Unassociated Document


     

    EXHIBIT
10.1

    


    PLACEMENT
AGENCY AGREEMENT

    


    July 12,
2010

    


    Emerson
Equity LLC

    155 Bovet
Road, Suite 725

    San
Mateo, CA 94402

    


    Re:           SPO
Medical Inc.

    


    Ladies
and Gentlemen:

    


    This
Placement Agency Agreement (this “Agreement”) sets forth terms upon which
Emerson Equity LLC, a registered broker-dealer and a member of the Financial
Industry Regulatory Authority (“FINRA”) (together with its selected dealers, the
“Placement Agent”), shall be engaged by SPO Medical Inc. (the “Company”) to act
as lead placement agent in connection with the private placement (the
“Offering”) on a “reasonable efforts basis” of up to seventeen (17) units
($510,000) (“Units”) (the “Maximum Offering”), each Unit consisting of (i)
200,000 shares of common stock, par value $0.01 per share (“Common Stock” or the
“Shares”) and (ii) three-year Common Stock Purchase Warrants (“Investor
Warrants”) to purchase 100,000 shares of Common Stock (the “Warrant Shares”) at
an exercise price of $0.25 per share.  The Company and the Placement
Agent (by mutual agreement) reserve the right to increase the Maximum Offering
by an additional seventeen (17) Units ($510,000) (“Overallotment”).

     

    Subscriptions
for the Units will be accepted by the Company at a price of $30,000 per Unit
(the “Offering Price”), with a minimum investment of one Unit; provided,
however, that subscriptions in lesser amounts may be accepted in the Company’s
and Placement Agent’s discretion.  The Placement Agent shall not
tender to the Company subscriptions for any persons or entities who do not
qualify as “accredited investors,” as such term is defined in Rule 501 of
Regulation D as promulgated under Section 4(2) (“Regulation D”) of the
Securities Act of 1933, as amended (the “Act”).  The Units will be
offered commencing on the issue date of the Memorandum (as defined below) until
September 7, 2010 (the “Initial Offering Period”), which period may be extended
by the Company and the Placement Agent until up to November 9, 2010 (this
additional period and the Initial Offering Period shall be referred to as the
“Offering Period”).  The date on which the Offering shall terminate
shall be referred to as the “Termination Date.”

     

    With
respect to the Offering, the Company shall provide the Placement Agent, on the
terms set forth herein, the exclusive right to offer and sell all of the Units
being offered.  Each of the Placement Agent and the Company may, in
its sole reasonable discretion, accept or reject in whole or in part any
prospective investment in the Units or allot to any prospective subscriber less
than the number of Units that such subscriber desires to purchase.

     

    The
Offering will be made by the Company solely pursuant to the Memorandum (as
hereinafter defined), which at all times will be in form and substance
reasonably acceptable to the Placement Agent, the Company and their respective
counsel and contain such legends and other information as such parties and their
respective counsel may, from time to time, deem necessary and desirable to be
set forth therein.  “Memorandum” as used in this Agreement means the
Company’s Confidential Private Placement Memorandum dated July 9, 2010,
inclusive of all annexes, and all amendments, supplements and appendices thereto
and all documents incorporated therein by reference.

     

    
      
         


      

      
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    1.    
        Appointment of Placement
Agent.

    


    (a)           On
the basis of the representations and warranties provided herein, and subject to
the terms and conditions set forth herein, the Placement Agent is appointed as
exclusive Placement Agent of the Company during the Offering Period to assist
the Company in finding qualified subscribers for the Offering.  On the
basis of such representations and warranties and subject to such terms and
conditions, the Placement Agent hereby accepts such appointment and agrees to
perform its services hereunder in a professional and businesslike manner and to
use its commercially reasonable efforts to assist the Company in finding
subscribers of Units who qualify as “accredited investors,” as such term is
defined in Rule 501 of Regulation D and to complete the Offering.  The
Placement Agent has no obligation to purchase any of the
Units.  Unless sooner terminated in accordance with this Agreement,
the engagement of the Placement Agent hereunder shall continue until the later
of the Termination Date or the last Closing (as defined below).  Prior
to the Termination Date, the Company shall not engage any other party to act as
placement agent of any type of security (either debt or
equity).  Notwithstanding anything contained herein, in the event
that closings for in
excess of $250,000 are not consummated on or before August 20, 2010, the
engagement of the Placement Agent will, at the Company’s option upon written
notice to the Placement Agent, become a non-exclusive engagement and, in such
event the Company will revise the Memorandum (provided such revised Memorandum
is provided to the Placement Agent so that it has an opportunity to comment on
such revisions) to reflect the non-exclusivity of Emerson as placement
agent.

    


    (b)           The
Placement Agent shall not contact any potential investors regarding the offering
of the Units unless the following procedures are complied with. The Placement
Agent has furnished the Company with a list of potential investors, as may be
supplemented from time to time (hereinafter the "Potential Investor List") that
it may solicit with respect to the Offering.  The Potential Investor
List is annexed hereto as Exhibit A and has been approved by the
Company.  To the extent the Placement Agent desires to add names to
the list, it will provide notice via email to the Company.  The
Company shall have two business days from such e-mail delivery to object to any
person or entity on the Potential Investor List, citing the reason for such
objection. The failure of the Company to timely object shall be deemed to
represent its consent to the approach of such person.

    


    2.      
     Representations and
Warranties.

    


    Except as
otherwise disclosed in the SEC Documents (as defined below) or in the
Memorandum, the following representations and warranties of the Company are true
and correct as of the date of this Agreement:

     

    
      
         


      

      
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    (a)           The
Company and each subsidiary of which the Company owns, directly or indirectly, a
controlling interest (a “Subsidiary”) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as
and where now owned, leased, used, operated and conducted.  The
Company has no Subsidiaries, other than SPO Medical Equipment Ltd., a company
incorporated under the laws of the State of Israel and SPO Ltd., a company
incorporated under the laws of the State of Israel.  Except as
disclosed in the SEC Documents, the Company owns, directly or indirectly, all of
the capital stock or comparable equity interests of each Subsidiary free and
clear of any and all liens, security interests, charges, pledges or similar
encumbrances (“Liens”) and all of the issued and outstanding shares of capital
stock or comparable equity interest of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive rights of first refusal
and other similar rights.  The Company has the unrestricted right to
vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital stock or other equity securities of
its Subsidiaries that are owned by the Company. As used herein, “SEC Documents”
means all of the Company’s reports, schedules, financial statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) including, without limitation, the Company Annual Report on Form 10-K for
the year ended December 31, 2009, filed with the SEC on March 29, 2010, the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010,
filed with SEC on May 14, 2010 and the Company's Current Report on Form 8-K
filed on July 2, 2010 and as amended and filed with the SEC on July __,
2010.  The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership or
use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. For purposes of this
Agreement “Material Adverse Effect” shall mean a material adverse effect on (1)
the assets, liabilities, results of operations, condition (financial or
otherwise), business, or prospects of the Company and each Subsidiary taken as a
whole; or (2) the ability of the Company to perform its obligations under the
Transaction Documents (as defined herein).

     

    (b)           The
Company and each Subsidiary has all requisite power and authority to conduct its
business as presently conducted and as proposed to be conducted, with respect to
the Company only, to enter into and perform its obligations under this
Agreement, the Subscription Agreement annexed to the Memorandum (the
“Subscription Agreement”), the Investor Warrants and the warrants to be issued
to the Placement Agent at each closing of the Offering (“Placement Agent
Warrants” and collectively with the aforementioned agreements and instruments,
the “Transaction Documents”).  The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by the
Company’s Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders, is required.  At
the time of the initial Closing and each subsequent closing the Company will
have all requisite power and authority to issue, sell and deliver the securities
comprising the Units and the Placement Agent Warrants and the securities
underlying such Units and Placement Agent Warrants.  Upon due
execution and delivery, the Transaction Documents will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally, securities
laws applicable to indemnification and contribution obligations of the kind set
forth herein and to general equitable principles and the availability of
specific performance.

     

    (c)           None
of the execution and delivery of, or performance by the Company under the
Transaction Documents, will conflict with or violate, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company or any of its Subsidiaries under any agreement or other
instrument to which the Company or any of its Subsidiaries is a party or by
which either the Company or any of its Subsidiaries or their respective assets
may be bound, or any term of the charter or by-laws of the Company, or any
license, permit, judgment, decree, order, statute, rule or regulation applicable
to the Company or its Subsidiaries or any of their respective
assets.

     

    (d)           None
of the Units, the Investor Warrants, the Placement Agent Warrants and the shares
of Common Stock issuable upon exercise of the Investor Warrants or the Placement
Agent Warrants are subject to preemptive or similar rights of any stockholder or
security holder of the Company or an adjustment under the anti-dilution or
exercise rights of any holders of any outstanding shares of capital stock,
options, warrants or other rights to acquire any securities of the
Company.

     

    
      
         


      

      
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    (e)           As
of the date of the initial Closing, the Common Stock and Common stock underlying
the Investor Warrants and Placement Agent Warrants have been duly authorized
and, when issued and delivered against payment therefore as provided in the
Transaction Documents, will be validly issued, fully paid and nonassessable and
shall be free and clear of all liens, charges restrictions, claims and
encumbrances imposed by or through the Company other than as provided in the
Transaction Documents.

     

    (f)           No
consent, authorization or filing of or with any United States court or
government authority is required in connection with the consummation of the
transactions contemplated herein, except for required filings with the United
States Securities and Exchange Commission (the “SEC”) and applicable “Blue Sky”
or state securities commissions relating specifically to the
Offering.

     

    (g)        
The Memorandum does not, and will not, include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  None of the statements,
documents, certificates or other items prepared or supplied by the Company with
respect to the transactions contemplated hereby contains an untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.  There is no fact which the Company has not
disclosed to the Placement Agent and its counsel in writing and of which the
Company is aware which materially adversely affects or could materially
adversely affect the business prospects, financial condition, operations,
property or affairs of the Company or any of its Subsidiaries.

     

    (h)           The
Memorandum has been diligently prepared by the Company, and, to the Company’s
knowledge, is in compliance with Regulation D, the Act and the requirements of
all other rules and regulations (the “Regulations”) of the Securities and
Exchange Commission (the “SEC”) relating to offerings of the type contemplated
by the Offering, and the applicable securities laws and the rules and
regulations of those jurisdictions wherein the Units are to be offered and
sold.  With respect to actions taken by the Company, the Units will be
offered and sold pursuant to the registration exemption provided by Regulation D
and Section 4(2) and/or Section 4(6) of the Act as a transaction not involving a
public offering and the requirements of any other applicable state securities
laws and the respective rules and regulations thereunder in those jurisdictions
in which the Placement Agent notifies the Company that the Units are being
offered for sale.  The Memorandum describes all material aspects,
including attendant risks, of an investment in the Company.  The
Company has not taken nor will it take any action which conflicts with the
conditions and requirements of, or which would make unavailable with respect to
the Offering, the exemption(s) from registration available pursuant to
Regulation D or Section 4(2) and/or Section 4(6) of the Act, and knows of no
reason why any such exemption would be otherwise unavailable to it. Neither the
Company, nor, to the Company’s 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) in connection with the offer or sale of the
Units.  The Company has not been subject to any order, judgment or
decree of any court of competent jurisdiction temporarily, preliminarily or
permanently enjoining it for failing to comply with Section 503 of Regulation
D.

     

    (i)           The
Company owns its property and assets free and clear of all mortgages, liens,
loans, pledges, security interests, claims, equitable interests, charges, and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company’s or its
subsidiaries, as the case may be, ownership or use of such property or
assets.  With respect to the property and assets it leases, if any,
each of the Company is in compliance in all material respects with such leases
and, to its knowledge, holds a valid leasehold interest free of any liens,
claims, or encumbrances.

     

    
      
         


      

      
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    (j)           The
Company has authorized and outstanding the capital stock as set forth in the
Memorandum as of the date set forth therein.  All outstanding shares
of capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable.  Except
for  warrants and options referred to in the Memorandum: (i) there are
no outstanding options, warrants or other rights permitting or requiring the
Company or others to purchase or acquire any shares of capital stock or other
equity securities of the Company or to pay any dividend or make any other
distribution in respect thereof; (ii) there are no securities issued or
outstanding which are convertible into or exchangeable for shares of capital
stock or other equity securities of the Company and there are no contracts,
commitments or understandings to which the Company is a party, whether or not in
writing, to issue or grant any such option, warrant, right or convertible or
exchangeable security; (iii) no shares of stock or other securities of the
Company are reserved for issuance for any purpose; and (iv) there are no voting
trusts or other contracts, commitments, understandings, arrangements or
restrictions of any kind to which the Company is a party with respect to the
ownership, voting or transfer of Units of stock or other securities of the
Company, including without limitation, any preemptive rights, rights of first
refusal, proxies or similar rights.  The issued and outstanding shares
of capital stock of the Company conform to all statements in relation thereto
contained in the Memorandum and the Memorandum describes all material terms and
conditions thereof.  All issuances by the Company of its securities
have been registered or were exempt from registration under the Act and any
applicable state securities laws.

     

    (k)           The
financial statements, together with the related notes, of the Company included
in the Company’s SEC filings and the Memorandum present fairly in all material
respects the financial position of the Company as of the respective dates
specified and the results of its operations and cash flow for the respective
periods covered thereby.  Except as set forth in such financial
statements and incurred in the ordinary course of business, the Company has not
incurred any material liabilities of any kind, whether accrued, absolute,
contingent or otherwise or entered into any material transactions subsequent to
December 31, 2009.

     

    (l)           The
conduct of business by the Company as presently and proposed to be conducted is
not subject to continuing oversight, supervision, regulation or examination by
any governmental official or body of the United States or any other jurisdiction
wherein the Company conducts or proposes to conduct such business, except as is
described in the Memorandum or where such regulation is otherwise applicable to
commercial enterprises generally.  The Company has obtained all
requisite licenses, permits and other governmental authorizations to conduct its
business as presently conducted, except to the extent the failure to so obtain
would not reasonably be expected to have a Material Adverse
Effect.  The Company has not received any notice of any violation of,
or noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to
environmental protection, occupational safety and health, federal securities
laws, equal employment opportunity, consumer protection, credit reporting,
“truth-in-lending”, and warranties and trade practices) applicable to its
business, the violation of, or noncompliance with, which would reasonably be
expected to have a Material Adverse Effect, and the Company knows of no facts or
set of circumstances which would give rise to such a notice.

     

    (m)           No
default by the Company or, to the knowledge of the Company, any other party
exists in the due performance under any material agreements to which the Company
is a party or to which any of its assets are subject, other than defaults that
would not reasonably be expected to have a Material Adverse
Effect.  No default by the Company or, to the knowledge of the
Company, any other party exists in the due performance under any material
agreements to which the Company is a party or to which any of its assets are
subject, other than defaults that would not reasonably be expected to have a
Material Adverse Effect.

     

    
      
         


      

      
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    (n)           There
are no actions, suits, claims, hearings or proceedings pending before any court
or governmental authority or, to the knowledge of the Company, threatened,
against the Company, or involving its assets or any of its officers or directors
(in their capacity as such) which, if determined adversely to the Company or
such officer or director, would reasonably be expected to have a Material
Adverse Effect or adversely affect the transactions contemplated by this
Agreement or the enforceability thereof.

     

    (o)           The
Company is not in violation of its Certificate of Incorporation, By-laws or
other organizational documents. The Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default), under, and the Company has not taken any action or failed to take any
action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party or by which any property or assets of the Company is
bound or affected, except for possible defaults, terminations, amendments,
accelerations or cancellations which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The
businesses of the Company are not being conducted in violation of any law, rule
ordinance or regulation of any governmental entity, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect.

     

    (p)           Except
as set forth in the Memorandum, since December 31, 2009, there has been
no:  (i) material adverse change in the financial condition,
operations or business of the Company from that shown on the Company Financial
Statements (as defined below), or any material transaction or commitment
effected or entered into by the Company outside of the ordinary course of
business or (ii) damage, loss or destruction, whether or not covered by
insurance, with respect to any material asset or property of the
Company.

     

    (q)           Except
as set forth in the Memorandum, there are no loans, leases, royalty agreements
or other transactions between (i) the Company or any of its customers or
suppliers; and (ii) any officer, employee, consultant or director of the Company
or any person owning five (5%) percent or more of the capital stock of the
Company or five (5%) percent or more of the ownership interests of the Company
or any member of the immediate family of such officer, employee, consultant,
director, stockholder or owner or any corporation or other entity controlled by
such officer, employee, consultant, director, stockholder or owner, or a member
of the immediate family of such officer, employee, consultant, director,
stockholder or owner.

     

    (r)           Each
of the Company and its Subsidiaries is insured by recognized, financially sound
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are prudent and customary in the business
in which it is engaged, including directors and officers liability. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able:
(i) to renew its existing insurance coverage as and when such policies
expire; or (ii) to obtain comparable coverage from similar institutions as
may be necessary or appropriate to conduct its business as now
conducted.

     

    (s)           The
Company or its Subsidiaries owns valid title, free and clear of any Liens, or
possesses the requisite valid and current licenses or rights, free and clear of
any Liens, to use all intellectual property in connection with the conduct its
business as now operated.  There is no pending claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any intellectual property necessary to enable it to conduct its
business as now operated.  To the Company’s knowledge, the Company’s
current and proposed products, services and processes do not infringe on any
intellectual property or other rights held by any person, and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.  The Company has not received any written notice of
infringement of, or conflict with, the asserted rights of others with respect to
its intellectual property. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of its intellectual
property.

     

    
      
         


      

      
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    (t)           Except
as set forth in the Memorandum, there is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, or its businesses,
properties or assets or their officers or directors in their capacity as such,
that would
reasonably be expected to have a Material Adverse Effect.

     

    (u)           Each
of the Company and its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject and which are due (unless and only to
the extent that it has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes or has obtained an extension of
the deadline for such filing) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  To the Company’s knowledge,
there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, statue or local tax.  To the Company’s
knowledge, none of the Company’s or any Subsidiary’s tax returns is presently
being audited by any taxing authority.  To the Company’s knowledge,
there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, statue or local tax.

     

    (v)           Except
as set forth in the SEC Documents, since January 1, 2009, the Company has timely
filed (subject to 12b-25 filings with respect to certain periodic filings) all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange
Act.  The SEC Documents have been made available to the Investor via
the SEC’s EDGAR system.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party have been filed as exhibits to the SEC Filings.  As of their
respective dates, the financial statements of the Company included in the SEC
Documents (“Company Financial Statements”) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect at the time of the
filing.  The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”),
consistently applied, during the periods involved except: (1) as may be
otherwise indicated in such financial statements or the notes thereto; or (2) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries, if any, as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments).  Except as expressly set forth in the Company Financial
Statements or in the SEC Documents, the Company has no liabilities, contingent
or otherwise, other than: (1) liabilities incurred in the ordinary course of
business subsequent to December 31, 2009; and (2) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under GAAP to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.  All information relating to or concerning the
Company and its officers, directors, employees, customers or clients (including,
without limitation, all information regarding the Company’s internal financial
accounting controls and procedures) set forth in the Transaction Documents and
the SEC Documents, when taken together as a whole, does not contain an untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.


    
      
         


      

      
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    (w)           The
shares of Common Stock are quoted on the OTCBB under the symbol
“SPOM.”  The Company has not received notice (written or oral) from
the OTCBB to the effect that the Company is not in compliance with the
continuing requirements of the OTCBB.  The Company is, and it has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such maintenance requirements.

    


    (x)           The
Company has complied in all material respects with the laws, rules and
regulation under the Sarbanes-Oxley Act of 2002 to the extent applicable to the
Company.

     

    (y)           Neither
the Company, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company has, in the course of
its actions for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

     

    (z)           To
the knowledge of the Company, neither the sale of the Units by the Company nor
its use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.  Without limiting the
foregoing, the Company is not (a) a person whose property or interests in
property are blocked pursuant to Section 1 of Executive Order 13224 of September
23, 2001 Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a
person who engages in any dealings or transactions, or be otherwise associated,
with any such person.  To the knowledge of the Company, the Company is
in compliance, in all material respects, with the USA Patriot Act of 2001
(signed into law October 26, 2001).

     

    (aa)        
Except for the compensation set forth in this Agreement or the Memorandum, the
Company is not obligated to pay, and has not obligated the Placement Agent to
pay, a finder’s or origination fee in connection with the Offering, and hereby
agrees to indemnify the Placement Agent from any such claim made by any other
person as more fully set forth in Section 9 hereof.  The Company has
not offered for sale or solicited offers to purchase the Units except for
negotiations with the Placement Agent.  Except as set forth in the
Memorandum, no other person has any right to participate in any offer, sale or
distribution of the Company’s securities to which the Placement Agent’s rights,
described herein, shall apply.

     

    
      
         


      

      
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    (bb)           Neither
the Company, its affiliates, nor any person acting on its or their behalf has
made any offers or sales of any security or solicited any offers to buy any
security under circumstances that would cause the offer of the
Units  pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the Act, or any applicable stockholder
approval provisions, which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. Nor will the Company or its affiliates take any action or steps that
would knowingly cause the offer or issuance of the Units 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 will be integrated with the offer or issuance of the Units, which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.

     

    3.           Certain Obligations of the
Company and Placement Agent Compensation.

     

    (a)           The
Company shall cause to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws and in
accordance with the terms and conditions of this Agreement, and hereby
authorizes the Placement Agent and its agents, employees, to use the Memorandum
in connection with the sale of the Units until the Termination Date, and no
person or entity is or will be authorized to give any information or make any
representations other than those contained in the Memorandum or to use any
offering materials other than those contained in the Memorandum in connection
with the sale of the Units.

     

    (b)           The
Company shall make available to the Placement Agent and its representatives such
information as may be reasonably requested in making a reasonable investigation
of the Company and its affairs and shall provide access to such employees during
normal business hours as shall be reasonably requested by the Placement
Agent.

     

    (c)           As
compensation for its services under this Agreement, at each Closing, the
Placement Agent will receive (i) a cash fee (the “Placement Agent Fee”) equal to
10% of the aggregate gross cash proceeds that the Company receives from the sale
of Units at such closing and (ii) a non-accountable expense allowance (the
“Expense Allowance”) equal to 2% of the aggregate gross proceeds that the
Company receives from the sale of Units at such closing and a legal expense
reimbursement not to exceed $15,000, $5,000 of which has previously been paid,
with the balance to be paid upon the initial Closing.

     

    (d)           In
addition to the Placement Agent Fee and Expense Allowance and reimbursement set
forth in clause (c) above, the Company shall at each Closing issue to Placement
Agent, or its designee(s), a warrant to purchase 12% of the number of shares of
Common Stock (i) included in the Units at an exercise price of $0.15 per share
and (ii) issuable upon exercise of the Investor Warrants at an exercise price of
$0.25 (the “Placement Agent Warrants”).  The Placement Agent Warrants
shall be substantially identical to the Investor Warrants.

     

    
      
         


      

      
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    (e)           The
Company shall also pay to the Placement Agent the Placement Agent Fee and issue
to the Placement Agent or its designees the Placement Agent Warrants, calculated
according to the percentages set forth in Sections 3(c) and (d) of this
Agreement, if any party on the Potential Investor List makes a private
investment in the Company at any time prior to the date that is twelve (12)
months after the later to occur of the Termination Date and the Final Closing
(the “Post-Closing Investors”).  In that regard, the Placement Agent
shall update the Potential Investor List within 5 business days following the
later to occur of the Termination Date and the Final Closing which shall
represent a comprehensive list of Post Closing Investors for purposes of the
“tail” provisions of this section.  The Company acknowledges and
agrees that the Potential Investor List is proprietary to the Placement Agent
and shall be maintained in strict confidence by the Company.  As used
herein, the term “Post Closing Investors” includes any party that is an
affiliate or a referral of the specific party named in the Potential Investor
List.

    


    4.            Subscription and Closing
Procedures.

     

    (a)           The
Units sold in the Offering will be sold pursuant to Subscription Agreements
between the Company and the investors in the Offering in the form annexed to the
Memorandum.

     

    (b)         
All funds for subscriptions received from the Offering will be promptly
forwarded by the Placement Agent or the Company, if received by it, to, and
deposited into, a non-interest bearing escrow account (the “Escrow Account”)
established for such purpose with Signature Bank (the “Escrow
Agent”).  All such funds for subscriptions will be held in the Escrow
Account pursuant to the terms of an escrow agreement among the Company, the
Placement Agent and the Escrow Agent.  The Company will pay all fees
related to the establishment and maintenance of the Escrow
Account.  The Company will either accept or reject, for any or no
reason, the Subscription Agreements in a timely fashion and at each Closing will
countersign the Subscription Agreements and provide duplicate copies of such
documents to the Placement Agent for distribution to the
subscribers.  The Company will give notice to the Placement Agent of
its acceptance of each subscription.  The Company, or the Placement
Agent on the Company’s behalf, will promptly return to subscribers incomplete,
improperly completed, improperly executed and rejected subscriptions and give
written notice thereof to the Placement Agent upon such return.

     

    (c)           If
all of the conditions set forth elsewhere in this Agreement are fulfilled, the
initial Closing shall be held in accordance with the terms of the Memorandum
with respect to the Units sold.  Thereafter, additional closings may
be held until either (i) all of the Units are sold or (ii) the Termination Date,
with the final closing (the “Final Closing” and each closing of the purchase and
sale of Units is referred to in this Agreement as a “Closing”) to occur within
10 days from the earlier of the Termination Date or the sale of all Units
offered.  Delivery of payment for the accepted subscriptions for Units
from the funds held in the Escrow Account will be made at each Closing at the
Placement Agent’s offices against delivery of the securities comprising the
Units by the Company at the address set forth in Section 14 hereof (or at
such other place as may be mutually agreed upon between the Company and the
Placement Agent), net of amounts due to the Placement Agent and its counsel as
of such Closing.  Executed instruments/certificates for the Units and
the Agent’s Warrants will be in such authorized denominations and registered in
such names as the Placement Agent may request on or before the date of each
Closing (“Closing Date”), and will be made available to the Placement Agent for
checking and packaging at the Placement Agent’s office at each
Closing.

     

    (d)           If
subscriptions for Units have not been received and accepted by the Company on or
before the expiration of the Offering Period for any reason, the Offering will
be terminated, no Units will be sold, and the Escrow Agent will, at the request
of the Placement Agent, cause all monies received from subscribers for the Units
to be promptly returned to such subscribers without interest, penalty, expense
or deduction.

     

    
      
         


      

      
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    5.           Further
Covenants.  The Company hereby covenants and agrees
that:

     

    (a)           Except
upon prior written notice to the Placement Agent, the Company shall not, at any
time prior to the Closing, knowingly take any action which would reasonably be
expected to cause any of the representations and warranties made by it in this
Agreement not to be complete and correct in all material respects on and as of
the Closing date with the same force and effect as if such representations and
warranties had been made on and as of each such date.

     

    (b)           
If, at any time prior to the Final Closing (i) any event shall occur which does
or may materially affect the Company or as a result of which it might become
necessary to amend or supplement the Memorandum so that the representations,
warranties and covenants herein remain true, or (ii) in case it shall, in the
opinion of counsel to the Placement Agent and the Company, be necessary to amend
or supplement the Memorandum to comply with Regulation D or any other applicable
securities laws or regulations, the Company shall, in the case of (i) above,
promptly notify the Placement Agent and, in the event of either (i) or (ii)
above shall, at its sole cost, prepare and furnish to the Placement Agent copies
of appropriate amendments and/or supplements to the Memorandum in such
quantities as the Placement Agent may request.  The Company shall not
at any time, whether before or after the Final Closing, prepare or use any
amendment or supplement to the Memorandum of which the Placement Agent shall not
previously have been advised and furnished with a copy, or to which the
Placement Agent or its counsel will have reasonably objected in writing or
orally (confirmed in writing within 24 hours), or which is not in compliance
with the Act, the regulations thereunder and other applicable securities laws.
As soon as the Company is advised thereof, the Company shall advise the
Placement Agent and its counsel, and confirm the advice in writing, of any order
preventing or suspending the use of the Memorandum, or the suspension of the
qualification or registration of the Units or the Securities for offering or the
suspension of any exemption for such qualification or registration of the Units
or the Securities for offering in any jurisdiction, or of the institution or
threatened institution of any proceedings for any of such purposes, and the
Company shall use its best efforts to prevent the issuance of any such order
and, if issued, to obtain as soon as reasonably possible the lifting
thereof.

     

    (c)          
 The Company will use its commercially reasonable efforts to assist counsel
to the Placement Agent in qualifying the Units for sale under the securities
laws of such U.S. jurisdictions as may be mutually agreed to by the Company and
the Placement Agent; provided, that the
Company will not be required or obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Units.  Furthermore, the Company shall file a
copy of a Notice of Sale on Form D with the SEC within the prescribed time
period and shall file all amendments with the SEC as may be
required.  Copies of the Form D and all amendments thereto shall be
provided to the Placement Agent.  The Company or its counsel will
provide counsel for the Placement Agent with copies of all correspondence or
other documentation filed with or received from any jurisdiction where the Units
are to be registered or qualified or offered.  The Company will
promptly provide to the Placement Agent for delivery to all offerees and
investors and their representatives any additional information, documents and
instruments which the Placement Agent or the Company reasonably deem necessary
to comply with the rules, regulations and judicial and administrative
interpretations respecting compliance with such exemptions or qualifications and
registrations in those states where the Units are to be offered or
sold.

     

     (d)           The
Company shall place a legend on the certificates representing the securities
comprising the Units and the Placement Agent Warrants that the securities
evidenced thereby have not been registered under the Act or applicable state
securities laws, setting forth or referring to the applicable restrictions on
transferability and sale of such securities under the Act and applicable state
laws.

     

    
      
         


      

      
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    (e)           The
Company shall apply the net proceeds from the sale of the Units to fund its
working capital requirements and for such other purposes as substantially
described under the “Use of Proceeds” section of the Memorandum.

     

    (f)           During
the Offering Period, the Company shall afford each prospective purchaser of
Units the opportunity to ask questions of and receive answers from an officer of
the Company concerning the terms and conditions of the Offering and the
opportunity to obtain such other additional information necessary to verify the
accuracy of the Memorandum to the extent it possesses such information or can
acquire it without unreasonable expense or violation of any confidentiality
agreements.

     

    (g)        
Except to the extent set forth in Section 1(a) hereto, until the earlier of (i)
completion of the Offering, and (ii) the Termination Date, neither the Company
nor any person or entity acting on its behalf shall negotiate with any other
placement agent or underwriter with respect to a private or public offering of
the Company’s debt or equity securities. Notwithstanding the foregoing, the
Company shall have the ability during the Term, to negotiate and conclude terms
with respect to establishing an equity credit line with a third party provider;
provided the following terms are adhered to: (a) the Placement Agent shall be
provided with periodic updates with respect to such activities during the Term,
(b) no equity line shall be established that contemplate share issuances are
below the per share offering price of the Shares or which contain terms that are
more favorable than the terms of the Offering, (c) no actions shall be taken
with respect to the establishment of the credit line which would jeopardize the
exempt nature of the Offering under federal or state securities laws, including
without limitation, the filing during the Offering Period of a registration
statement with the SEC with respect to such credit line.   In
addition, except as contemplated in Section 1(a) or in the Memorandum, neither
the Company nor anyone acting on its behalf shall, until the Termination Date,
offer for sale to, or solicit offers to subscribe for Units or other securities
of the Company from, or otherwise approach or negotiate in respect thereof with,
any other person.

     

    (h)     Until
the earlier of (i) the Termination Date and (ii) the Final Closing, the Company
will not issue any press release, grant any media interview (including without
limitation, internet media outlets), or otherwise communicate with the media in
any manner whatsoever except to the extent it first provides the Placement Agent
prior written notice of the proposed press release or other communication which
it desires to make and provides the Placement Agent with a reasonable
opportunity to comment on such press release or other
communication.   In no event shall the Company issue any press
release or otherwise communicate with the media in a fashion that could
jeopardize the exempt nature of the Offering.

     

    (i)       The
Company shall pay all expenses incurred in connection with the preparation and
printing of all necessary offering documents, amendments, and instruments
related to the Offering and the issuance of the Units, the Common Stock,
Investor Warrants and the Placement Agent Warrants, and shall also pay its own
expenses for accounting fees, legal fees, bound volumes of closing documents,
and other costs involved with the Offering. The Company shall provide at its own
expense such quantities of the Memorandum and other documents and instruments
relating to the Offering as the Placement Agent may reasonably request. The Blue
Sky filings shall be prepared by the Placement Agent’s counsel for the Company’s
account, with copies to Company’s counsel concurrently (or as soon as sent or
received as reasonable possible) of the filings, correspondence, orders,
findings and all related matters.  In addition, the Company shall pay
all filing fees and reasonable legal fees and expenses for Blue Sky services and
related filings and out-of-pocket expenses of the Placement Agent’s counsel with
respect to Blue Sky exemptions that are sought with respect to the Offering (the
“Blue Sky Expenses”), $4,000 of which shall be paid to the Placement Agent’s
counsel upon the First Closing, and additional reasonable amounts, if any, of
which shall be paid at any subsequent Closing, as applicable.  The
Blue Sky filings shall be prepared by the Placement Agent’s counsel for the
Company’s account and Placement Agent’s counsel shall communicate with the
Company’s counsel with respect to such filings.

     

    
      
         


      

      
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    6.           Conditions of Placement
Agent’s Obligations.  The obligations of the Placement Agent
hereunder to affect each Closing are subject to the fulfillment, at or before
each Closing, of the following additional conditions:

     

    (a)           Each
of the representations and warranties of the Company qualified as to materiality
shall be true and correct at all times prior to and on each Closing Date, except
to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and
correct as of such earlier date, and the representations and warranties of the
Company not qualified as to materiality shall be true and correct in all
material respects at all times prior to and on each Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects as of such earlier date.

     

    (b)           The
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions required to be performed by and complied
with it under the Transaction Documents at or before each Closing.

     

    (c)           
No order suspending the use of the Memorandum or enjoining the offering or sale
of the Units shall have been issued, and no proceedings for that purpose or a
similar purpose shall have been initiated or pending, or, to the Company’s
knowledge, are contemplated or threatened.

    


    (d)           No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

    


    (e)           The
Placement Agent shall have received certificates of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of each Closing Date,
certifying, in such detail as Placement Agent may reasonably request, as to the
fulfillment of the conditions set forth in paragraphs (a), (b), (c) and (d)
above.

     

    (f)           The
Company shall have delivered to the Placement Agent: (i) at each Closing a
currently dated good standing certificate from the secretary of state of its
jurisdiction of incorporation and each jurisdiction in which the Company and
each Subsidiary is qualified to do business as a foreign corporation, and (ii)
at the First Closing, certified resolutions of the Company’s Board of Directors
approving this Agreement and the other Transaction Documents, and the
transactions and agreements contemplated by this Agreement and the other
Transaction Documents.

     

    (g)           On
or prior to the date hereof and at each Closing, either the Chief Executive
Officer or the Chief Financial Officer of the Company shall have provided a
certificate to the Placement Agent confirming that, to the best of their
knowledge, there have been no material adverse changes in the condition
(financial or otherwise) or prospects of the Company from the date of the
financial statements included in the Memorandum, the absence of undisclosed
liabilities and such other matters relating to the financial condition and
prospects of the Company that the Placement Agent may reasonably
request.

     

    
      
         


      

      
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    (h)           At
each Closing, the Company shall pay and deliver to the Placement Agent the
Placement Agent Fee, calculated in accordance with Sections 3(c), the Expense
Allowance, calculated in accordance with Sections 3(c) and the Blue Sky Expenses
in accordance with Section 5(i) hereof.

     

    (i)           At
each Closing the Company shall have delivered to the Placement Agent and/or its
designees, the appropriate number of Placement Agent Warrants, calculated in
accordance with Section 3(d) hereof.

     

    (j)           There
shall have been delivered to the Placement Agent a signed opinion of Aboudi
& Brounstein Law Offices,  counsel to the Company, dated as of
each Closing Date, containing substantially the opinions set forth as Exhibit B
hereto.

    


    (k)           All
proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent’s Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as it may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.

     

    7.            Representation and
Warranties of the Placement Agent; Covenants of the Placement
Agent.

     

    (a)           The
Placement Agent hereby represents and warrants to the Company that it is a
registered broker-dealer pursuant to the Exchange Act and a member in good
standing of the Financial Industry Regulatory Authority

     

    (b)           The
Placement Agent shall not engage in any form of general solicitation or general
advertising that is prohibited by Regulation D in connection with the
Offering, or take any action that might reasonably be expected to jeopardize the
availability for the Offering of the exemption from registration provided by
Rule 506 under Regulation D.

     

    8.            Indemnification.

     

    (a)           The
Company shall: (i) indemnify and hold harmless the Placement Agent, its selected
dealers, agents and their respective officers, directors, employees and each
person, if any, who controls the Placement Agent within the meaning of the Act
and such agents (each an “Indemnitee”) against, and pay or reimburse each
Indemnitee for, any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which will, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys’ fees, including appeals), to which any Indemnitee may
become subject, under the Act or otherwise, in connection with the offer and
sale of the Units, and (ii) reimburse each Indemnitee for any legal or other
expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, action, proceeding or investigation; provided,
however, that the Company will not be liable in any such case to the extent that
any such claim, damage or liability is found in a final judgment, or judgment
not appealed within the prescribed appeal time period, in both cases by a court
of competent jurisdiction to have resulted from (A) an untrue statement or
alleged untrue statement of a material fact made in the Memorandum, or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons specifically for
use in the Memorandum, (B) any violations by the Placement Agent or such
controlling persons of the Act or state securities laws which does not result
from a violation thereof by the Company or any of its affiliates, or (C) the
gross negligence, willful misconduct, or bad faith of the Placement Agent or the
party claiming a right to indemnification.  In addition to the
foregoing agreement to indemnify and reimburse the Indemnitees, the Company will
indemnify and hold harmless each Indemnitee against any and all losses, claims,
damages, liabilities or expenses whatsoever (or actions or proceedings or
investigations in respect thereof), joint or several (which shall for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals) to which any Indemnitee may become subject insofar as such costs,
expenses, losses, claims, damages or liabilities arise out of or are based upon
the claim of any person or entity that he or it is entitled to broker’s or
finder’s fees from any Indemnitee in connection with the Offering and provided
that such claim did not arise out of actions taken by the Placement
Agent.


    
      
         


      

      
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    (b)
   The Placement Agent will indemnify and hold harmless the Company,
its officers, directors, employees and each person, if any, who controls the
Company within the meaning of the Act against, and pay or reimburse any such
person for, any and all losses, claims, damages or liabilities or expenses
whatsoever (or actions, proceedings or investigations in respect thereof), joint
or several, to which the Company or any such person may become subject under the
Act or otherwise, in connection with the offer and sale of the Units, insofar
whether such losses, claims, damages, liabilities or expenses (or actions,
proceedings or investigations in respect thereof) shall result from any claim of
the Company, any of its officers, directors, employees, agents, any person who
controls the Company and such persons within the meaning of the Act or any third
party, but only insofar as such losses, claims, damages or liabilities are based
upon (A) any untrue statement or alleged untrue statement of any material fact
contained in the Memorandum, but only with reference to information contained in
the Memorandum relating to the Placement Agent, or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if made or omitted in
reliance upon and in conformity with information furnished to the Company by the
Placement Agent or any such controlling persons, specifically for use in the
preparation thereof, or (B) fraud, willful misconduct or gross negligence of the
Placement Agent.  The Placement Agent will reimburse the Company or
any such person for any legal or other expenses reasonably incurred in
connection with investigating or defending against any such loss, claim, damage,
liability or action, proceeding or investigation to which such indemnity
obligation applies, including appeals. Notwithstanding the foregoing, (i) in no
case shall the Placement Agent have any liability to any person under this
Section 8(b) for the gross negligence, fraud or willful misconduct of the
Company or any person entitled to indemnification hereunder and (ii) in no event
shall the Placement Agent’s indemnification obligation hereunder exceed the fees
payable to it hereunder, except in cases of the Placement Agent’s gross
negligence, fraud or willful misconduct as determined in a final judgment, or
judgment not appealed within the prescribed appeal time period, in both cases by
a court of competent jurisdiction.


    
      
         


      

      
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    (c)     Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, claim, proceeding or investigation (the “Action”),
such indemnified party, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, will notify the indemnifying party of
the commencement thereof, but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party under this Section 8 unless the indemnifying party has been substantially
prejudiced by such omission. The indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party, to assume the defense thereof subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party.
The indemnified party will have the right to employ separate counsel in any such
Action and to participate in the defense thereof, but the fees and expenses of
such counsel will not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the Action with counsel reasonably
satisfactory to the indemnified party, provided, however, that if the
indemnified party shall be requested by the indemnifying party to participate in
the defense thereof or shall have concluded in good faith and specifically
notified the indemnifying party either that there may be specific defenses
available to it which are different from or additional to those available to the
indemnifying party or that such Action involves or could have a material adverse
effect upon it with respect to matters beyond the scope of the indemnity
agreements contained in this Agreement, then the counsel representing it, to the
extent made necessary by such defenses, shall have the right to direct such
defenses of such Action on its behalf and in such case the reasonable fees and
expenses of such counsel in connection with any such participation or defenses
shall be paid by the indemnifying party. No settlement of any Action against an
indemnified party will be made without the consent of the indemnifying party and
the indemnified party, which consent shall not be unreasonably withheld or
delayed in light of all factors of importance to such party and no indemnifying
party shall be liable to indemnify any person for any settlement of any such
claim effected without such indemnifying party’s consent.

     

    9.           Contribution.  To
provide for just and equitable contribution, if (i) an indemnified party makes a
claim for indemnification pursuant to Section 8 hereof and it is finally
determined, by a judgment, order or decree not subject to further appeal that
such claims for indemnification may not be enforced, even though this Agreement
expressly provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the 1934 Act, or otherwise,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Placement Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total commissions and fees
actually received by the Placement Agent.  The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Placement Agent, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 9. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 9. Anything in this Section 10 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 9 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.


    
      
         


      

      
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    10.         Termination.

     

    (a) The Offering may be terminated by
the Placement Agent at any time prior to the expiration of the Offering Period
in the event that: (i) any of the representations, warranties or covenants of
the Company contained herein, in the Memorandum or in any other Transaction
Document shall prove to have been false or misleading in any material respect
when actually made, (ii) the Company shall have failed to perform any of its
material obligations hereunder or under any other Transaction Document; or (iii)
there shall occur any event, within the control of the Company, which could
materially adversely affect the transactions contemplated hereby or the other
Transaction Documents or the ability of the Company to perform
thereunder.  In such event, the Placement Agent shall be entitled to
receive from the Company, within ten (10) business days of the Termination Date,
in addition to other rights and remedies it may have hereunder, at law or
otherwise, an amount equal to the sum of: (A) any and all Placement Agent Fee
which would have been earned through the Termination Date based on amounts in
the Escrow Account that, but for the termination would have been available in
normal course for release to the Company at a Closing and shall retain any
Placement Agent Fee for any closings previously consummated; (B) the Expense
Allowance based on amounts in the Escrow Account that, but for the termination
would have been available in normal course to be paid to the Placement Agent at
a Closing and shall retain any Expense Allowance for any closings previously
consummated [(A) and (B) collectively, the “Termination Amount”] and (C) all
amounts which may become payable in respect of Post-Closing Investors pursuant
to Section 3(e) hereof.  In addition, in the event such termination
occurs prior to the time that a Closing has been consummated and there are no
funds in the Escrow Account, the Placement Agent will be entitled, upon
presentation of a written accounting therefor in reasonable detail (but without
the need to include the underlying statements or evidence of payment), to prompt
reimbursement of its actual, out-of-pocket expenses related to the Offering in
an amount not to exceed $15,000  (of which $5,000 has previously been
paid) including but not limited to fees and expenses of legal counsel, travel
expenses and the fees and expenses of outside experts, if any, retained to
assist the Placement Agent with due diligence (the foregoing hereinafter
referred to as the “Expense Reimbursement”).

    


    (b)  This
Offering may be terminated by the Company at any time prior to the expiration of
the Offering Period in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder (excluding failing to raise
the Minimum Amount hereunder). In the event of any such termination by the
Company, the Placement Agent shall not be entitled to any amounts whatsoever
except for the Expense Reimbursement.

    


    (c)  This Offering may also
be terminated by the Company at any time prior to the expiration of the Offering
Period for any reason not covered in Section 10(b) above (the “Company 10(c)
Termination”).  In such event, the Placement Agent shall be entitled
to receive from the Company (i) the Termination Amount (or if at the time of
such termination, there are no funds in the Escrow Account that have or are to
be released to Company, the Expense Reimbursement) and (ii) all amounts which
may become payable in respect of Post-Closing Investors pursuant to Section 3(e)
hereof.  In addition, if within twelve (12) months after the Company
10(c) Termination, the Company conducts a public or private offering of its
securities or enters into a letter of intent with respect to the foregoing, then
upon the closing of any such transaction, the Placement Agent shall be entitled
to receive from the Company an amount equal to five (5%) of the gross proceeds
raised in such transaction (the “Company 10 (c) Termination
Amount”).

    


    (d)  Upon any such
termination, the Placement Agent and the Company will cause, via written
instructions to the Escrow Agent, all monies received with respect to the
subscriptions for Units not accepted by the Company to be promptly returned to
such subscribers without interest, penalty, expense or deduction.

     

    
      
         


      

      
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    (e)  Before any termination
by the Placement Agent under Section 10(a) or by the Company under Section 10(b)
or Section 10(c) shall become effective, the terminating party shall give
written notice to the other party of its intention to terminate the Offering
(the “Termination Notice”).  The Termination Notice shall specify the
grounds for the proposed termination. If the specified grounds for termination,
or their resulting adverse effect on the Transactions, are curable, then the
other party shall have ten (10) days from the Termination Notice within which to
remove such grounds or to eliminate all of their material adverse effects on the
Transactions contemplated hereby; otherwise, the Offering shall
terminate.

     

    11.           Survival.  The
obligations of the parties to pay any costs and expenses hereunder and to
provide indemnification pursuant to Section 8 and contribution pursuant to
Section 9 shall survive any termination or completion of the
Offering.  The respective indemnities, agreements, representations,
warranties and other statements of the Company or the Placement Agent set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of, and regardless of any
access to information by, the Company or the Placement Agent, or any of their
officers or directors or any controlling person thereof, and will survive the
sale of the Units.  In addition, the provisions of Sections 3(e),
5(e), and 10 through 18 hereof shall also survive the termination or expiration
of this Offering.

     

    12.            Notices.  All
communications hereunder will be in writing and, except as otherwise expressly
provided herein or after notice by one party to the other of a change of
address, if sent to the Placement Agent, will be mailed, delivered or telefaxed
and confirmed to the Placement Agent at 155 Bovet Road, Suite 725, San Mateo, CA
94402, with a copy to Littman Krooks LLP, 655 Third Avenue, 20th Floor,
New York, New York 10017, Attention: Steven D. Uslaner, Esq., telefax number
(212) 490-2990 and if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to SPO Medical Inc., 3 Gavish Street, POB 2454, Kfar
Saba Israel, Attention: Michael Braunold, telefax number (972) 9-764-3571 with a
copy to Aboudi & Brounstein Law Offices, 3 Gavish Street, POB 2432, Kfar
Saba Ind. Zone 44641 Israel, Attention: David Aboudi, telefax number
972-9-764-4834.

    


    13.           Governing Law, Jurisdiction,
Costs.   This Agreement shall be deemed to have been made
and delivered in New York, New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York without regard to principles of conflicts of law
thereof.   The parties hereto irrevocably submit to the exclusive
jurisdiction of the New York State or United States Federal courts located in
the Borough of Manhattan, New York over any action or proceeding arising out of
or in any manner relating to this Agreement or any agreement contemplated
hereby, and the parties irrevocably agree that all claims in respect of any such
action or proceeding shall be heard in such New York State or Federal court. The
parties hereto further irrevocably waive any objection to venue in such state
and any objection to an action or proceeding in such state on the basis of an
inconvenient forum. Service of process may be made upon either party by mailing
a copy thereof to it, by certified or registered mail, at its address to be used
for the giving of notices under this Agreement. The prevailing party in any
action or proceeding brought arising out of or relating to this Agreement shall
be entitled to receive from the other party all costs, fees and expenses,
including without limitation, the fees and expenses of legal counsel, incurred
in connection with such action or proceeding.

     

    
      
         


      

      
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    14.           Limitation of Engagement to
the Company. The Company acknowledges that the Placement Agent has been
retained only by the Company, that the Placement Agent is providing services
hereunder as an independent contractor (and not in any fiduciary or agency
capacity) and that the Company’s engagement of the Placement Agent is not deemed
to be on behalf of, and is not intended to confer rights upon, any shareholder,
owner or partner of the Company or any other person not a party hereto as
against the Placement Agent or any of its affiliates, or any of its or their
officers, directors, controlling persons (within the meaning of Section 15 of
the Act or Section 20 of the 1934 Act), employees or agents, other than the
indemnification and contribution provisions set forth in Sections 8 and 9
hereof. Unless otherwise expressly agreed in writing by the Placement Agent, no
one other than the Company is authorized to rely upon this Agreement or any
other statements or conduct of the Placement Agent, and no one other than the
Company is intended to be a beneficiary of this Agreement.

    


    15.           Limitation of Liability to
the Company. Except as provided in Section 8 (Indemnification) and
Section 9 (Contribution), neither the Placement Agent nor any of its affiliates
or any of its or their officers, directors, controlling persons (within the
meaning of Section 15 of the Act or Section 20 of the 1934 Act ), employees or
agents shall have any liability to the Company, its security holders or
creditors, or any person asserting claims on behalf of or in the right of the
Company (whether direct or indirect, in contract, tort, for an act of negligence
or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
equitable relief arising out of or relating to this Agreement or the services
rendered hereunder, except for losses, fees, damages, liabilities, costs or
expenses that arise out of or are based on any action of or failure to act by
the Placement Agent and that are determined in a final judgment, or
judgment not appealed within the prescribed appeal time period, in both cases by
a court of competent jurisdiction to have resulted from the fraud, gross
negligence, or willful misconduct of the Placement Agent.

    


    16.           Miscellaneous.  No
provision of this Agreement may be changed or terminated except by a writing
signed by the party or parties to be charged therewith.  Unless
expressly so provided, no party to this Agreement will be liable for the
performance of any other party’s obligations hereunder.  Either party
hereto may waive compliance by the other with any of the terms, provisions and
conditions set forth herein; provided, however, that any such waiver shall be in
writing specifically setting forth those provisions waived
thereby.  No such waiver shall be deemed to constitute or imply waiver
of any other term, provision or condition of this Agreement.

    


    17.           Entire
Agreement.  This Agreement supersedes all prior agreements
(including, without limitation, that certain letter agreement  between
the Company and the Placement Agent dated June 14, 2010) between the parties
with respect to the Offering and the subject matter hereof.

     

    18.           Counterparts.  This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the same
instrument.  In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.  This
Agreement shall become effective when one or more counterparts has been signed
and delivered by each of the parties hereto.

     

    * * * *
*

     

    
      
        
           


        

        
          19

          
            

          

        

        
           


        

      

    

    


    If the
foregoing is in accordance with your understanding of the agreement, kindly sign
and return this Agreement, whereupon it will become a binding agreement between
the Company and the Placement Agent in accordance with its terms.

    


    
      
        
          
            	 
      	
                    SPO
      MEDICAL INC.

                  
	 
      	 
      	 
      
	 
      	
                    By: 

                  	
                    /s/
      Michael Braunold

                  
	 
      	 
      	 
      
	 
      	 
      	
                    Michael
      Braunold

                  
	 
      	 
      	
                    Chief
      Executive Officer

                  
	 	 	 
	 	[ 	 


          

        

      

    

     

    
      	
              Accepted
      and agreed to this

            	 
      
	
              12th  day
      of July, 2010

            	 
      
	 
      	 
      
	
              EMERSON
      EQUITY LLC

            	 
      
	 
      	 
      	 
      
	
              By: 

            	
              /s/
      Domenic Baldini

            	 
      
	 
      	 
      	 
      
	 
      	
              Domenic
      Baldini

            	 
      
	 
      	
              President

            	 
      


    


    
      
         


      

      
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