respective dates, the financial statements
      of
      the Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles and have
      been reviewed and/or audited by a firm that is a member of the Public Companies
      Accounting Oversight Board ("PCAOB") consistently applied, during the periods
      involved (except (I) as may be otherwise indicated in such financial statements
      or the notes thereto, or (II) in the case of unaudited interim statements,
      to
      the extent they may exclude footnotes or may be condensed or summary statements)
      and fairly present in all material respects the financial position of the
      Company as of the dates thereof and the results of its operations and cash
      flows
      for the periods then ended (subject, in the case of unaudited statements, to
      normal year-end audit adjustments). No other written information provided by
      or
      on behalf of the Company to the Investor which is not included in the SEC
      Documents, including, without limitation, information referred to in Section
      4(D) of this Agreement, contains any untrue statement of a material fact or
      omits to state any material fact necessary to make the statements therein,
      in
      the light of the circumstance under which they are or were made, not misleading.
      Neither the Company nor any of its Subsidiaries or any of their officers,
      directors, employees or agents have provided the Investor with any material,
      nonpublic information which was not publicly disclosed prior to the date hereof
      and any material, nonpublic information provided to the Investor by the Company
      or its Subsidiaries or any of their officers, directors, employees or agents
      prior to any Closing Date shall be publicly disclosed by the Company prior
      to
      such Closing Date.

     

     

    (G)
      ABSENCE OF CERTAIN CHANGES. Except
      as otherwise set forth in the SEC Documents, the Company does not intend to
      change the business operations of the Company in any material way. The Company
      has not taken any steps, and does not currently expect to take any steps, to
      seek protection pursuant to any bankruptcy law nor does the Company or its
      Subsidiaries have any knowledge or reason to believe that its creditors intend
      to initiate involuntary bankruptcy proceedings.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (H)
      ABSENCE OF LITIGATION AND/OR
      REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is
      no
      action, suit, proceeding, inquiry or investigation before or by any court,
      public board, government agency, self-regulatory organization or body pending
      or, to the knowledge of the executive officers of Company or any of its
      Subsidiaries, threatened against or affecting the Company, the Common Stock
      or
      any of the Company's Subsidiaries or any of the Company's or the Company's
      Subsidiaries' officers or directors in their capacities as such, in which an
      adverse decision could have a Material Adverse Effect.

     

     

    (I)
      ACKNOWLEDGMENT REGARDING INVESTOR'S
      PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is
      acting solely in the capacity of an arm's length purchaser with respect to
      the
      Transaction Documents and the transactions contemplated hereby and thereby.
      The
      Company further acknowledges that the Investor is not acting as a financial
      advisor or fiduciary of the Company (or in any similar capacity) with respect
      to
      the Equity Line Transaction Documents and the transactions contemplated hereby
      and thereby and any advice given by the Investor or any of its respective
      representatives or agents in connection with the Equity Line Transaction
      Documents and the transactions contemplated hereby and thereby is merely
      incidental to the Investor's purchase of the Securities, and is not being relied
      on by the Company. The Company further represents to the Investor that the
      Company's decision to enter into the Equity Line Transaction Documents has
      been
      based solely on the independent evaluation by the Company and its
      representatives.

     

     

    (J)
      NO UNDISCLOSED EVENTS, LIABILITIES,
      DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as
      of
      the date hereof, no event, liability, development or circumstance has occurred
      or exists, or to the Company's knowledge is contemplated to occur, with respect
      to the Company or its Subsidiaries or their respective business, properties,
      assets, prospects, operations or financial condition, that would be required
      to
      be disclosed by the Company under applicable securities laws on a registration
      statement filed with the SEC relating to an issuance and sale by the Company
      of
      its Common Stock and which has not been publicly announced.

     

     

    (K)
      EMPLOYEE RELATIONS. Neither the
      Company nor any of its Subsidiaries is involved in any union labor dispute
      nor,
      to the knowledge of the Company or any of its Subsidiaries, is any such dispute
      threatened. Neither the Company nor any of its Subsidiaries is a party to a
      collective bargaining agreement, and the Company and its Subsidiaries believe
      that relations with their employees are good. No executive officer (as defined
      in Rule 501(f) of the 1933 Act) has notified the Company that such officer
      intends to leave the Company's employ or otherwise terminate such officer's
      employment with the Company.

     

     

    (L)
      INTELLECTUAL PROPERTY RIGHTS. The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, trade names, service marks, service mark registrations, service
      names, patents, patent rights, copyrights, inventions, licenses, approvals,
      governmental authorizations, trade secrets and rights necessary to conduct
      their
      respective businesses as now conducted. Except as set forth in the SEC
      Documents, none of the Company's trademarks, trade names, service marks, service
      mark registrations, service names, patents, patent rights, copyrights,
      inventions, licenses, approvals, government authorizations, trade secrets or
      other intellectual property rights necessary to conduct its business as now
      or
      as proposed to be conducted have expired or terminated, or are expected to
      expire or terminate within two (2) years from the date of this Agreement. The
      Company and its Subsidiaries do not have any knowledge of any infringement
      by
      the Company or its Subsidiaries of trademark, trade name rights, patents, patent
      rights, copyrights, inventions, licenses, service names, service marks, service
      mark registrations, trade secret or other similar rights of others, or of any
      such development of similar or identical trade secrets or technical information
      by others and, except as set forth in the SEC Documents, there is no claim,
      action or proceeding being made or brought against, or to the Company's
      knowledge, being threatened against, the Company or its Subsidiaries regarding
      trademark, trade name, patents, patent rights, invention, copyright, license,
      service names, service marks, service mark registrations, trade secret or other
      infringement; and the Company and its Subsidiaries are unaware of any facts
      or
      circumstances which might give rise to any of the foregoing. The Company and
      its
      Subsidiaries have taken commercially reasonable security measures to protect
      the
      secrecy, confidentiality and value of all of their intellectual
      properties.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (M)
      ENVIRONMENTAL LAWS. The Company and
      its Subsidiaries (I) are, to the knowledge of the management and directors
      of
      the Company and its Subsidiaries, in compliance with any and all applicable
      foreign, federal, state and local laws and regulations relating to the
      protection of human health and safety, the environment or hazardous or toxic
      substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
      have, to the knowledge of the management and directors of the Company, received
      all permits, licenses or other approvals required of them under applicable
      Environmental Laws to conduct their respective businesses; and (III) are in
      compliance, to the knowledge of the  management and directors of the
      Company, with all terms and conditions of any such permit, license or approval
      where, in each of the three (3) foregoing cases, the failure to so comply would
      have, individually or in the aggregate, a Material Adverse Effect.

     

     

    (N)
      TITLE. The Company and its
      Subsidiaries have good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in the SEC Documents or such as do not materially affect the
      value
      of such property and do not interfere with the use made and proposed to be
      made
      of such property by the Company or any of its Subsidiaries. Any real property
      and facilities held under lease by the Company or any of its Subsidiaries are
      held by them under valid, subsisting and enforceable leases with such exceptions
      as are not material and do not interfere with the use made and proposed to
      be
      made of such property and buildings by the Company and its Subsidiaries.

     

     

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

     

     

    (P)
      REGULATORY PERMITS. The Company and
      its Subsidiaries have in full force and effect all certificates, approvals,
      authorizations and permits from the appropriate federal, state, local or foreign
      regulatory authorities and comparable foreign regulatory agencies, necessary
      to
      own, lease or operate their respective properties and assets and conduct their
      respective businesses, and neither the Company nor any such Subsidiary has
      received any notice of proceedings relating to the revocation or modification
      of
      any such certificate, approval, authorization or permit, except for such
      certificates, approvals, authorizations or permits which if not obtained, or
      such revocations or modifications which, would not have a Material Adverse
      Effect.

     

     

    (Q)
      INTERNAL ACCOUNTING CONTROLS. The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (I) transactions are
      executed in accordance with management's general or specific authorizations;
      (II) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles by a
      firm
      with membership to the PCAOB and to maintain asset accountability; (III) access
      to assets is permitted only in accordance with management's general or specific
      authorization; and (IV) the recorded accountability for assets is compared
      with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

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

     

     

    (S)
      TAX STATUS. The Company and each of
      its Subsidiaries has made or filed all United States federal and state income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject (unless and only to the extent that the Company and
      each
      of its Subsidiaries has set aside on its books provisions reasonably adequate
      for the payment of all unpaid and unreported taxes) and has paid all taxes
      and
      other governmental assessments and charges that are material in amount, shown
      or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

     

     

    (T)
      CERTAIN TRANSACTIONS. Except as set
      forth in the SEC Documents filed at least ten (10) days prior to the date hereof
      and except for arm's length transactions pursuant to which the Company makes
      payments in the ordinary course of business upon terms no less favorable than
      the Company could obtain from disinterested third parties and other than the
      grant of stock options disclosed in the SEC Documents, none of the officers,
      directors, or employees of the Company is presently a party to any transaction
      with the Company or any of its Subsidiaries (other than for services as
      employees, officers and directors), including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer, director or such employee or, to the knowledge of the
      Company, any corporation, partnership, trust or other entity in which any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

     

     

    (U)
      DILUTIVE EFFECT. The Company
      understands and acknowledges that the number of shares of Common Stock issuable
      upon purchases pursuant to this Agreement will increase in certain circumstances
      including, but not necessarily limited to, the circumstance wherein the trading
      price of the Common Stock declines during the period between the Effective
      Date
      and the end of the Open Period. The Company's executive officers and directors
      have studied and fully understand the nature of the transactions contemplated
      by
      this Agreement and recognize that they have a potential dilutive effect on
      the
      shareholders of the Company. The Board of Directors of the Company has
      concluded, in its good faith business judgment, and with full understanding
      of
      the implications, that such issuance is in the best interests of the Company.
      The Company specifically acknowledges that, subject to such limitations as
      are
      expressly set forth in the Equity Line Transaction Documents, its obligation
      to
      issue shares of Common Stock upon purchases pursuant to this Agreement is
      absolute and unconditional regardless of the dilutive effect that such issuance
      may have on the ownership interests of other shareholders of the Company.

     

     

    (V)
      LOCK-UP. The Company shall cause its
      officers, insiders, directors, and affiliates or other related parties under
      control of the Company, to refrain from selling Common Stock during each Pricing
      Period.

     

     

    (W)
      NO GENERAL SOLICITATION. Neither the
      Company, nor any of its affiliates, nor any person acting on its behalf, has
      engaged in any form of general solicitation or general advertising (within
      the
      meaning of Regulation D) in connection with the offer or sale of the Common
      Stock to be offered as set forth in this Agreement.

     

     

    (X)
      NO BROKERS, FINDERS OR FINANCIAL
      ADVISORY FEES OR COMMISSIONS.  No brokers, finders or financial
      advisory fees or commissions will be payable by the Company, its agents or
      Subsidiaries, with respect to the transactions contemplated by this Agreement,
      except as otherwise disclosed in this Agreement.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    SECTION
      5. COVENANTS OF THE
      COMPANY

     

     

    (A)
      BEST EFFORTS. The Company shall use
      all commercially reasonable efforts to timely satisfy each of the conditions
      set
      forth in Section 7 of this Agreement.

     

     

    (B)
      BLUE SKY. The Company shall, at its
      sole cost and expense, on or before each of the Closing Dates, take such action
      as the Company shall reasonably determine is necessary to qualify the Securities
      for, or obtain exemption for the Securities for, sale to the Investor at each
      of
      the Closings pursuant to this Agreement under applicable securities or "Blue
      Sky" laws of such states of the United States, as reasonably specified by the
      Investor, and shall provide evidence of any such action so taken to the Investor
      on or prior to the Closing Date.

     

     

    (C)
      REPORTING STATUS. Until one of the
      following occurs, the Company shall file all reports required to be filed with
      the SEC pursuant to the 1934 Act, and the Company shall not terminate its
      status, or take an action or fail to take any action, which would terminate
      its
      status as a reporting company under the 1934 Act: (i) this Agreement terminates
      pursuant to Section 9 and the Investor has the right to sell all of the
      Securities without restrictions pursuant to Rule 144(k) promulgated under the
      1933 Act, or such other exemption (ii) the date on which the Investor has sold
      all the Securities and this Agreement has been terminated pursuant to Section
      9.

     

     

    (D)
      USE OF PROCEEDS. The Company will
      use the proceeds from the sale of the Shares (excluding amounts paid by the
      Company for fees as set forth in the Equity Line Transaction Documents) for
      general corporate and working capital purposes and acquisitions of assets,
      businesses or operations or for other purposes that the Board of Directors,
      in
      its good faith deem to be in the best interest of the Company.

     

     

    (E)
      FINANCIAL INFORMATION. During the
      Open Period, the Company agrees to make available to the Investor via EDGAR
      or
      other electronic means the following documents and information on the forms
      set
      forth: (I) within five (5) Trading Days after the filing thereof with the SEC,
      a
      copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB,
      any Current Reports on Form 8-K and any Registration Statements or amendments
      filed pursuant to the 1933 Act; (II) copies of any notices and other information
      made available or given to the shareholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      shareholders; and (III) within two (2) calendar days of filing or delivery
      thereof, copies of all documents filed with, and all correspondence sent to,
      the
      Principal Market, any securities exchange or market, or the National Association
      of Securities Dealers, Inc., unless such information is material nonpublic
      information.

     

     

    (F)
      RESERVATION OF SHARES. The Company
      shall take all action necessary to at all times have authorized, and reserved
      for the purpose of issuance, a sufficient number of shares of Common Stock
      to
      provide for the issuance of the Securities to the Investor as required
      hereunder. In the event that the Company determines that it does not have a
      sufficient number of authorized shares of Common Stock to reserve and keep
      available for issuance as described in this Section 5(F), the Company shall
      use
      all commercially reasonable efforts to increase the number of authorized shares
      of Common Stock by seeking shareholder approval for the authorization of such
      additional shares.

     

     

    (G)
      LISTING. The Company shall promptly
      secure and maintain the listing of all of the Registrable Securities (as defined
      in the Registration Rights Agreement) on the Principal Market and each other
      national securities exchange and automated quotation system, if any, upon which
      shares of Common Stock are then listed (subject to official notice of issuance)
      and shall maintain, such listing of all Registrable Securities from time to
      time
      issuable under the terms of the Equity Line Transaction Documents. Neither
      the
      Company nor any of its Subsidiaries shall take any action which would be
      reasonably expected to result in the delisting or suspension of the Common
      Stock
      on the Principal Market (excluding suspensions of not more than one (1) trading
      day resulting from business announcements by the Company). The Company shall
      promptly provide to the Investor copies of any notices it receives from the
      Principal Market regarding the continued eligibility of the Common Stock for
      listing on such automated quotation system or securities exchange. The Company
      shall pay all fees and expenses in connection with satisfying its obligations
      under this Section 5(G).

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (H)
      TRANSACTIONS WITH AFFILIATES. The
      Company shall not, and shall cause each of its Subsidiaries not to, enter into,
      amend, modify or supplement, or permit any Subsidiary to enter into, amend,
      modify or supplement, any agreement, transaction, commitment or arrangement
      with
      any of its or any Subsidiary's officers, directors, persons who were officers
      or
      directors at any time during the previous two (2) years, shareholders who
      beneficially own 5% or more of the Common Stock, or Affiliates or with any
      individual related by blood, marriage or adoption to any such individual or
      with
      any entity in which any such entity or individual owns a 5% or more beneficial
      interest (each a "Related Party"), except for (I) customary employment
      arrangements and benefit programs on reasonable terms, (II) any agreement,
      transaction, commitment or arrangement on an arms-length basis on terms no
      less
      favorable than terms which would have been obtainable from a disinterested
      third
      party other than such Related Party, or (III) any agreement, transaction,
      commitment or arrangement which is approved by a majority of the disinterested
      directors of the Company. For purposes hereof, any director who is also an
      officer of the Company or any Subsidiary of the Company shall not be a
      disinterested director with respect to any such agreement, transaction,
      commitment or arrangement. "Affiliate" for purposes hereof means, with respect
      to any person or entity, another person or entity that, directly or indirectly,
      (I) has a 5% or more equity interest in that person or entity, (II) has 5%
      or
      more common ownership with that person or entity, (III) controls that person
      or
      entity, or (IV) is under common control with that person or entity. "Control"
      or
      "Controls" for purposes hereof means that a person or entity has the power,
      directly or indirectly, to conduct or govern the policies of another person
      or
      entity.

     

     

    (I)
      FILING OF FORM 8-K. On or before the
      date which is four (4) Trading Days after the Execution Date, the Company shall
      file a Current Report on Form 8-K with the SEC describing the terms of the
      transaction contemplated by the Equity Line Transaction Documents in the form
      required by the 1934 Act, if such filing is required.

     

     

    (J)
      CORPORATE EXISTENCE. The Company
      shall use all commercially reasonable efforts to preserve and continue the
      corporate existence of the Company.

     

     

    (K)
      NOTICE OF CERTAIN EVENTS AFFECTING
      REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly
      notify the Investor upon the occurrence of any of the following events in
      respect of a Registration Statement or related prospectus in respect of an
      offering of the Securities: (I) receipt of any request for additional
      information by the SEC or any other federal or state governmental authority
      during the period of effectiveness of the Registration Statement for amendments
      or supplements to the Registration Statement or related prospectus; (II) the
      issuance by the SEC or any other federal or state governmental authority of
      any
      stop order suspending the effectiveness of any Registration Statement or the
      initiation of any proceedings for that purpose;  (III) receipt of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Securities for sale in any jurisdiction or
      the
      initiation or notice of any proceeding for such purpose; (IV) the happening
      of
      any event that makes any statement made in such Registration Statement or
      related prospectus or any document incorporated or deemed to be incorporated
      therein by reference untrue in any material respect or that requires the making
      of any changes in the Registration Statement, related prospectus or documents
      so
      that, in the case of a Registration Statement, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein not misleading,
      and
      that in the case of the related prospectus, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading; and (V) the Company's
      reasonable determination that a post-effective amendment to the Registration
      Statement would be appropriate, and the Company shall promptly make available
      to
      Investor any such supplement or amendment to the related prospectus. The Company
      shall not deliver to Investor any Put Notice during the continuation of any
      of
      the foregoing events in this Section 5(K).

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (L)  REIMBURSEMENT.  If
      (I) the Investor becomes involved in any capacity in any action, proceeding
      or
      investigation brought by any shareholder of the Company, in connection with
      or
      as a result of the consummation of the transactions contemplated by the Equity
      Line Transaction Documents, or if the Investor is impleaded in any such action,
      proceeding or investigation by any person (other than as a result of a breach
      of
      the Investor’s representations and warranties set forth in this Agreement); or
      (II) the Investor becomes involved in any capacity in any action, proceeding
      or
      investigation brought by the SEC against or involving the Company or in
      connection with or as a result of the consummation of the transactions
      contemplated by the Equity Line Transaction Documents (other than as a result
      of
      a breach of the Investor’s representations and warranties set forth in this
      Agreement), or if this Investor is impleaded in any such action, proceeding
      or
      investigation by any person, then in any such case, the Company will reimburse
      the Investor for its reasonable legal and other expenses (including the cost
      of
      any investigation and preparation) incurred in connection therewith, as such
      expenses are incurred. In addition, other than with respect to any matter in
      which the Investor is a named party, the Company will pay to the Investor the
      charges, as reasonably determined by the Investor, for the time of any officers
      or employees of the Investor devoted to appearing and preparing to appear as
      witnesses, assisting in preparation for hearings, trials or pretrial matters,
      or
      otherwise with respect to inquiries, hearing, trials, and other proceedings
      relating to the subject matter of this Agreement. The reimbursement obligations
      of the Company under this section shall be in addition to any liability which
      the Company may otherwise have, shall extend upon the same terms and conditions
      to any affiliates of the Investor that are actually named in such action,
      proceeding or investigation, and partners, directors, agents, employees,
      attorneys, accountants, auditors and controlling persons (if any), as the case
      may be, of Investor and any such affiliate, and shall be binding upon and inure
      to the benefit of any successors of the Company, the Investor and any such
      affiliate and any such person.

    


    (M)
      TRANSFER AGENT.  Upon effectiveness of the Registration Statement, and
      for so long as the Registration Statement is effective,  the Company
      shall deliver instructions to its transfer agent to issue Shares to the Investor
      that are covered for resale by the Registration Statement free of restrictive
      legends.

    


    (N)
      ACKNOWLEDGEMENT OF TERMS.  The Company hereby represents and warrants
      to the Investor that: (i) it is voluntarily entering into this Agreement of
      its
      own freewill, (ii) it is not entering this Agreement under economic duress,
      (iii) the terms of this Agreement are reasonable and fair to the Company, and
      (iv) the Company has had independent legal counsel of its own choosing review
      this Agreement, advise the Company with respect to this Agreement, and represent
      the Company in connection with this Agreement.

     

    SECTION
      6. INTENTIONALLY OMITTED

     

     

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

     

     

    The
      obligation hereunder of the Company
      to issue and sell the Securities to the Investor is further subject to the
      satisfaction, at or before each Closing Date, of each of the following
      conditions set forth below. These conditions are for the Company's sole benefit
      and may be waived by the Company at any time in its sole discretion.

     

     

    (A)
      The Investor shall have executed
      this Agreement and the Registration Rights Agreement and delivered the same
      to
      the Company.

     

     

    (B)
      The Investor shall have delivered to
      the Company the Purchase Price for the Securities being purchased by the
      Investor between the end of the Pricing Period and the Closing Date via a Put
      Settlement Sheet (hereto attached as Exhibit D). After receipt of confirmation
      of delivery of such Securities to the Investor, the Investor, by wire transfer
      of immediately available funds pursuant to the wire instructions provided by
      the
      Company will disburse the funds constituting the Purchase Amount.

     

     

    (C)
      No statute, rule, regulation,
      executive order, decree, ruling or injunction shall have been enacted, entered,
      promulgated or endorsed by any court or governmental authority of competent
      jurisdiction which prohibits the consummation of any of the transactions
      contemplated by this Agreement.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    SECTION
      8. FURTHER CONDITIONS OF THE
      INVESTOR'S OBLIGATION TO PURCHASE.

     

     

    The
      obligation of the Investor hereunder
      to purchase Shares is subject to the satisfaction, on or before each Closing
      Date, of each of the following conditions set forth below.

     

     

    (A)
      The Company shall have executed the
      Equity Line Transaction Documents and delivered the same to the Investor.

     

    (B)
      The Common Stock shall be authorized
      for quotation on the Principal Market and trading in the Common Stock shall
      not
      have been suspended by the Principal Market or the SEC, at any time beginning
      on
      the date hereof and through and including the respective Closing Date (excluding
      suspensions of not more than one (1) Trading Day resulting from business
      announcements by the Company, provided that such suspensions occur prior to
      the
      Company's delivery of the Put Notice related to such Closing).

     

    (C)
      The representations and warranties
      of the Company shall be true and correct as of the date when made and as of
      the
      applicable Closing Date as though made at that time and the Company shall have
      performed, satisfied and complied with the covenants, agreements and conditions
      required by the Equity Line Transaction Documents to be performed, satisfied
      or
      complied with by the Company on or before such Closing Date. The Investor may
      request an update as of such Closing Date regarding the representation contained
      in Section 4(C) above.

     

     

    (D)
      The Company shall have executed and
      delivered to the Investor the certificates representing, or have executed
      electronic book-entry transfer of, the Securities (in such denominations as
      the
      Investor shall request) being purchased by the Investor at such Closing.

     

     

    (E)
      The Board of Directors of the
      Company shall have adopted resolutions consistent with Section 4(B)(II) above
      (the "Resolutions") and such Resolutions shall not have been amended or
      rescinded prior to such Closing Date.

     

     

    (F)
      Reserved

     

     

    (G)
      No statute, rule, regulation,
      executive order, decree, ruling or injunction shall have been enacted, entered,
      promulgated or endorsed by any court or governmental authority of competent
      jurisdiction which prohibits the consummation of any of the transactions
      contemplated by this Agreement.

     

     

    (H)
      The Registration Statement shall be
      effective on each Closing Date and no stop order suspending the effectiveness
      of
      the Registration statement shall be in effect or to the Company's knowledge
      shall be pending or threatened. Furthermore, on each Closing Date (I) neither
      the Company nor the Investor shall have received notice that the SEC has issued
      or intends to issue a stop order with respect to such Registration Statement
      or
      that the SEC otherwise has suspended or withdrawn the effectiveness of such
      Registration Statement, either temporarily or permanently, or intends or has
      threatened to do so (unless the SEC's concerns have been addressed and Investor
      is reasonably satisfied that the SEC no longer is considering or intends to
      take
      such action), and (II) no other suspension of the use or withdrawal of the
      effectiveness of such Registration Statement or related prospectus shall
      exist.

     

    (I)
      At the time of each Closing, the
      Registration Statement (including information or documents incorporated by
      reference therein) and any amendments or supplements thereto shall not contain
      any untrue statement of a material fact or omit to state any material fact
      required to be stated therein or necessary to make the statements therein not
      misleading or which would require public disclosure or an update supplement
      to
      the prospectus.

    


    (J)
      If
      applicable, the shareholders of the Company shall have approved the issuance
      of
      any Shares in excess of the Maximum Common Stock Issuance in accordance with
      Section 2(H) or the Company shall have obtained appropriate approval pursuant
      to
      the requirements of Nevada law and the Company’s Articles of Incorporation and
      By-laws.

    


    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (K)
      The
      conditions to such Closing set forth in Section 2(E) shall have been satisfied
      on or before such Closing Date.

    


    (L)  The
      Company shall have certified to the Investor the number of Shares of Common
      Stock outstanding when a Put Notice is given to the Investor.  The
      Company's delivery of a Put Notice to the Investor constitutes the Company's
      certification of the existence of the necessary number of shares of Common
      Stock
      reserved for issuance.

     

    SECTION
      9. TERMINATION. This Agreement
      shall terminate upon any of the following events:

     

     

    (I)
      when the Investor has purchased an
      aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the
      Company pursuant to this Agreement; or,

     

     

    (II)
      on the date which is thirty-six
      (36) months after the Effective Date; or,

     

     

    (III)
      upon written notice of the Company
      to the Investor.  Any and all shares, or penalties, if any, due under
      this Agreement shall be immediately payable and due upon termination of the
      Line.

     

    SECTION
      10.  SUSPENSION

    


    This
      Agreement shall be suspended upon any of the following events, and shall remain
      suspended until such event is rectified:

    


    (I)  the
      trading of the Common Stock is suspended by the SEC, the Principal Market or
      the
      NASD for a period of two (2) consecutive Trading Days during the Open Period;
      or,

    


    (II)
      The
      Common Stock ceases to be registered under the 1934 Act or listed or traded
      on
      the Principal Market.  Immediately upon the occurrence of one of the
      above-described events, the Company shall send written notice of such event
      to
      the Investor.

     

    SECTION
      11. INDEMNIFICATION.

     

     

    In
      consideration of the parties mutual
      obligations set forth in the Transaction Documents, each of the parties (in
      such
      capacity, an "Indemnitor") shall defend, protect, indemnify and hold harmless
      the other and all of the other party's shareholders, officers, directors,
      employees, counsel, and direct or indirect investors and any of the foregoing
      person's agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees") from and against any and all actions, causes
      of action, suits, claims, losses, costs, penalties, fees, liabilities and
      damages, and reasonable expenses in connection therewith (irrespective of
      whether any such Indemnitee is a party to the action for which indemnification
      hereunder is sought), and including reasonable attorneys' fees and disbursements
      (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of,
      or
      arising out of, or relating to (I) any misrepresentation or breach of any
      representation or warranty made by the Indemnitor or any other certificate,
      instrument or document contemplated hereby or thereby; (II) any breach of any
      covenant, agreement or obligation of the Indemnitor contained in the Equity
      Line
      Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby; or (III) any cause of action, suit or claim
      brought or made against such Indemnitee by a third party and arising out of
      or
      resulting from the execution, delivery, performance or enforcement of the Equity
      Line Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, except insofar as any such misrepresentation,
      breach or any untrue statement, alleged untrue statement, omission or alleged
      omission is made in reliance upon and in conformity with information furnished
      to Indemnitor which is specifically intended for use in the preparation of
      any
      such Registration Statement, preliminary prospectus, prospectus or amendments
      to
      the prospectus. To the extent that the foregoing undertaking by the Indemnitor
      may be unenforceable for any reason, the Indemnitor shall make the maximum
      contribution to the payment and satisfaction of each of the Indemnified
      Liabilities which is permissible under applicable law. The indemnity provisions
      contained herein shall be in addition to any cause of action or similar rights
      Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees
      may
      be subject to.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    SECTION
      12. GOVERNING LAW; DISPUTES
      SUBMITTED TO ARBITRATION.

     

     

    All
      disputes arising under this
      agreement shall be governed by and interpreted in accordance with the laws
      of
      the Commonwealth of Massachusetts, without regard to principles of conflict
      of
      laws.  The parties to this agreement will submit all disputes arising
      under this agreement to arbitration in Boston, Massachusetts before a single
      arbitrator of the American Arbitration Association (“AAA”).  The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of
      Massachusetts.  No party to this agreement will challenge the
      jurisdiction or venue provisions as provided in this section.  No
      party to this agreement will challenge the jurisdiction or venue provisions
      as
      provided in this section.  Nothing contained herein shall prevent the
      party from obtaining an injunction.

     

     

    (B)
      LEGAL FEES; AND MISCELLANEOUS FEES.
      Except as otherwise set forth in the Equity Line Transaction Documents, each
      party shall pay the fees and expenses of its advisers, counsel, the accountants
      and other experts, if any, and all other expenses incurred by such party
      incident to the negotiation, preparation, execution, delivery and performance
      of
      this Agreement. Any attorneys' fees and expenses incurred by either the Company
      or the Investor in connection with the preparation, negotiation, execution
      and
      delivery of any amendments to this Agreement or relating to the enforcement
      of
      the rights of any party, after the occurrence of any breach of the terms of
      this
      Agreement by another party or any default by another party in respect of the
      transactions contemplated hereunder, shall be paid on demand by the party which
      breached the Agreement and/or defaulted, as the case may be. The Company shall
      pay all stamp and other taxes and duties levied in connection with the issuance
      of any Securities.

     

     

    (C)
      COUNTERPARTS. This Agreement may be
      executed in two or more identical counterparts, all of which shall be considered
      one and the same agreement and shall become effective when counterparts have
      been signed by each party and delivered to the other party; provided that a
      facsimile signature shall be considered due execution and shall be binding
      upon
      the signatory thereto with the same force and effect as if the signature were
      an
      original signature.

     

     

    (D)
      HEADINGS; SINGULAR/PLURAL. The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement. Whenever required
      by
      the context of this Agreement, the singular shall include the plural and
      masculine shall include the feminine.

     

     

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

     

     

    (F)
      ENTIRE AGREEMENT; AMENDMENTS. This
      Agreement is the FINAL AGREEMENT between the Company and the Investor with
      respect to the terms and conditions set forth herein, and, the terms of this
      Agreement may not be contradicted by evidence of prior, contemporaneous, or
      subsequent oral agreements of the Parties.  No provision of this
      Agreement may be amended other than by an instrument in writing signed by the
      Company and the Investor, and no provision hereof may be waived other than
      by an
      instrument in writing signed by the party against whom enforcement is sought.
      The execution and delivery of the Equity Line Transaction Documents shall not
      alter the force and effect of any other agreements between the Parties, and
      the
      obligations under those agreements.

     

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    (G)
      NOTICES. Any notices or other
      communications required or permitted to be given under the terms of this
      Agreement must be in writing and will be deemed to have been delivered (I)
      upon
      receipt, when delivered personally; (II) upon receipt, when sent by facsimile
      (provided confirmation of transmission is mechanically or electronically
      generated and kept on file by the sending party); or (III) one (1) day after
      deposit with a nationally recognized overnight delivery service, in each case
      properly addressed to the party to receive the same. The addresses and facsimile
      numbers for such communications shall be:

     

    


    If
      to the Company:

    


    Edgeline
      Holdings, Inc.

    1330
      Post Oak Blvd.

    Suite
      1600

    Houston,
      Texas 77056

    Telephone:
(713)
      621-5208

    Facsimile:
      (713) 621-5336

    


    If
      to the Investor:

    


    Dutchess
      Private Equities Fund,
      Ltd.,

    50
      Commonwealth Avenue, Suite 2

    Boston,
      MA 02116

    Telephone:
      617-301-4700

    Facsimile:
      617-249-0947

     

    Each
      party shall provide five (5) days
      prior written notice to the other party of any change in address or facsimile
      number.

     

     

    (H)
      NO ASSIGNMENT. This Agreement may
      not be assigned.

     

     

    (I)
      NO THIRD PARTY BENEFICIARIES. This
      Agreement is intended for the benefit of the parties hereto and is not for
      the
      benefit of, nor may any provision hereof be enforced by, any other person,
      except that the Company acknowledges that the rights of the Investor may be
      enforced by its general partner.

     

    (J)
      SURVIVAL. The representations and
      warranties of the Company and the Investor contained in Sections 2 and 3, the
      agreements and covenants set forth in Sections 4 and 5, and the indemnification
      provisions set forth in Section 11, shall survive each of the Closings and
      the
      termination of this Agreement.

     

     (K)
      PUBLICITY. The Company and the
      Investor shall consult with each other in issuing any press releases or
      otherwise making public statements with respect to the transactions contemplated
      hereby and no party shall issue any such press release or otherwise make any
      such public statement without the prior consent of the other party, which
      consent shall not be unreasonably withheld or delayed, except that no prior
      consent shall be required if such disclosure is required by law, in which such
      case the disclosing party shall provide the other party with prior notice of
      such public statement. Notwithstanding the foregoing, the Company shall not
      publicly disclose the name of the Investor without the prior consent of the
      Investor, except to the extent required by law. The Investor acknowledges that
      this Agreement and all or part of the Equity Line Transaction Documents may
      be
      deemed to be "material contracts" as that term is defined by Item 601(b)(10)
      of
      Regulation S-B, and that the Company may therefore be required to file such
      documents as exhibits to reports or registration statements filed under the
      1933
      Act or the 1934 Act.  The Investor further agrees that the status of
      such documents and materials as material contracts shall be determined solely
      by
      the Company, in consultation with its counsel.

     

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

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (M)
      PLACEMENT AGENT. The Company agrees
      to pay a registered broker dealer, to act as placement agent, a percentage
      of
      the Put Amount on each draw toward the fee as outlined in the Placement Agent
      Agreement.  The Investor shall have no obligation with respect to any
      fees or with respect to any claims made by or on behalf of other persons or
      entities for fees of a type contemplated in this Section that may be due in
      connection with the transactions contemplated by the Equity Line Transaction
      Documents. The Company shall indemnify and hold harmless the Investor, their
      employees, officers, directors, agents, and partners, and their respective
      affiliates, from and against all claims, losses, damages, costs (including
      the
      costs of preparation and attorney's fees) and expenses incurred in respect
      of
      any such claimed or existing fees, as such fees and expenses are
      incurred.

     

     

    (N)
      NO STRICT CONSTRUCTION. The language
      used in this Agreement will be deemed to be the language chosen by the parties
      to express their mutual intent, and no rules of strict construction will be
      applied against any party, as the parties mutually agree that each has had
      a
      full and fair opportunity to review this Agreement and seek the advice of
      counsel on it.

     

     

    (O)
      REMEDIES. The Investor shall have
      all rights and remedies set forth in this Agreement and the Registration Rights
      Agreement and all rights and remedies which such holders have been granted
      at
      any time under any other agreement or contract and all of the rights which
      the
      Investor has by law. Any person having any rights under any provision of this
      Agreement shall be entitled to enforce such rights specifically (without posting
      a bond or other security), to recover damages by reason of any default or breach
      of any provision of this Agreement, including the recovery of reasonable
      attorneys fees and costs, and to exercise all other rights granted by
      law.

     

     

    (P)
      PAYMENT SET ASIDE. To the extent
      that the Company makes a payment or payments to the Investor hereunder or under
      the Registration Rights Agreement or the Investor enforces or exercises its
      rights hereunder or thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

     

     

    (Q)
      PRICING OF COMMON STOCK. For
      purposes of this Agreement, the VWAP of the Common Stock shall be as reported
      on
      MyTrack quotations.

     

     

    SECTION
      13. NON-DISCLOSURE OF NON-PUBLIC
      INFORMATION.

     

     

    (a)
      The Company shall not disclose
      non-public information to the Investor, its advisors, or its
      representatives.

     

     

    (b)
      Nothing herein shall require the
      Company to disclose non-public information to the Investor or its advisors
      or
      representatives, and the Company represents that it does not disseminate
      non-public information to any investors who purchase stock in the Company in
      a
      public offering, to money managers or to securities analysts, provided, however,
      that notwithstanding anything herein to the contrary, the Company will, as
      hereinabove provided, immediately notify the advisors and representatives of
      the
      Investor and, if any, underwriters, of any event or the existence of any
      circumstance (without any obligation to disclose the specific event or
      circumstance) of which it becomes aware, constituting non-public information
      (whether or not requested of the Company specifically or generally during the
      course of due diligence by such persons or entities), which, if not disclosed
      in
      the prospectus included in the Registration Statement would cause such
      prospectus to include a material misstatement or to omit a material fact
      required to be stated therein in order to make the statements, therein, in
      light
      of the circumstances in which they were made, not misleading. Nothing contained
      in this Section 13 shall be construed to mean that such persons or entities
      other than the Investor (without the written consent of the Investor prior
      to
      disclosure of such information) may not obtain non-public information in the
      course of conducting due diligence in accordance with the terms of this
      Agreement and nothing herein shall prevent any such persons or entities from
      notifying the Company of their opinion that based on such due diligence by
      such
      persons or entities, that the Registration Statement contains an untrue
      statement of material fact or omits a material fact required to be stated in
      the
      Registration Statement or necessary to make the statements contained therein,
      in
      light of the circumstances in which they were made, not misleading.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    ARTICLE
      14  ACKNOWLEDGEMENTS
      OF THE PARTIES.

     

     

    Notwithstanding
      anything in this
      Agreement to the contrary, the parties hereto hereby acknowledge and agree
      to
      the following: (i) the Investor makes no representations or covenants that
      it
      will not engage in trading in the securities of the Company, other than the
      Investor will not sell short the Company's common stock at any time during
      this
      Agreement; (ii) the Company shall, by 8:30 a.m. Boston Time on the trading
      day
      following the date hereof, file a current report on Form 8-K disclosing the
      material terms of the transactions contemplated hereby and in the other Equity
      Line Transaction Documents; (iii) the Company has not and shall not provide
      material non-public information to the Investor unless prior thereto the
      Investor shall have executed a written agreement regarding the confidentiality
      and use of such information; and (iv) the Company understands and confirms
      that
      the Investor will be relying on the acknowledgements set forth in clauses (i)
      through (iii) above if the Investor effects any transactions in the securities
      of the Company.

     

     

    


     


    
      
         

      

      
        21

        
          

        

      

      
         

      

    


    SIGNATURE
      PAGE OF INVESTMENT
      AGREEMENT

     

    Your
      signature on this Signature Page
      evidences your agreement to be bound by the terms and conditions of the
      Investment Agreement and the Registration Rights Agreement as of the date first
      written above.

     

     

    The
      undersigned signatory hereby
      certifies that he has read and understands the Investment Agreement, and the
      representations made by the undersigned in this Investment Agreement are true
      and accurate, and agrees to be bound by its terms.

     

    


    DUTCHESS
      PRIVATE EQUITIES FUND,
      LTD.

    


    


    


    By:_/s/  Douglas
      H. Leighton_______

         Douglas
      H.
      Leighton, Director

    


    


    


    EDGELINE
      HOLDINGS, INC.

    


    


    


    By:_/s/  Carl
      A. Chase______________

         Carl
      A.
      Chase, CFO and Director

    



    
      
         

      

      
        22

        
          

        

      

      
         

      

    


    


    LIST
      OF EXHIBITS

    


    
      	
              EXHIBIT  A               Registration  Rights  Agreement

              EXHIBIT  B               Opinion  of  Company's  Counsel

              EXHIBIT  C               Put  Notice

              EXHIBIT  D               Put  Settlement  Sheet

            


    

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    


    LIST
      OF SCHEDULES

    


     

    Schedule
      4(a) Subsidiaries

     

     

    Secure
      Voice Communications, Inc.

     

     

    New
      EnerSource, Inc.

     

     

    Intertech
      Bio Corporation

     

    
    


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    
       

      EXHIBIT
        A

       

      


    

    REGISTRATION
      RIGHTS AGREEMENT


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      B

    


    


    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

                                                                                                    
      Date: __________

    [TRANSFER
      AGENT]

    


    
      	
               

            	

            	
              Re:

            	
              Edgeline
                Holdings, Inc.

            


    

    


    Ladies
      and Gentlemen:

    


               
      We are counsel to Edgeline
      Holdings, Inc.,a Nevada
      corporation (the "Company"), and have represented the Company in connection
      with
      that certain Investment Agreement (the "Investment Agreement") entered into
      by
      and among the Company and _________________________ (the "Investor") pursuant
      to
      which the Company has agreed to issue to the Investor shares of the Company's
      common stock, $.08 par value per share (the "Common Stock") on the terms and
      conditions set forth in the Investment Agreement. Pursuant to the Investment
      Agreement, the Company also has entered into a Registration Rights Agreement
      with the Investor (the "Registration Rights Agreement") pursuant to which the
      Company agreed, among other things, to register the Registrable Securities
      (as
      defined in the Registration Rights Agreement), including the shares of Common
      Stock issued or issuable under the Investment Agreement under the Securities
      Act
      of 1933, as amended (the "1933 Act"). In connection with the Company's
      obligations under the Registration Rights Agreement, on December [__], 2007,
      the
      Company filed a Registration Statement on Form S- ___ (File No. 333-________)
      (the "Registration Statement") with the Securities and Exchange Commission
      (the
      "SEC") relating to the Registrable Securities which names the Investor as a
      selling shareholder thereunder.

    


               
      In connection with the foregoing,
      we advise you that [a
      member of the SEC's staff has
      advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective] [the Registration Statement
      has become
      effective]under the 1933
      Act at [enter
      the
      time of effectiveness] on
      [enter
      the
      date of effectiveness] and
      to the best of our knowledge, after telephonic inquiry of a member of the SEC’s
      staff, no stop order suspending its effectiveness has been issued and no
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the 1933 Act pursuant
      to the Registration Statement.

    


                                                                               
      Very truly yours,

    


                                                                               
      [Company Counsel]

    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      C

     

    Date:

     

     

    RE:
      Put Notice Number __

     

     

    Dear
      Mr. Leighton,

     

     

    This
      is to inform you that as of today,
      Edgeline Holdings, Inc., a Nevada corporation (the "Company"), hereby elects
      to
      exercise its right pursuant to the Investment Agreement to require Dutchess
      Private Equities Fund, Ltd. to purchase shares of its common stock. The Company
      hereby certifies that:

     

     

    The
      amount of this put is
      $__________.

     

     

    The
      Pricing Period runs from ________
      until _______.

     

     

    The
      current number of shares issued and
      outstanding as of the Company are:

     

    [Missing
      Graphic Reference] 

     

    The
      number of shares currently available
      for issuance on the SB-2 for the Equity Line are:

     

     

    _________________________

     

    


    Regards,

    


    


    


    


    _____________

    Carl
      A. Chase, CFO

    Edgeline
      Holdings, Inc.

    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      D

    PUT
      SETTLEMENT SHEET

     

    Date:

     

     

    Dear
      Mr. Chase,

     

     

    Pursuant
      to the Put given by Edgeline
      Holdings, Inc., to Dutchess Private Equities Fund, Ltd. on _________________
      200_, we are now submitting the amount of common shares for you to issue to
      Dutchess.

     

     

    Please
      have a certificate bearing no
      restrictive legend totaling __________ shares issued to Dutchess Private
      Equities Fund, Ltd. immediately and send via DWAC to the following
      account:

     

     

    XXXXXX

     

     

    If
      not DWAC eligible, please send FedEx
      Priority Overnight to:

     

     

    XXXXXX

     

     

    Once
      these shares are received by us, we
      will have the funds wired to the Company.

     

     

    Regards,

     

     

    Douglas
      H. Leighton

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    


    
      	
              
              

              
              

              
              

              
              

              
              

              
              

              
              

              DATE.
                . . . . . . . . . . . . . .
                . . . . . .  PRICE

              
              

              Date
                of Day 1 . . . . . . . . . .
                . . . . . .  Closing VWAP of Day 1

              Date
                of Day 2 . . . . . . . . . .
                . . . . . .  Closing VWAP of Day 2

              Date
                of Day 3 . . . . . . . . . .
                . . . . . .  Closing VWAP of Day 3

              Date
                of Day 4 . . . . . . . . . .
                . . . . . .  Closing VWAP of Day 4

              Date
                of Day 5 . . . . . . . . . .
                . . . . . .  Closing VWAP of Day 5

              
              

              
              

              
              

              
              

              
              

              
              

              LOWEST
                VOLUME WEIGHTED AVERAGE
                PRICE (VWAP) IN PRICING PERIOD

                                                           ------------

              
              

              PUT
                AMOUNT

                                                           ------------

              WIRE
&
CERT
                FEES

                                                           ------------

              
              

              AMOUNT
                WIRED TO COMPANY

                                                           ------------

              
              

              PURCHASE
                PRICE (96)% (NINETY-SIX
                PERCENT))

                                                           ------------

              
              

              AMOUNT
                OF SHARES DUE

                                                           ------------

              
              

              
              

              
              

            


    

     

    The
      undersigned has completed this Put
      as of this ___th day of _________, 200_.

     

     

    EDGELINE
      HOLDINGS, INC.

     

    


    ______________________________

    


    Carl
      A. Chase, CFO

    


    


    


    


    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(c) CAPITALIZATION

    


    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(e) CONFLICTS

    


    


    


    


    


    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(g) MATERIAL CHANGES

    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(h) LITIGATION

    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(l) INTELLECTUAL
      PROPERTY

    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(n) LIENS

    


    



    
      
         

      

      
         

        
          

        

      

      
         

      

    


    SCHEDULE
      4(t) CERTAIN
      TRANSACTIONS