Exhibit
10.1

       

      SUBSCRIPTION
AGREEMENT

       

      THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of March ___, 2010, by and between MSGI Security Solutions, Inc.
(formerly Media Services Group, Inc.), a Nevada corporation (the “Company”), and the subscribers
listed on Schedule
1
hereto (the “Subscribers”).

      


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

       

      WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscribers, as provided herein, and the Subscribers
shall purchase, in the aggregate, (i) $650,000 of principal amount (“Principal Amount”) secured
promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, convertible into shares of the Company’s Common Stock, $0. 01 par
value (the “Common
Stock”) at a per share conversion price set forth in the Notes (“Conversion Price”); (ii) share
purchase warrants (the “Warrants”) in the form
attached hereto as Exhibit B,
to purchase shares of the Company’s Common Stock (the “Warrant Shares”) and (iii)
“Additional Investment
Rights” granting the Subscriber the right to purchase an additional
amount of Notes and Warrants equal to the amount purchased on the Closing Date,
in the form annexed hereto as Exhibit C (the “Offering”).  The
Notes, shares of Common Stock issuable upon conversion of the Notes (the “Conversion Shares”), the
Warrants and the Warrant Shares including the Additional Investment Rights are
collectively referred to herein as the “Securities”; The terms Notes,
Warrants, Conversion Shares and Warrant Shares as employed herein shall include
all of the foregoing that may be issued and issuable upon exercise of the
Additional Investment Rights and conversion of the Notes and exercise of the
Warrants issuable upon exercise of the Additional Investment Rights;
and

       

      WHEREAS, the aggregate
proceeds of the sale of the Notes and the Warrants contemplated hereby (“Purchase Price”) shall be held
in escrow by Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176 (the “Escrow Agent”) pursuant to the
terms of an Escrow Agreement to be executed by the parties substantially in the
form attached hereto as Exhibit
D (the “Escrow
Agreement”).

       

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

       

      1.           Closing.   The
“Closing Date” shall be
the date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement.  The Closing will not occur unless and until each of the
agreements and documents identified on Schedule
2 hereto relating to the Subscribers’ investment in working interests and
other assets of and with the Company shall have been agreed upon, executed and
delivered.  Such delivery may take place contemporaneously with the
Closing hereunder.   Subject to the satisfaction or waiver of the
terms and conditions of this Agreement, on the Closing Date, Subscribers shall
purchase and the Company shall sell to Subscribers the Notes, Warrants and
Additional Investment Rights as described in Section 2 of this
Agreement.


      
        
           


        

        
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      2.           Notes and
Warrants.

      


      (a)           Notes.   Subject
to the satisfaction or waiver of the terms and conditions of this Agreement, on
the Closing Date, each Subscriber shall purchase from the Company, and the
Company shall sell  to each such Subscriber a Note in the Principal
Amount set forth on Schedule
1 hereto for each such Subscriber’s Purchase Price indicated
thereon.

      


      (b)           Warrants.  On
the Closing Date, the Company will issue and deliver the Warrants to the
Subscribers.  Warrants to purchase ten (10) Shares will be issued for
each one (1) dollar of Purchase Price as set forth on Schedule
1.  The exercise price to acquire a Warrant Share upon exercise
of a Warrant shall be $0.15, subject to reduction as described in the
Warrants.  The Warrants shall be exercisable until five (5) years
after the Closing Date.

      


      (c)           Additional Investment
Rights.  On the Closing Date, the Company will issue Additional
Investment Rights to the Subscribers.  The Additional Investment
Rights will represent the right to purchase additional Principal Amount of
Secured Convertible Notes equal to the Principal Amount acquired on the Closing
Date and a corresponding amount of Warrants as described in the Additional
Investment Right certificate, annexed hereto as Exhibit C.  The
Additional Investment Right will be exercisable until six months after the
Closing Date.

      


      (d)           Allocation of Purchase
Price.   The Purchase Price will be allocated by each
Subscriber, among the components of the Securities so that each component of the
Securities will be fully paid and non-assessable.

      


      3.      
     Security
Interest.   The Subscribers will be granted a security
interest in the assets of the Company including ownership of the Subsidiaries
[as defined in Section 5(a)], and in the assets of the Subsidiaries, which
security interest will be memorialized in a “Security Agreement,” a form of
which is annexed hereto as Exhibit
E.   The Subsidiaries will guaranty the Company’s
obligations under the Transaction Documents [as defined in Section
5(c)].   Such guaranties will be memorialized in a “Subsidiary Guaranty”, the form
of which is annexed hereto as Exhibit F.  The
Company will acknowledge the appointment of a collateral agent (the “Collateral Agent”) to act on
behalf of the Subscribers as memorialized in The Security
Agreement.  The Company and Subsidiaries will execute such other
agreements, documents and financing statements reasonably requested by the
Subscribers and Collateral Agent, which will be filed at the Company’s expense
with the jurisdictions, states and counties designated by the
Subscribers.  Subsequent to the Closing, the Company and Subsidiaries
will also execute all such documents reasonably necessary in the opinion of the
Subscribers and Collateral Agent to memorialize and further protect the security
interest described herein which will be prepared and filed at the Company’s
expense with the jurisdictions, states and filing offices designated by the
Subscribers and Collateral Agent.

      


      4.      
     Subscriber Representations
and Warranties.  Each of the Subscribers hereby represents and
warrants to and agrees with the Company with respect only to such Subscriber
that:

      


      (a)           Organization and Standing of
the Subscriber.  Subscriber, to the extent applicable, is an
entity duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation.


      
        
           


        

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

      


      (c)           No
Conflicts.  The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by Subscriber
of the transactions contemplated hereby and thereby or relating hereto do not
and will not (i) result in a violation of Subscriber’s charter documents, bylaws
or other organizational documents, if applicable, (ii) conflict with nor
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any agreement to which Subscriber is a party, nor
(iii) result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to Subscriber
or its properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a material adverse effect on
Subscriber).  Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the other Transaction
Documents  nor to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

      


      (d)           Information on
Company.   Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's filings made with
the Commission through the fifth (5th)
business day preceding the Closing Date (hereinafter referred to collectively as
the "Reports").  In
addition, Subscriber may have received in writing from the Company such other
information concerning its operations, financial condition and other matters as
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other Written Information"),
and considered all factors Subscriber deems material in deciding on the
advisability of investing in the Securities.

      


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

      


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

      


      (g)           Compliance with Securities
Act.   Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of the Subscriber contained herein), and that
such Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. In any event, and subject to compliance with
applicable securities laws, the Subscriber may enter into lawful hedging
transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties who in turn may
dispose of these Securities.


      
        
           


        

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

      


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

      


      (i)           Notes, Warrants, and
Additional Investment Rights
Legend.  The Notes and Warrants shall bear the following
legend:

       

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

       

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


      
        
           


        

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

      


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

      


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

      


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

       

      5.           Company Representations and
Warranties.  Except as set forth in the Schedules, the Company
represents and warrants to and agrees with each Subscriber that:

       

      (a)           Due
Incorporation.  The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business as presently conducted.  The Company is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a Material Adverse
Effect.  For purposes of this Agreement, a “Material Adverse Effect” shall
mean a material adverse effect on the financial condition, results of
operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole.  For purposes of this Agreement, “Subsidiary” means, with
respect to any entity at any date, any direct or indirect corporation, limited
or general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than 9.5% of
(i) the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint venture
or other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such entity, or
(B) is under the actual control of the Company.  As of the Closing
Date, all of the Company’s Subsidiaries and the Company’s ownership interests
therein are set forth on Schedule
5(a). The Company represents that it owns all of the equity of the
Subsidiaries and rights to receive equity of the Subsidiaries set forth on Schedule
5(a), free and clear of all liens, encumbrances and claims, except as set
forth on Schedule
5(a).  No person or entity other than the Company has the right
to receive any equity interest in the Subsidiaries.  The Company
further represents that the Subsidiaries have not been known by any other names
for the prior five years.


      
        
           


        

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

       

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

       

      (d)           Capitalization and
Additional
Issuances.   The authorized and outstanding capital stock
of the Company and Subsidiaries on a fully diluted basis as of the date of
this Agreement and the Closing Date (not including the Securities) are set forth
on Schedule
5(d).  Except as set forth on Schedule
5(d), there are no options, warrants, or rights to subscribe to,
securities, rights, understandings or obligations convertible into or
exchangeable for or granting any right to subscribe for any shares of capital
stock or other equity interest of the Company or any of the
Subsidiaries.  The only officer, director, employee and consultant
stock option or stock incentive plan or similar plan currently in effect or
contemplated by the Company is described on Schedule
5(d).  There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock or preferred
stock.

       

      (e)           Consents.  Except
for the consent describe or Schedule 5 (e) which shall have been obtained by the
Company prior to the execution by the Company of this Agreement, no other
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, Subsidiaries or any of
their Affiliates, any Principal Market [as defined in Section 9(b)], or the
Company's stockholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company and
Subsidiaries of their obligations under the Transaction Documents, including,
without limitation, the issuance and sale of the Securities.  The
Transaction Documents and the Company’s performance of its obligations
thereunder have been approved by the Company’s Board of Directors in accordance
with the Company’s Certificate of Incorporation and applicable
law.  Any such qualifications and filings will, in the case of
qualifications, be effective upon Closing and will, in the case of filings, be
made within the time prescribed by law.

       

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


      
        
           


        

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

       

      (ii)          result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
in favor of Subscribers as described herein; or

       

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

       

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

       

      (g)          The
Securities.  The Securities upon issuance:

       

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

      


      (ii)          have
been, or will be, duly and validly authorized and on the dates of issuance,
conversion or exercise, as the case may be, of the Notes, Warrants, Additonal
Investment Rights Conversion Shares upon conversion of the Notes, and the
Warrant Shares upon exercise of the Warrants, such Notes, Warrants, Conversion
Shares and Warrant Shares will be duly and validly issued, fully paid and
non-assessable and if registered pursuant to the 1933 Act and resold pursuant to
an effective registration statement or exempt from registration will be free
trading, unrestricted and unlegended;

       

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

       

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

       

      (v)          assuming
the representations and warranties of the Subscribers as set forth in Section 4
hereof are true and correct, will not result in a violation of Section 5 under
the 1933 Act.

       

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


      
        
           


        

        
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      (i)           No Market
Manipulation.  The Company and its Affiliates have not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or
resold.

       

      (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   Since June 30, 2009, and except as disclosed
in the Reports or modified in the Other Written Information or in the Schedules
hereto, there has been no Material Adverse Event relating to the Company's
business, financial condition or affairs. The Reports and Other Written
Information including the financial statements included therein do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances and when
made.

       

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

       

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

       

      (m)           No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security of the Company nor solicited any offers to buy any
security of the Company under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board.  No prior offering will impair the exemptions
relied upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder.  Neither the Company nor any of its Affiliates
will take any action or steps that would cause the offer or issuance of the
Securities to be integrated with other offerings which would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.  The Company will not conduct
any offering other than the transactions contemplated hereby that may be
integrated with the offer or issuance of the Securities or that would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.


      
        
           


        

        
          8

          
            

          

        

        
           


        

      

       

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

       

      (o)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company’s business since June 30, 2009 and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

       

      (p)           No Undisclosed Events or
Circumstances.  Since June 30, 2009, except as disclosed in the
Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

       

      (q)           Banking.  Schedule
5(q) contains a list of all financial institutions at which the Company
and Subsidiaries maintain deposit, checking and other accounts. The list
includes the accurate addresses and telephone numbers of such financial
institutions and account numbers of such accounts.

       

      (r)           Dilution.   The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company.  The
board of directors of the Company has concluded, in its good faith business
judgment, that the issuance of the Securities is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Notes and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other stockholders of the Company or parties entitled to receive equity of the
Company.

       

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

      


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

      


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


      
        
           


        

        
          9

          
            

          

        

        
           


        

      


      (v)           Reporting Company/Shell
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act,
the Company has timely filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve
months.  As of the Closing Date, the Company is not a “shell company”
nor a “former shell company” as those terms are employed in Rule 144 under the
1933 Act.

      


      (w)           Listing.  The
Company’s Common Stock is quoted on the OTC Bulletin Board (“Bulletin Board”) under the
symbol MSGI.  The Company has not received any pending ooral or
written notice that its Common Stock is not eligible nor will become ineligible
for quotation on the Bulletin Board nor that its Common Stock does not meet all
requirements for the continuation of such quotation and (ii) the Company
satisfies all the requirements for the continued quotation of its Common Stock
on the Bulletin Board.

      


      (x)           DTC
Status.   The Company’s transfer agent is a participant
in, and the Common Stock is eligible for transfer pursuant to, the Depository
Trust Company Automated Securities Transfer Program. The name, address,
telephone number, fax number, contact person and email address of the Company
transfer agent is set forth on Schedule
5(x)
hereto.

      


      (y)           Company Predecessor and
Subsidiaries.  The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (l), (o),
(p), (q), (s), (t) and (u) of this Agreement, as same relate or could be
applicable to each Subsidiary.  All representations made by or
relating to the Company of a historical or prospective nature and all
undertakings described in Section 9 shall relate, apply and refer to the Company
and Subsidiaries and their predecessors and successors.

      


      (z)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.

       

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

       

      6.           Regulation D Offering/Legal
Opinion.  The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.  On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscribers from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers.  A form of the legal opinion is annexed hereto as Exhibit G.  The
Company will provide, at the Company's expense, to the Subscribers, such other
legal opinions, if any, as are reasonably necessary in each Subscriber’s opinion
for the issuance and resale of the Notes, Warrants, Conversion Shares and
Warrant Shares pursuant to an effective registration statement, Rule 144 under
the 1933 Act or an exemption from registration.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      7.1.         Conversion of
Notes.


      (a)           Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering an
opinion of counsel to assure that the Company's transfer agent shall issue stock
certificates in the name of a Subscriber (or its permitted nominee) or such
other persons as designated by Subscriber and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion.  The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the legend set forth
in Section 4(h).  If and when a Subscriber sells the Conversion
Shares, assuming (i) a registration statement including such Conversion Shares
for registration has been filed with the Commission, is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
Subscriber or its agent confirms in writing to the transfer agent that
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Conversion Shares without restrictive legend and the Conversion
Shares will be free-trading, and freely transferable.  In the event
that the Conversion Shares are sold in a manner that complies with an exemption
from registration, the Company will promptly instruct its counsel to issue to
the transfer agent an opinion permitting removal of the legend indefinitely
if such sale is pursuant to Rule 144(b)(1)(i) of the 1933 Act, provided that
Subscriber delivers reasonably requested representations in support of such
opinion.

      


      (b)           Each
Subscriber will give notice of its decision to exercise its right to convert its
Note, interest, or part thereof by telecopying or otherwise delivering a
completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement.  Subscriber will not be required to surrender
the Note until the Note has been fully converted or satisfied.  Each
date on which a Notice of Conversion is faxed to the Company in accordance with
the provisions hereof by 6 PM Eastern Time (“ET”) (or if received by the
Company after 6 PM ET, then the next business day) shall be deemed a “Conversion
Date.”  The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Conversion Shares issuable upon conversion of the Note to Subscriber via express
courier for receipt by Subscriber within three (3) business days after the
Conversion Date (such third day being the "Delivery Date").  In
the event the Conversion Shares are electronically transferable, then delivery
of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Subscriber.   A Note representing the balance of the Note
not so converted will be provided by the Company to Subscriber if requested by
Subscriber, provided Subscriber delivers the original Note to the
Company.

      


      (c)           The
Company understands that a delay in the delivery of the Conversion Shares in the
form required pursuant to Section 7.1 hereof later than the Delivery Date could
result in economic loss to the Subscribers.  As compensation to
Subscribers for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to each applicable Subscriber for late issuance of Conversion
Shares in the form required pursuant to Section 7.1 hereof upon Conversion of
the Note, the amount of $100 per business day after the Delivery Date for each
$10,000 of Note principal amount and interest (and proportionately for other
amounts) being converted of the corresponding Conversion Shares which are not
timely delivered.  The Company shall pay any payments incurred under
this Section upon demand.  Furthermore, in addition to any other
remedies which may be available to the Subscribers, in the event that the
Company fails for any reason to effect delivery of the Conversion Shares on or
before the Delivery Date, the Subscriber will be entitled to revoke all or part
of the relevant Notice of Conversion by delivery of a notice to such effect to
the Company whereupon the Company and Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that the damages payable in connection with the Company’s default shall be
payable through the date notice of revocation or rescission is given to the
Company.


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      7.2.           Mandatory Redemption at
Subscriber’s Election.  In the event (i) the Company is
prohibited from issuing Conversion Shares, (ii) upon the occurrence of any other
Event of Default (as defined in the Note, this Agreement or any other
Transaction Document), that continues for more than five (5) business days,
(iii) a Change in Control (as defined below), or (iv) of the liquidation,
dissolution or winding up of the Company or any Subsidiary, then at the
Subscriber's election, the Company must pay to each Subscriber not later than
ten (10) business days after request by such Subscriber, a sum of money
determined by multiplying up to the outstanding principal amount of the Note
designated by each such Subscriber by 120%, plus accrued but unpaid interest and
any other amounts due under the Transaction Documents ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by each
Subscriber on the same date as the Conversion Shares otherwise deliverable or
within ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal, interest and other amounts will be deemed paid and
no longer outstanding.  The Subscriber may rescind the election to
receive a Mandatory Redemption Payment at any time until such payment is
actually received.  For purposes of this Section 7.2, “Change in Control” shall mean
(i) the Company  becoming a Subsidiary of another entity (other than a
corporation formed by the Company for purposes of reincorporation in another
U.S. jurisdiction), (ii) the sale, lease or transfer of substantially all the
assets of the Company or its Subsidiaries, or (iii) a majority of the members of
the Company’s board of directors as of the Closing Date no longer serving as
directors of the Company, except as a result of natural causes or as a result of
hiring additional outside directors in order to meet appropriate stock exchange
requirements or with the prior written consent of the Subscribers.

      


      7.3.           Maximum
Conversion.  A Subscriber shall not be entitled to convert on a
Conversion Date that amount of a Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by such Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date.  For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder.  Subject to the foregoing, the
Subscriber shall not be limited to aggregate conversions of only 4.99% and
aggregate conversions by the Subscriber may exceed 4.99%.  The
Subscriber shall have the authority to determine whether the restriction
contained in this Section 7.3 will limit any conversion of a Note and the extent
such limitation applies and to which convertible or exercisable instrument or
part thereof such limitation applies.  The Subscriber may increase the
permitted beneficial ownership amount up to 9.99% upon and effective after 61
days prior written notice to the Company.  Subscriber may allocate
which of the equity of the Company deemed beneficially owned by Subscriber shall
be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%.

      


      7.4.           Injunction Posting of
Bond.  In the event a Subscriber shall elect to convert a Note
or part thereof, the Company may not refuse conversion based on any claim that
Subscriber or any one associated or affiliated with Subscriber has been engaged
in any violation of law, or for any other reason, unless, a final non-appealable
injunction from a court made on notice to Subscriber, restraining and or
enjoining conversion of all or part of such Note shall have been sought and
obtained by the Company and the Company has posted a surety bond for the benefit
of Subscriber equal to the greater of (i) 120% of the outstanding principal and
accrued but unpaid interest of the Note, and the aggregate purchase price of the
Conversion Shares which are sought to be subject to the injunction, or (ii) the
closing price of the Common Stock on the trading day before the issue date of
the injunction multiplied by the number of Conversion Shares issuable upon
conversion of the Note, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which shall be
payable to Subscriber to the extent the judgment or decision is in Subscriber’s
favor.

      


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


      
        
           


        

        
          12

          
            

          

        

        
           


        

      

       

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

       

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

      


      8.           Fees.

       

      (a)           Broker’s
Commission.  The Company on the one hand, and each Subscriber
(for himself only) on the other hand, agrees to indemnify the other against and
hold the other harmless from any and all liabilities to any persons claiming
brokerage commissions or similar fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby and arising out of such
party’s actions.  The Company represents that there are no parties
entitled to receive fees, commissions, finder’s fees, due diligence fees or
similar payments in connection with the Offering except as described on Schedule
8.  The Company agrees that it is solely responsible for
payment of the compensation set forth on Schedule
8.  Anything in this Agreement to the contrary notwithstanding,
each Subscriber is providing indemnification only for such Subscriber’s own
actions and not for any action of any other Subscriber.  The liability
of the Company and each Subscriber’s liability hereunder is several and not
joint.  The Company represents that to the best of its knowledge there
are no other parties entitled to receive fees, commissions, or similar payments
in connection with the Offering.

      


      (b)           Subscriber’s Legal
Fees.   The Company shall pay to Grushko & Mittman,
P.C., a cash fee of $20,000 (“Legal Fees”) as reimbursement
for services rendered in connection with the transactions described in the
Transaction Documents. The Legal Fees will be payable out of funds held pursuant
to the Escrow Agreement.  Grushko & Mittman, P.C. will be
reimbursed at Closing by the Company for all lien searches, filing fees, and
reasonable printing and shipping costs for the closing statements to be
delivered to Subscribers.

      


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

      


      (a)           Stop
Orders.  Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscribers, within twenty-four hours
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
only if at least two business days prior notice of such instruction is given to
the Subscribers.


      
        
           


        

        
          13

          
            

          

        

        
           


        

      

       

      (b)           Listing/Quotation.  The
Company shall promptly secure the quotation or listing of the Conversion Shares
and Warrant Shares upon each national securities exchange, or automated
quotation system upon which the Company’s Common Stock is quoted or listed and
upon which such Conversion Shares and Warrant Shares are or become eligible for
quotation or listing (subject to official notice of issuance) and shall maintain
same so long as any Notes and Warrants are outstanding.  The Company
will maintain the quotation or listing of its Common Stock on the American Stock
Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select
Market, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the “Principal
Market”), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable. Subject to the limitation set forth in Section 9(n), the Company
will provide Subscribers with copies of all notices it receives notifying the
Company of the threatened and actual delisting of the Common Stock from any
Principal Market.  As of the date of this Agreement and the Closing
Date, the Bulletin Board is the Principal Market.

       

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

       

      (d)           Filing
Requirements.  From the date of this Agreement and until the
last to occur of (i) all the Conversion Shares and Warrant Shares have been sold
or transferred by the Subscribers pursuant to a registration statement or
pursuant to Rule 144(b)(1)(i), or (ii) the Notes, Warrants and Additional
Investment Rights are no longer outstanding (the date of such latest occurrence
being the “End Date”),
the Company will (A) cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if the Company is
not subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this
Agreement.  The Company will use its best efforts not to take any
action or file any document (whether or not permitted by the 1933 Act or the
1934 Act or the rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under said acts
until the End Date.  Until the End Date, the Company will continue the
listing or quotation of the Common Stock on a Principal Market and will comply
in all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Principal Market.  The Company agrees to
timely file a Form D with respect to the Securities if required under Regulation
D and to provide a copy thereof to Subscribers promptly after such
filing.

       

      (e)           Use of
Proceeds.   The proceeds of the Offering will be
substantially employed by the Company for the purposes set forth on Schedule 9(e)
hereto.  Except as described on Schedule
9(e), the Purchase Price may not and will not be used for accrued and
unpaid officer and director salaries, nor payment of financing related debt nor
redemption of outstanding notes or equity instruments of the Company nor
non-trade payables outstanding on the Closing Date.

       

      (f)           Reservation.   Prior
to the Closing, the Company undertakes to reserve on behalf of Subscribers
from its authorized but unissued Common Stock, a number of shares of Common
Stock equal to 150% of the amount of Common Stock necessary to allow Subscribers
to be able to convert all of the Notes [including interest that would accrue
thereon through the Maturity Date (as defined in the Notes)] and 100% of the
amount of Warrant Shares issuable upon exercise of the Warrants (“Required
Reservation”).   Failure to have sufficient shares
reserved pursuant to this Section 9(f) at any time shall be a material default
of the Company’s obligations under this Agreement and an Event of Default under
the Notes.  Without waiving the foregoing requirement, if at any time
Notes and Warrants are outstanding the Company has reserved on behalf of the
Subscribers less than 125% of the amount necessary for full conversion of the
outstanding Note principal and interest at the conversion price in effect on
every such date and 100% of the Warrant Shares issuable upon exercise of
outstanding Warrants (“Minimum
Required Reservation”), the Company will promptly reserve the Minimum
Required Reservation, or if there are insufficient authorized and available
shares of Common Stock to do so, the Company will take all action necessary to
increase its authorized capital to be able to fully satisfy its reservation
requirements hereunder, including the filing of a preliminary proxy with the
Commission not later than fifteen business days after the first day the Company
has reserved less than the Minimum Required Reservation.  The Company
agrees to provide notice to the Subscribers not later than three days after the
date the Company has less than the Minimum Required Reservation reserved on
behalf of the Subscribers.


      
        
           


        

        
          14

          
            

          

        

        
           


        

      

       

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

       

      (h)           Taxes.  From
the date of this Agreement and until the End Date, the Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.

       

      (i)           Insurance.  From
the date of this Agreement and until the End Date, the Company will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company’s line of business and
location, in amounts and to the extent and in the manner customary for companies
in similar businesses similarly situated and located and to the extent available
on commercially reasonable terms.

       

      (j)           Books and
Records.  From the date of this Agreement and until the End
Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.

       

      (k)           Governmental
Authorities.   From the date of this Agreement and until
the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.

       

      (l)           Intellectual
Property.  From the date of this Agreement and until the End
Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for
value. Schedule
9(l) hereto identifies all of the intellectual property owned by the
Company and Subsidiaries, which schedule includes but is not limited to patents,
patents pending, patent applications, trademarks, tradenames, service marks and
copyrights.

       

      (m)           Properties.  From
the date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases and claims to which it is a party
or under which it occupies or has rights to property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect.  The Company will not abandon any of its assets except for
those assets which have negligible or marginal value or for which it is prudent
to do so under the circumstances.


      
        
           


        

        
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      (n)           Confidentiality/Public
Announcement.   From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K, Form
10-Q, Form 10-K and the registration statement or statements regarding the
Subscribers’ Securities or in correspondence with the Commission regarding same,
it will not disclose publicly or privately the identity of the Subscribers
unless expressly agreed to in writing by Subscribers or only to the extent
required by law and then only upon not less than three days prior notice to
Subscribers.  In any event and subject to the foregoing, the Company
undertakes to file a Form 8-K describing the Offering not later than the second
(2nd)
business day after the Closing Date.  Prior to the filing date of such
Form 8-K, a draft in the final form will be provided to Subscribers for
Subscribers’ review and approval.  In the Form 8-K, the Company will
specifically disclose the amount of Common Stock outstanding immediately after
the Closing.  Upon  delivery by the Company to the
Subscribers after the Closing Date of any notice or information, in writing,
electronically or otherwise, and while a Note, Conversion Shares or Warrants are
held by Subscribers, unless the  Company has in good faith determined
that the matters relating to such notice do not
constitute material, nonpublic information relating to
the Company or Subsidiaries, the Company  shall within one
business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
Report on Form 8-K.  In the event that
the Company believes that a notice or communication to
Subscribers contains material, nonpublic information relating to the Company or
Subsidiaries, except as required to be delivered in connection with this
Agreement, the Company shall so indicate to Subscribers prior to delivery of
such notice or information.  Subscribers will be granted three (3)
business days to notify the Company that Subscriber elects not to receive such
information.   In the case that Subscriber elects not to receive
such information, the Company will not deliver such information to
Subscribers.  In the absence of any such Company
indication, Subscribers shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or Subsidiaries.

       

      (o)           Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time provide a
Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber, its agent or counsel shall have agreed in writing to accept such
information as described in Section 9(n) above.  The Company
understands and confirms that the Subscribers shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.  The Company agrees that any information known to Subscriber
not already made public by the Company, may be made public and disclosed by the
Subscriber.

      


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


      
        
           


        

        
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      (i)           create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanic’s,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property; (g) the Liens granted to Enable Growth Partners LP, Enable
Opportunity Partners LP and Pierce Diversified Strategy Master Fund LLC in
connection with 8% secured convertible notes issued to them on May 21, 2007 and
due May 21, 2010 as same may have been or will be assigned to Madison & Wall
Investments, LLC in connection with which approximately $10,250,000 principal,
$1,797,000 interest and no other amount remain outstanding as of the date of
this Agreement; (h) the Liens granted in connection with the secured convertible
notes issued to the following parties on December 11, 2007 and July 31, 2009:
IRA F/B/O Leonid Frenkel, Pershing LLC as Custodian $1,200,000 principal amount,
$416,970 interest and no other amount remain outstanding as of the date of this
Agreement,  and (i) the Liens granted to Agile Opportunity Fund LLC in
connection with 8% secured convertible notes issued to it on February 6, 2009
and due October 21, 2009 in connection with which approximately $254,000
principal, $0 interest and no other amount remain outstanding as of the date of
this Agreement (each of (a) through (i), a “Permitted Lien”);

      


      (ii)          amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscribers (an increase in
the amount of authorized shares, will not be deemed adverse to the rights of the
Subscribers);

      


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

      


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

      


      (v)          pay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, which in management’s good faith, reasonable judgment
must be repaid to avoid disruption of the Company’s
businesses).


      
        
           


        

        
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      (q)           Offering
Restrictions.   For so long as the Notes are outstanding,
the Company will not enter into any Equity Line of Credit or similar agreement,
nor issue nor agree to issue any floating or Variable Priced Equity Linked
Instruments nor any of the foregoing or equity with price reset rights
(collectively, the “Variable
Rate Restrictions”).   For purposes hereof, “Equity Line of Credit” shall
include any transaction involving a written agreement between the Company and an
investor or underwriter whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of time and at
an agreed price or price formula, and “Variable Priced Equity Linked
Instruments” shall include: (A) any debt or equity securities which are
convertible into, exercisable or exchangeable for, or carry the right to receive
additional shares of Common Stock either (1) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the initial issuance
of such debt or equity security, or (2) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date at any time
after the initial issuance of such debt or equity security due to a change in
the market price of the Company’s Common Stock since date of initial issuance,
and (B) any amortizing convertible security which amortizes prior to its
maturity date, where the Company is required or has the option to (or any
investor in such transaction has the option to require the Company to) make such
amortization payments in shares of Common Stock which are valued at a price that
is based upon and/or varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or equity security
(whether or not such payments in stock are subject to certain equity
conditions).  Until December 21, 2010, the Company will not enter into
an agreement to modify, amend, reset, exchange, or adjust any outstanding or
issuable equity, convertible debt or other securities convertible into Common
Stock or equity of the Company, without the prior written consent of the
Subscribers and thereafter and for so long as any Note is outstanding take any
of the foregoing actions if the result would be the issuance or potential
issuance upon any such action of Common Stock at a price less than $0.25 per
share of Common Stock.

       

      (r)           Seniority.   Except
for Permitted Liens, until the Notes are fully satisfied or converted, the
Company shall not grant nor allow any security interest to be taken in any
assets of the Company or any Subsidiary or any Subsidiary’s assets; nor issue or
amend any debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any equity or assets of the Company or any
Subsidiary or any right to payment equal to or superior to any right of the
Subscribers as holders of the Notes in or to such equity, assets or payment, nor
issue or incur any debt not in the ordinary course of business.

       

      (s)           Notices.   For
so long as the Subscribers hold any Notes or Warrants, the Company will maintain
a United States address and United States fax number for notice purposes under
the Transaction Documents.

       

      (t)           Transactions With
Insiders.  So long as the Notes are outstanding, the Company
shall not, and shall cause each of its Subsidiaries not to, enter into,
materially amend, materially modify or materially supplement, or permit any
Subsidiary to enter into, materially amend, materially modify or materially
supplement, any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual.  “Affiliate” for purposes of
this Section 9(t) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity.  “Control” or
“Controls” for purposes of the Transaction Documents means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.  For purposes hereof, “Insiders” shall mean
any officer, director or manager of the Company, including but not limited to
the Company’s president, chief executive officer, chief financial officer and
chief operations officer, and any of their affiliates or family
members.

       

      (u)           No Change in Transfer
Agent.  So long as the Notes are outstanding, the Company shall
not take any action to cause a change in the Company’s transfer agent of record,
without Subscribers’ prior written consent.

       

      
        
           

        

        
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      10.          Covenants of the Company
Regarding Indemnification.

       

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

       

      (b)           Indemnification
Procedures.   Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 10(b) and shall only relieve it from any liability which it may have to
such indemnified party under this Section 10(b), except and only if and to the
extent the indemnifying party is prejudiced by such omission. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 10(b) for
any legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnifying party shall have reasonably concluded that there may be
reasonable defenses available to indemnified party which are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified parties, as a group, shall have the
right to select one separate counsel, reasonably satisfactory to the indemnified
and indemnifying party, and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

       

      11.          Unlegended Shares and 144
Sales.

       

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


      
        
           


        

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

      


      (c)           Late Delivery of Unlegended
Shares.   The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof later than the
Unlegended Shares Delivery Date could result in economic loss to a
Subscriber.  As compensation to a Subscriber for such loss, the
Company agrees to pay late payment fees (as liquidated damages and not as a
penalty) to the Subscriber for late delivery of Unlegended Shares in the amount
of $100 per business day after the Unlegended Shares Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default.  If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11 for an aggregate of thirty
days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to redeem all or any portion of
the Unlegended Shares subject to such default at a price per share equal to the
greater of (i) 120% of the Purchase Price paid by the Subscriber for the
Unlegended Shares that were not timely delivered, or (ii) a fraction in which
the numerator is the highest closing price of the Common Stock during the
aforedescribed thirty day period and the denominator of which is the lowest
conversion price or exercise price, as the case may be, during such thirty day
period, multiplied by the price paid by Subscriber for such Common Stock (“Unlegended Redemption
Amount”).  The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.

      


      (d)           Injunction.  In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11, the Company may not refuse to deliver Unlegended Shares
based on any claim that such Subscriber or any one associated or affiliated with
such Subscriber has been engaged in any violation of law, or for any other
reason, unless, an injunction or temporary restraining order from a court, on
notice, restraining and or enjoining delivery of such Unlegended Shares shall
have been sought and obtained by the Company and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of the greater of (i) 120%
of the amount of the aggregate purchase price of the Common Stock which is
subject to the injunction or temporary restraining order, (ii) the closing price
of the Common Stock on the trading day before the issue date of the injunction
multiplied by the number of Unlegended Shares to be subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the proceeds of which shall be payable to such Subscriber to
the extent Subscriber obtains judgment in Subscriber’s favor.

      


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


      
        
           


        

        
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      (f)           144
Default.   At any time commencing six months after the
Closing Date, in the event the Subscriber is not permitted to sell any of the
Conversion Shares or Warrant Shares without any restrictive legend or if such
sales are permitted but subject to volume limitations or further restrictions on
resale as a result of the unavailability to Subscriber of Rule 144(b)(1)(i)
under the 1933 Act or any successor rule (a “144 Default”), for any reason
including but not limited to failure by the Company to file quarterly, annual or
any other filings required to be made by the Company by the required filing
dates, or the Company’s failure to make information publicly available which
would allow Subscriber’s reliance on Rule 144 in connection with sales of
Conversion Shares or Warrant Shares, except due to a change in current
applicable securities laws or because the Subscriber is an Affiliate (as defined
under Rule 144) of the Company, then the Company shall pay such Subscriber as
liquidated damages and not as a penalty for each thirty days (or such lesser
pro-rata amount for any period less than thirty days) an amount equal to two
percent (2%) of the purchase price of the Conversion Shares and Warrant Shares
subject to such 144 Default.  Liquidated Damages shall not be payable
pursuant to this Section 11(f) in connection with Shares for such times as such
Shares may be sold by the holder thereof without any legend or volume or other
restrictions pursuant to Section 144(b)(1)(i) of the 1933 Act or pursuant to an
effective registration statement.

      


      12.           (a)           Favored Nations
Provision.  Other than in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of a corporation or
other entity so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (ii) the Company’s issuance of securities in connection
with strategic license agreements and other partnering arrangements so long as
such issuances are not for the purpose of raising capital and which holders of
such securities or debt are not at any time granted registration rights, (iii)
the Company’s issuance of Common Stock or the issuances or grants of options to
purchase Common Stock to employees, directors, and consultants, pursuant to
plans described on Schedule
5(d) as such plans are constituted on the Closing Date, (iv) securities
upon the exercise or exchange of or conversion of any securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement on the terms disclosed in the Reports
and as the foregoing are described on Schedule
12(a),
and (v) as a result of the exercise of Warrants or conversion of Notes which are
granted or issued pursuant to this Agreement (collectively, the foregoing
(i) through (v) are “Excepted
Issuances”), if at any time the Notes or Warrants are outstanding, the
Company shall agree to or issue (the “Lower Price Issuance”) any
Common Stock or securities convertible into or exercisable for shares of Common
Stock (or modify any of the foregoing which may be outstanding) to any person or
entity at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price in effect at such time, or if less than
the Warrant exercise price in effect at such time, without the consent of the
Subscribers, then the Conversion Price and Warrant exercise price shall
automatically be reduced to such other lower price.  The average
Conversion Price of the Conversion Shares and average exercise price in relation
to the Warrant Shares shall be calculated separately for the Conversion Shares
and Warrant Shares.   Common Stock issued or issuable by the
Company for no consideration or for consideration that cannot be determined at
the time of issue will be deemed issuable or to have been issued for $0.001 per
share of Common Stock.  For purposes of the issuance and adjustments
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or any
warrant, right or option to purchase Common Stock shall result in the issuance
of the additional shares of Common Stock upon the sooner of the agreement to or
actual issuance of such convertible security, warrant, right or options and
again at any time upon any subsequent issuances of shares of Common Stock upon
exercise of such conversion or purchase rights if such issuance is at a price
lower than the Conversion Price or Warrant exercise price in effect upon such
issuance.  The rights of Subscribers set forth in this Section 12 are
in addition to any other rights the Subscribers have pursuant to this Agreement,
the Notes, Warrants any other Transaction Document, and any other agreement
referred to or entered into in connection herewith or to which Subscribers and
Company are parties.


      
        
           


        

        
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      (b)           Right of First
Refusal.  Until one year following the Closing Date, the
Subscribers shall be given not less than fifteen (15) business days prior
written notice of any proposed sale by the Company of its common stock or other
securities or equity linked debt obligations (“Other Offering”), except in
connection with the Excepted Issuances.  If Subscribers elect to
exercise their rights pursuant to this Section 12(b), the Subscribers shall have
the right during the fifteen (15) business days following receipt of the notice,
to purchase in the aggregate up to all of such offered
common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale, relative to each other in proportion
to the amount of Note Principal issued to them on the Closing
Date.  Subscribers who participate in such Other Offering shall be
entitled at their option to purchase, in proportion to each other, the amount of
such Other Offering that could have been purchased by Subscribers who do not
exercise their rights hereunder until up to the entire Other Offering is
purchased by Subscribers.  In the event such terms and conditions are
modified during the notice period, Subscribers shall be given prompt notice of
such modification and shall have the right during the fifteen (15) business days
following the notice of modification to exercise such
right.  Commencing one year after the Closing Date, and ending the
later of either: (i) 24 months following the Closing Date; or (ii) the date
Notes are no longer outstanding, each Subscriber is granted the foregoing right
to participate in an Other Offering, up to a portion of such Other Offering
equal to the gross amount of such Other Offering multiplied by a fraction the
numerator of which is the Note Principal acquired on the Closing Date by such
Subscriber and the denominator of which is the total amount of Note Principal
issued on the Closing Date.

      


      (c)           Maximum Exercise of
Rights.   In the event the exercise of the rights
described in Section 12(a) and Section 12(b) would or could result in the
issuance of an amount of Common Stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 7.3 of this Agreement, then the issuance of such additional
shares of Common Stock of the Company to such Subscriber will be deferred in
whole or in part until such time as such Subscriber is able to beneficially own
such Common Stock without exceeding the applicable maximum amount set forth
calculated in the manner described in Section 7.3 of this Agreement and such
Subscriber notifies the Company accordingly.

       

      13.          Miscellaneous.

       

      (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: MSGI Security
Solutions, Inc., 575 Madison Avenue, 10th Floor,
New York, NY 10022, Attn: Jeremy Barbera, President & CEO, facsimile: (212)
605-0222, with a copy by fax only to: Joshua M. Gold, Esq., (401) 633-6660, and
(ii) if to the Subscribers, to: the addresses and fax numbers indicated on Schedule
1 hereto, with an additional copy by fax only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, facsimile: (212)
697-3575.


      
        
           


        

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

       

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

       

      (d)      
    Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York.  The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.  In the event that any provision
of this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of any agreement.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other Transaction
Document by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law.

       

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

       

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


      
        
           


        

        
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      (g)          Maximum
Payments.   Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest or dividends required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscribers and
thus refunded to the Company.  The Company agrees that it may not and
actually waives any right to challenge the effectiveness or applicability of
this Section 13(g).

       

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

       

      (i)           Captions: Certain
Definitions.  The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.  As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

       

      (j)           Consent.   As
used in this Agreement and the Transaction Documents and any other agreement
delivered in connection herewith, “Consent of the Subscribers” or similar
language means the consent of holders of not less than a majority of the
outstanding Principal Amount of actually issued Notes on the date consent is
requested,  (such Subscribers being a “Majority in
Interest”).  A Majority in Interest may consent to take or
forebear from any action permitted under or in connection with the Transaction
Documents, modify any Transaction Documents or waive any default or requirement
applicable to the Company, Subsidiaries or Subscribers under the Transaction
Documents provided the effect of such action does not waive any accrued interest
or damages and further provided that the relative rights of the Subscribers to
each other remains unchanged.

       

      (k)           Severability.  In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

       

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

       

      (m)          Maximum
Liability.   In no event shall the liability of the
Subscribers or permitted successor hereunder or under any Transaction Document
or other agreement delivered in connection herewith be greater in amount than
the dollar amount of the net proceeds actually received by such Subscriber or
successor upon the sale of Conversion Shares.


      
        
           


        

        
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      (n)           Independent Nature of
Subscribers.     The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that each
Subscriber has represented that the decision of each Subscriber to purchase
Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
other Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions.  The Company acknowledges
that nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto shall be deemed to constitute the
Subscribers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Subscribers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents.  The Company acknowledges that
it has elected to provide all Subscribers with the same terms and Transaction
Documents for the convenience of the Company and not because Company was
required or requested to do so by the Subscribers.  The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.

       

      (o)           Equal
Treatment.   No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any provision of
the Transaction Documents unless the same consideration is also offered and paid
to all the Subscribers and their permitted successors and assigns.

       

      [SIGNATURE
PAGE FOLLOWS]


      
        
           


        

        
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      SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT

      


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

      


      
        
          	
                  MSGI
      Security Solutions, Inc.

                
	
                  a
      Nevada corporation

                
	 
      
	
                  By:

                	
                    

                
	 
      	
                  Name:
      Jeremy Barbera

                
	 
      	
                  Title:
      Chairman & CEO

                
	 
      
	
                  Dated:
      March ___, 2010

                


        

      

      


      
        	
                SUBSCRIBER

              	 
      	
                PRINCIPAL

                AMOUNT

              	 
      	
                WARRANTS

              
	 
      	 
      	 
      	 
      	 
      
	
                Name
      and Address:___________________

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                Taxpayer
      ID# (if applicable): _____________________

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                _____________________________________________

              	 
      	 
      	 
      	 
      
	
                (Signature)

              	 
      	 
      	 
      	 
      
	
                By:

              	
                  

              	 
      	
                  

              	 
      


      


      
        
           


        

        
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