rim_8k-ex1001.htm


    EXHIBIT
      10.1

     

    SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as
      of December 5, 2007, by and among Rim Semiconductor Company, a
      Utah corporation (the “Company”), and the subscribers
      identified on the signature page hereto (each a “Subscriber”
and collectively “Subscribers”).

    


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

     

    WHEREAS,
      the parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase for up to $6,000,000
      (the
“Purchase Price”) up to $6,666,666.67 (the “Principal
      Amount”) of principal amount of promissory notes of the Company
      (“Note” or “Notes”), a form of which is
      annexed hereto as Exhibit A, convertible into shares of the
      Company’s Common Stock, $0.001 par value (the “Common Stock”)
      at a per share conversion price set forth in the Note (“Conversion
      Price”); and share purchase warrants (the “Warrants”),
      in the form annexed hereto as Exhibit B, to purchase shares of
      Common Stock (the “Warrant Shares”).  The Notes,
      shares of Common Stock issuable upon conversion of the Notes (the
“Shares”), the Warrants and the Warrant Shares are collectively
      referred to herein as the “Securities”; and

     

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

     

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

     

    1.           Closing
      Date.  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.   Subject to the satisfaction or waiver of the terms
      and conditions of this Agreement, on the Closing Date, each Subscriber shall
      purchase and the Company shall sell to each Subscriber a Note in the Principal
      Amount designated on the signature page hereto for the Purchase Price indicated
      thereon, and Warrants as described in Section 2 of this
      Agreement.  The Company shall have up to twenty (20) additional days
      after the first Closing to close on the balance of the Purchase Price in one
      or
      more Closings.  The Notes and Warrants to be issued on the additional
      closing dates will have the same Maturity Dates and exercise periods,
      respectively, as the Notes and Warrants issued on the First Closing
      Date.  The first such Closing Date shall be the Closing Date for all
      amounts representing the Closing Purchase Price.

    


    2.           Warrants.  On
      the Closing Date, the Company will issue and deliver Class A Warrants to the
      Subscribers.  One Class A Warrant will be issued for each Share which
      would be issued on the Closing Date assuming the complete conversion of the
      Note
      on the Closing Date at the Conversion Price set forth in Section 2.1 of the
      Note.  The exercise price to acquire a Warrant Share upon exercise of
      a Class A Warrant shall be equal to $0.10, subject to reduction as described
      in
      the Class A Warrant.  The Class A Warrants shall be exercisable until
      five years after the issue date of the Class A Warrants.


    
      
        
        

      

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

    


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

    


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

    


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

    


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


    
      
        
        

      

      
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    (d)           Information
      on Company.   Such Subscriber has been furnished with or has
      had access at the EDGAR Website of the Commission to the Company’s Form 10-KSB
      filed on February 5, 2007 for the fiscal year ended October 31, 2006, and the
      financial statements included therein for the year ended October 31, 2006,
      the
      Company’s 10-QSB filed on March 14, 2007 and the financial statements included
      for the quarter ended January 31, 2007, the Company’s 10-QSB filed on June 13,
      2007 and the financial statements included for the quarter ended April 30,
      2007,
      the Company’s 10-QSB filed on September 14, 2007 and the financial
      statements included for the quarter ended July 31, 2007, and the Company’s
      definitive proxy statement filed on April 2, 2007, together with all subsequent
      filings made with the Commission available at the EDGAR website (hereinafter
      referred to collectively as the “Reports”).  In
      addition, such Subscriber may have received in writing from the Company such
      other information concerning its operations, financial condition and other
      matters as such Subscriber has requested in writing, identified thereon as
      OTHER
      WRITTEN INFORMATION (such other information is collectively, the “Other
      Written Information”), and considered all factors such Subscriber deems
      material in deciding on the advisability of investing in the
      Securities.

    


    (e)           Information
      on Subscriber.  Such 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 such Subscriber to
      utilize the information made available by the Company to evaluate the merits
      and
      risks of and to make an informed investment decision with respect to the
      proposed purchase, which represents a speculative investment.  Such
      Subscriber has the authority and is duly and legally qualified to purchase
      and
      own the Securities.  Such Subscriber is able to bear the risk of such
      investment for an indefinite period and to afford a complete loss
      thereof.  The information set forth on the signature page hereto
      regarding such Subscriber is accurate.

    


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

    


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


    
      
        
        

      

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

    


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

    


    (i)           Warrants
      Legend.  The Warrants shall bear the following or similar
      legend:

     

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


    
      
        
        

      

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

     

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

     

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

     

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

    


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


    
      
        
        

      

      
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    (n)           Intentionally
      Deleted.

    


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

    


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

    


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

     

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

     

    (a)           Due
      Incorporation.  The Company is a corporation or other entity duly
      incorporated or organized, validly existing and in good standing under the
      laws
      of the jurisdiction of its incorporation or organization and has the requisite
      corporate power to own its properties and to carry on its business as presently
      conducted.  The Company is duly qualified as a foreign corporation to
      do business and is in good standing in each jurisdiction where the nature of
      the
      business conducted or property owned by it makes such qualification necessary,
      other than those jurisdictions in which the failure to so qualify would not
      have
      a Material Adverse Effect.  For purposes of this Agreement, a
“Material Adverse Effect” shall mean a material adverse effect
      on the financial condition, results of operations, prospects, properties or
      business of the Company and its Subsidiaries taken as a whole.  For
      purposes of this Agreement, “Subsidiary” means, with respect to
      any entity at any date, any corporation, limited or general partnership, limited
      liability company, trust, estate, association, joint venture or other business
      entity of which more than 30% of (i) the outstanding capital stock
      having (in the absence of contingencies) ordinary voting power to elect a
      majority of the board of directors or other managing body of such entity,
      (ii) in the case of a partnership or limited liability company, the
      interest in the capital or profits of such partnership or limited liability
      company or (iii) in the case of a trust, estate, association, joint venture
      or other entity, the beneficial interest in such trust, estate, association
      or
      other entity business is, at the time of determination, owned or controlled
      directly or indirectly through one or more intermediaries, by such
      entity.  The Company’s Subsidiaries as of the Closing Date are set
      forth on Schedule 5(a).

     

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

     

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


    
      
        
        

      

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

     

    (e)           Consents.  No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or
      the Company’s shareholders is required for the execution by the Company of the
      Transaction Documents and compliance and performance by the Company of its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities.  The Transaction Documents and
      the Company’s performance of its obligations thereunder has been unanimously
      approved by the Company’s Board of Directors.

     

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

     

    (i)           except
      as set forth on Schedule 5(f), 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
      as described herein; or

     

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

     

    (iv)           except
      as described on Schedule 5(f), result in the triggering of any
      piggy-back registration rights of any person or entity holding securities of
      the
      Company or having the right to receive securities of the Company.

     

    (g)           The
      Securities.  The Securities upon issuance:

     

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


    
      
        
        

      

      
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    (ii)           have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares upon conversion of the Notes and the Warrant Shares and upon exercise
      of
      the Warrants, the 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 will be free trading
      and
      unrestricted;

     

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

     

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

     

    (i)           Intentionally
      Deleted.

     

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

     

    (k)           Stop
      Transfer.  The Company will not issue any stop transfer order or
      other order impeding the sale, resale or delivery of any of the Securities,
      except as may be required by any applicable federal or state securities laws
      and
      unless contemporaneous notice of such instruction is given to the
      Subscriber.

     

    (l)           Defaults.  The
      Company is not in violation of its articles of incorporation or
      bylaws.  Except as set forth on Schedule 5(l), 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.


    
      
        
        

      

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

     

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

     

    (o)           No
      Undisclosed Liabilities.  The Company has no liabilities or
      obligations which are material, individually or in the aggregate, other than
      those incurred in the ordinary course of the Company businesses since October
      31, 2006 and which, individually or in the aggregate, would reasonably be
      expected to have a Material Adverse Effect, except as disclosed in the Reports
      or on Schedule 5(o).

     

    (p)           No
      Undisclosed Events or Circumstances.  Since October 31, 2006, no
      event or circumstance has occurred or exists with respect to the Company or
      its
      businesses, properties, operations or financial condition, that, under
      applicable law, rule or regulation, requires public disclosure or announcement
      prior to the date hereof by the Company but which has not been so publicly
      announced or disclosed in the Reports.

     

    (q)           Capitalization.  The
      authorized and outstanding capital stock of the Company and Subsidiaries as
      of
      the date of this Agreement and the Closing Date (not including the Securities)
      are set forth in the Reports or on Schedule
      5(d).  Except as set forth on Schedule 5(d),
      there are no options, warrants, or rights to subscribe to, securities, rights
      or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries.

     

    (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 Shares upon conversion of the Notes, and the Warrant Shares upon
      exercise of the Warrants, is binding upon the Company and enforceable regardless
      of the dilution such issuance may have on the ownership interests of other
      shareholders of the Company or parties entitled to receive equity of the
      Company.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

    


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

     

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

    


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

    


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

    


    (x)           [Reserved].

    


    (y)           Solvency.  Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the Notes
      hereunder, (i) the Company’s fair saleable value of its assets exceeds the
      amount that will be required to be paid on or in respect of the Company’s
      existing debts and other liabilities (including known contingent liabilities)
      as
      they mature; (ii) the Company’s assets do not constitute unreasonably small
      capital to carry on its business for the current fiscal year as now conducted
      and as proposed to be conducted including its capital needs taking into account
      the particular capital requirements of the business conducted by the Company,
      and projected capital requirements and capital availability thereof, after
      the
      receipt of proceeds from the sale of the Notes hereunder; 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).


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    (z)           Company
      Subsidiaries.  Except as provided in Schedule
      5(a), the Company makes each of the representations contained in
      Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o), (p), (q), (s),
      (t)
      and (u) of this Agreement, as same relate to the Subsidiary of the
      Company.  All representations made by or relating to the Company of a
      historical or prospective nature and all undertakings described in Sections
      9(g)
      through 9(l) shall relate, apply and refer to the Company and its
      predecessors.  The Company represents that it owns 100% of the
      outstanding equity of the Subsidiaries and rights to receive equity of the
      Subsidiaries free and clear of all liens, encumbrances and claims, except as
      set
      forth on Schedule 5(d).  No person or entity other
      than the Company has the right to receive any equity interest in the
      Subsidiaries.

    


    (AA)         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 in all material respects as of such date.

     

    (BB)           The
      Company agrees and acknowledges that for purposes of Rule 144, the holding
      period of all of the securities issued in the Bridge Loan Transaction with
      Double U Master Fund LP and Professional Offshore Opportunity Fund Ltd., as
      amended, modified and/or extended, commenced on its funding date, July 27,
      2007,
      respectively.

     

    (CC)           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, such other legal opinions, if any, as are
      reasonably necessary  in each Subscriber’s opinion for the issuance
      and resale of the Common Stock issuable upon conversion of the Notes and
      exercise of the Warrants pursuant to an effective registration statement, Rule
      144 under the 1933 Act or an exemption from registration.

    


    7.1.           Conversion
      of Note.

    


    (a)           Upon
      the conversion of a Note or part thereof, the Company shall, at its own cost
      and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company’s transfer agent shall issue stock
      certificates in the name of Subscriber (or its 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 usual 1933 Act restriction from transfer
      legend.  If and when a Subscriber sells the Shares, assuming (i) the
      Registration Statement (as defined below) is effective and the prospectus,
      as
      supplemented or amended, contained therein is current and (ii) such Subscriber
      or its agent confirms in writing to the transfer agent that such Subscriber
      has
      complied with the prospectus delivery requirements, the Company will reissue
      the
      Shares without restrictive legend and the Shares will be free-trading, and
      freely transferable.  In the event that the Shares are sold in a
      manner that complies with an exemption from registration, the Company will
      promptly instruct its counsel to issue to the transfer agent an opinion
      permitting removal of the legend (indefinitely, if pursuant to Rule 144(k)
      of
      the 1933 Act, or for ninety (90) days if pursuant to the other provisions of
      Rule 144 of the 1933 Act, provided that Subscriber delivers all reasonably
      requested representations in support of such opinion).


    
      
        
        

      

      
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    (b)           A
      Subscriber will give notice of its decision to exercise its right to convert
      the
      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.  Such
      Subscriber will not be required to surrender the Note until the Note has been
      fully converted or satisfied.  Each date on which a Notice of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      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 Shares issuable upon conversion of the Note to such Subscriber via express
      courier for receipt by such Subscriber within three (3) business days after
      receipt by the Company of the Notice of Conversion (such third day being the
      “Delivery Date”).  In the event the Shares are
      electronically transferable, then delivery of the Shares must be made by
      electronic transfer provided request for such electronic transfer has been
      made
      by the Subscriber.  A Note representing the balance of the Note not so
      converted will be provided by the Company to such Subscriber if requested by
      Subscriber, provided such Subscriber delivers the original Note to the
      Company.  In the event that a Subscriber elects not to surrender a
      Note for reissuance upon partial payment or conversion of a Note, such
      Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note.

    


    (c)           The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
      described in Section 7.2 hereof, respectively later than the Delivery Date
      or
      the Mandatory Redemption Payment Date (as hereinafter defined) could result
      in
      economic loss to the Subscriber.  As compensation to a Subscriber for
      such loss, the Company agrees to pay (as liquidated damages and not as a
      penalty) to such Subscriber for late issuance of Shares in the form required
      pursuant to Section 7.1 hereof upon Conversion of the Note in the amount of
      $100
      per business day after the Delivery Date for each $10,000 of Note principal
      amount (and proportionately for other amounts) being converted of the
      corresponding Shares which are not timely delivered.  The Company
      shall pay any payments incurred under this Section in immediately available
      funds upon demand.  Furthermore, in addition to any other remedies
      which may be available to the Subscriber, in the event that the Company fails
      for any reason to effect delivery of the Shares within seven (7) business days
      after the Delivery Date or make payment within seven (7) business days after
      the
      Mandatory Redemption Payment Date (as defined in Section 7.2 below), such
      Subscriber will be entitled to revoke all or part of the relevant Notice of
      Conversion or rescind all or part of the notice of Mandatory Redemption by
      delivery of a notice to such effect to the Company whereupon the Company and
      such Subscriber shall each be restored to their respective positions immediately
      prior to the delivery of such notice, except that the liquidated damages
      described above shall be payable through the date notice of revocation or
      rescission is given to the Company.

    


    (d)           The
      Company agrees and acknowledges that despite the pendency of a not yet effective
      Registration Statement which includes for registration the Registrable
      Securities (as defined in Section 11.1(iv)), a Subscriber is permitted to and
      the Company will issue to such Subscriber Shares upon conversion of the Note
      and
      Warrant Shares upon exercise of the Warrants.  Such Shares will, if
      required by law, bear the legends described in Section 4 above and if the
      requirements of Rule 144 under the 1933 Act are satisfied, be resalable
      thereunder.


    
      
        
        

      

      
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    7.2.           Mandatory
      Redemption at Subscriber’s Election.  In the event
      (i) the Company is prohibited from issuing Shares, (ii) upon the occurrence
      of
      any other Event of Default (as defined in the Note or in this Agreement) that
      continues for more than twenty (20) business days, (iii) a Change in
      Control (as defined below), or (iv) of the liquidation, dissolution or winding
      up of the Company, then at the Subscriber’s election, the Company must pay to
      each Subscriber ten (10) business days after request by each Subscriber
      (“Calculation Period”), 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
      (“Mandatory Redemption Payment”).  The Mandatory
      Redemption Payment must be received by each Subscriber on the same date as
      the
      Shares otherwise deliverable or within ten (10) business days after request,
      whichever is sooner (“Mandatory Redemption Payment Date”).
 Upon receipt of the Mandatory Redemption Payment, the corresponding
      Note
      principal and interest will be deemed paid and no longer
      outstanding.  Liquidated damages calculated pursuant to Section 7.1(c)
      hereof, that have been paid or accrued for the ten (10) day period prior to
      the
      actual receipt of the Mandatory Redemption Payment by a Subscriber shall be
      credited against the Mandatory Redemption Payment. For purposes of this
      Section 7.2, “Change in Control” shall mean (i) the Company no
      longer having a class of shares publicly traded or listed on a Principal Market,
      (ii) the Company  becoming a Subsidiary of another entity (other than
      a corporation formed by the Company for purposes of reincorporation in another
      U.S. jurisdiction), (iii) Ray Willenberg, Jr. and Brad Ketch no longer serve
      as
      directors of the Company except due to natural causes (which shall include,
      termination of such directors by the holders of more than 50% of the equity
      outstanding as of the Closing Date), and (iv) the sale, lease or transfer of
      substantially all the assets of the Company or its Subsidiaries.

    


    7.3.           Maximum
      Conversion.  No Subscriber shall be entitled to convert on a
      Conversion Date that amount of the Note in connection with that number of shares
      of Common Stock which would be in excess of the sum of (i) the number of shares
      of Common Stock beneficially owned by such Subscriber and its Affiliates on
      a
      Conversion Date, and (ii) the number of shares of Common Stock issuable upon
      the
      conversion of the Note with respect to which the determination of this provision
      is being made on a Conversion Date, which would result in beneficial ownership
      by such 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 provision to 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 may increase the permitted beneficial ownership
      amount up to 9.99% upon and effective after sixty-one (61) days’ prior written
      notice to the Company.  Such Subscriber may allocate which of the
      equity of the Company deemed beneficially owned by such 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 or exercise based
      on any claim that such Subscriber or any one associated or affiliated with
      such
      Subscriber has been engaged in any violation of law, or for any other reason,
      unless, an injunction from a court, on notice, restraining and or enjoining
      conversion of all or part of such Note shall have been sought and obtained
      by
      the Company or at the Company’s request or with the Company’s assistance, and
      the Company has posted a surety bond for the benefit of such Subscriber in
      the
      amount of 120% of the outstanding principal and interest of the Note, or
      aggregate purchase price of the Shares which are sought to be subject to the
      injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.


    
      
        
        

      

      
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    7.5.           Buy-In.  In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber such shares issuable upon conversion of a Note by the
      Delivery Date and if after seven (7) business days after the Delivery Date
      such
      Subscriber or a broker on such 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 Common Stock which such Subscriber was entitled
      to receive upon such conversion (a “Buy-In”), then the Company
      shall pay in cash to such Subscriber (in addition to any remedies available
      to
      or elected by the Subscriber) the amount by which (A) such Subscriber’s total
      purchase price (including brokerage commissions, if any) for the shares of
      Common Stock so purchased exceeds (B) the aggregate principal and/or interest
      amount of the Note for which such conversion was not timely honored together
      with interest thereon at a rate of 15% per annum, or the maximum amount legally
      allowed under the jurisdiction in which the subscriber resides, 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 such
      Subscriber $1,000 plus interest.  Such Subscriber shall provide the
      Company written notice and evidence indicating the amounts payable to such
      Subscriber in respect of the Buy-In.

    


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

     

    7.7.         Redemption.  The
      Notes shall not be redeemable or prepayable except as described in the
      Notes.

    


    8.           Finder
      Fee/Due Diligence Fee/Legal Fees.

     

    (a)           Finder’s
      Fee/Due Diligence Fee.  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 Finder’s Fee/Due Diligence Fee other than the one or more entities
      identified on Schedule 8 hereto, (each a
“Finder”) on account of services purported to have
      been
      rendered on behalf of the indemnifying party in connection with this Agreement
      or the transactions contemplated hereby and arising out of such party’s
      actions.  Anything in this Agreement to the contrary notwithstanding,
      each Subscriber is providing indemnification only for such Subscriber’s own
      actions and not for any action of any other Subscriber.  Each
      Subscriber’s liability hereunder is several and not joint.  The
      Company agrees that it will pay the Finder the fees set forth on
Schedule 8 hereto (“Finder/Due Diligence
      Fees”).  The Company represents that there are no other
      parties entitled to receive fees, commissions, or similar payments in connection
      with the offering described in this Agreement except the Finder.

     

    (b)           Subscriber’s
      Legal Fees.  The Company shall pay to Grushko & Mittman, P.C.,
      a fee of $25,000 (“Subscriber’s
Legal Fees”) as
      reimbursement for services rendered to
      the Subscribers in connection with this Agreement and the purchase and sale
      of
      the Notes and Warrants (the “Offering”).  The
      Subscriber’s Legal Fees and expenses will be payable out of funds held pursuant
      to the Escrow Agreement.  Grushko & Mittman, P.C. will be
      reimbursed at Closing for all lien searches, filing fees, and 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:


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (a)           Stop
      Orders.  The Company will advise the Subscribers, within
      twenty-four (24) hours after it receives notice of issuance by the Commission,
      any state securities commission or any other regulatory authority of any stop
      order or of any order preventing or suspending any offering of any securities
      of
      the Company, or of the suspension of the qualification of the Common Stock
      of
      the Company for offering or sale in any jurisdiction, or the initiation of
      any
      proceeding for any such purpose.

     

    (b)           Listing/Quotation.  The
      Company shall promptly secure the quotation or listing of the Shares and Warrant
      Shares upon each national securities exchange, or automated quotation system
      upon which they are or become eligible for quotation or listing (subject to
      official notice of issuance) and shall maintain same so long as any 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.  The Company will provide the Subscribers copies of all
      notices it receives notifying the Company of the threatened and actual delisting
      of the Common Stock from any Principal Market. As of the date of this Agreement
      and the Closing Date, the Bulletin Board is and will be the Principal
      Market.

     

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

     

    (d)           Filing
      Requirements.  From the date of this Agreement and until the last
      to occur of (i) two (2) years after the Closing Date, (ii) until all the Shares
      and Warrant Shares have been resold or transferred by all the Subscribers
      pursuant to the Registration Statement or pursuant to Rule 144, without regard
      to volume limitations or (iii) the Notes are no longer outstanding (the date
      of
      occurrence of the last such event being the “End Date”), the
      Company will (A) cause its Common Stock to be registered under Section 12(b)
      or
      12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
      obligations under the 1934 Act, (C) voluntarily comply with all reporting
      requirements that are applicable to an issuer with a class of shares registered
      pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
      reporting requirements, and (D) comply with all requirements related to any
      registration statement filed pursuant to this Agreement.  The Company
      will use its best efforts not to take any action or file any document (whether
      or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
      terminate or suspend such registration or to terminate or suspend its reporting
      and filing obligations under said acts until the End Date.  Until the
      End Date, the Company will continue the listing or quotation of the Common
      Stock
      on a Principal Market and will comply in all respects with the Company’s
      reporting, filing and other obligations under the bylaws or rules of the
      Principal Market.  The Company agrees to timely file a Form D with
      respect to the Securities if required under Regulation D and to provide a copy
      thereof to each Subscriber promptly after such filing.

     

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


    
      
        
        

      

      
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    (f)           Reservation.  Prior
      to the Closing Date, and at all times thereafter, the Company shall have
      reserved, pro rata, on behalf of each holder of a Note or
      Warrant, from its authorized but unissued Common Stock, a number of common
      shares equal to 125% of the amount of Common Stock necessary to allow each
      holder of a Note to be able to convert all such outstanding Notes and interest
      (if any) and reserve the amount of Warrant Shares issuable upon exercise of
      the
      Warrants.

     

    (g)           [Reserved].

     

    (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, in
      amounts sufficient to prevent the Company from becoming a co-insurer and not
      in
      any event less than 100% of the insurable value of the property insured less
      reasonable deductible amounts; and the Company will maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner customary
      for
      companies in similar businesses similarly situated and to the extent available
      on commercially reasonable terms.

     

    (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.

     

    (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 to which it is a party or under
      which it occupies property if the breach of such provision could reasonably
      be
      expected to have a Material Adverse Effect.


    
      
        
        

      

      
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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 and the
      registration statement or statements regarding the Subscribers’ securities or in
      correspondence with the SEC regarding same, it will not disclose publicly or
      privately the identity of the Subscribers unless expressly agreed to in writing
      by a Subscriber or only to the extent required by law and then only upon not
      less than two (2) days prior notice to Subscriber.  In any event and
      subject to the foregoing, the Company undertakes to file a Form 8-K or make
      a
      public announcement describing the Offering not later than the business day
      after the Closing Date.  Prior to filing or announcement, such Form
      8-K or public announcement will be provided to Subscribers for their review
      and
      approval, which will not be unreasonably withheld, delayed or
      conditioned.  In the Form 8-K or public announcement, the Company will
      specifically disclose the amount of Common Stock outstanding immediately after
      the Closing.  Upon delivery by the Company to the Subscribers after
      the Closing Date of any notice or information, in writing, electronically or
      otherwise, and while a Note, Shares, Warrants, or Warrant Shares are held by
      such Subscribers, unless the Company has in good faith determined that the
      matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or Subsidiaries, the Company shall within
      one (1) business day after any such delivery publicly disclose such material,
      nonpublic information on a Report on Form 8-K or
      otherwise.  In the event that the Company believes that a
      notice or communication to a Subscriber contains material, nonpublic
      information, relating to the Company or Subsidiaries, the Company shall so
      indicate to such Subscriber contemporaneously with delivery of such notice
      or
      information.  In the absence of any such indication, such Subscriber
      shall be allowed to presume that all matters relating to such notice and
      information do not constitute material, nonpublic information relating to the
      Company or its Subsidiaries.

     

    (o)           Non-Public
      Information.  The Company covenants and agrees that except for the
      Reports, Other Written Information and schedules and exhibits to this Agreement,
      which information the Company undertakes to publicly disclose not later than
      the
      sooner of the required or actual filing date of 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 any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to keep such
      information in confidence.  The Company understands and confirms that
      each Subscriber shall be relying on the foregoing representations in effecting
      transactions in securities of the Company.

     

    (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:

    


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


    
      
        
        

      

      
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    (ii)           amend
      its certificate of incorporation, bylaws or its charter documents so as to
      materially and adversely affect any rights of the Subscriber (an increase in
      the
      amount of authorized shares and an increase in the number of directors 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 consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company; and

     

    (v)           prepay
      or redeem any financing related debt or past due obligations outstanding as
      of
      the Closing Date except as described on Schedule
      9(e).

     

    (q)           Further
      Registration Statements.  Except for a registration statement
      filed on behalf of the Subscribers pursuant to Section 11 of this Agreement,
      and
      as set forth on Schedule 11.1 hereto, the Company will not,
      without the consent of the Subscribers, file with the Commission or with state
      regulatory authorities any registration statements or amend any already filed
      registration statement to increase the amount of Common Stock registered
      therein, or reduce the price of which such Common Stock is registered therein,
      (including but not limited to Forms S-8), until the expiration of the
“Exclusion Period,” which shall be defined as the sooner of (i)
      the Registration Statement having been current and available for use in
      connection with the resale of all of the Registrable Securities (as defined
      in
      Section 11.1(i)) for a period of one hundred eighty (180) days, or (ii) until
      all the Shares and Warrant Shares have been resold or transferred by the
      Subscribers pursuant to the Registration Statement or Rule 144, without regard
      to volume limitations.  The Exclusion Period will be tolled or
      reinstated, as the case may be, during the pendency of an Event of Default
      as
      defined in the Note.

     

    (r)           Blackout.    The
      Company undertakes and covenants that, until the end of the Exclusion Period,
      the Company will not enter into any acquisition, merger, exchange or sale or
      other transaction or fail to take any action that could have the effect of
      delaying the effectiveness of any pending Registration Statement or causing
      an
      already effective Registration Statement to no longer be effective or current
      for a period of forty-five (45) or more days in the aggregate during any three
      hundred sixty-five (365) day period.


    
      
        
        

      

      
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    (s)           Offering
      Restrictions.  Until the effectiveness of the Registration
      Statement and/or during the pendency of an Event of Default, except for the
      Excepted Issuances, the Company will not enter into an agreement to issue nor
      issue any equity, convertible debt or other securities convertible into Common
      Stock or equity of the Company nor modify any of the foregoing which may be
      outstanding at anytime, without the prior written consent of the Subscriber,
      which consent may be withheld for any reason.  Until the later of (i)
      one year after the Effective Date of the Registration Statement, and (ii) such
      time as less than 25% of the principal amount of 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).  The only officer, director, employee and
      consultant stock option or stock incentive plans currently in effect or
      contemplated by the Company are described on Schedule
      5(d).

     

    (t)           Limited
      Standstill.  The Company will deliver to the Subscribers on or
      before the Closing Date and enforce the provisions of an irrevocable lockup
      agreement (“Lockup Agreement”) in the form annexed hereto as
Exhibit H, with the persons identified on Schedule
      9(t).

     

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

     

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

     

    (w)           Stop
      Transfer.  The Company will not issue any stop transfer order or
      other order impeding the sale, resale or delivery of any of the Securities,
      except as may be required by any applicable federal or state securities laws
      and
      unless contemporaneous notice of such instruction is given to the
      Subscriber.


    
      
        
        

      

      
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    10.           Covenants
      of the Company Regarding Indemnification.

     

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

     

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

     

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

     

    (i)           On
      one occasion, for a period commencing one hundred twenty-one (121) days after
      the Closing Date, but not later than two years after the Closing Date, upon
      a
      written request therefor from any record holder or holders of more than 50%
      of
      the Shares issued and issuable upon conversion of the outstanding Notes and
      outstanding Warrant Shares, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering the
      Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
      subject of such request for unrestricted public resale by the holder
      thereof.  For purposes of Sections 11.1(i) and 11.1(ii), Registrable
      Securities shall not include Securities which are (A) registered for resale
      in
      an effective registration statement, (B) included for registration in a pending
      registration statement, (C) which have been issued without further transfer
      restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act
      or
      (D) which may be resold under Rule 144(k) or Rule 144 without volume
      limitations.  Upon the receipt of such request, the Company shall
      promptly give written notice to all other record holders of the Registrable
      Securities that such registration statement is to be filed and shall include
      in
      such registration statement Registrable Securities for which it has received
      written requests within ten (10) days after the Company gives such written
      notice.  Such other requesting record holders shall be deemed to have
      exercised their demand registration right under this Section
      11.1(i).

     

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


    
      
        
        

      

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

     

    (iv)          The
      Company shall file with the Commission a Form SB-2 registration statement (the
      “Registration Statement”) (or such other form that it is
      eligible to use) in order to register the Registrable Securities for resale
      and
      distribution under the 1933 Act within forty-five (45) calendar days after
      the
      Closing Date (the “Filing Date”), and cause the Registration
      Statement to be declared effective not later than one hundred fifty (150)
      calendar days after the Closing Date (the “Effective
      Date”).  The Company will register not less than a number of
      shares of common stock in the aforedescribed registration statement that is
      equal to 125% of the Shares issued and issuable upon conversion of all of the
      Notes (collectively the “Registrable Securities”).
 The Registrable Securities shall be reserved and set aside
      exclusively for
      the benefit of each Subscriber, pro rata, and not issued,
      employed or reserved for anyone other than each such Subscriber. The
      Registration Statement will be immediately be amended or  additional
      registration statements will be immediately filed by the Company as necessary
      to
      register additional shares of Common Stock to allow the public resale of all
      Common Stock included in and issuable by virtue of the Registrable
      Securities.  Except with the written consent of the Subscribers, no
      securities of the Company other than the Registrable Securities will be included
      in the Registration Statement.  It shall be deemed a Non-Registration
      Event if at any time after the date the Registration Statement is declared
      effective by the Commission (“Actual Effective Date”) the
      Company has registered for unrestricted resale on behalf of the Subscribers
      fewer than 120% of the amount of Common Shares issuable upon full conversion
      of
      all sums due under the Notes (“Shortfall”).  The
      foregoing notwithstanding, the Company must take all actions necessary to cause
      at least 120% of the amount of shares of Common Stock issuable upon full
      conversion of all sums due under the Notes to be registered within sixty (60)
      days after the date the Shortfall occurs.  Provided a Subscriber has
      not noticed the Company that an Event of Default has occurred and the Company
      has timely eliminated the Shortfall within the sixty (60) day period, the
      Shortfall will be deemed to have not occurred.   Except for
      Common Stock described on Schedule 11.1, no other securities of
      the Company will be included in the Registration Statement other than the
      Registrable Securities.

     

               (v)           The
      amount of Registrable Securities required to be included in the Registration
      Statement as described in Section 11.1(iv) (“Initial Registrable
      Securities”) shall be limited to not less than 100% of the maximum
      amount (“Rule 415 Amount”) of Common Stock which may be
      included in a single Registration Statement without exceeding registration
      limitations imposed by the Commission pursuant to Rule 415 of the 1933 Act
      but
      in any event not less than 135,000,000 shares of Common Stock.  In the
      event that less than all of the Initial Registrable Securities are included
      in
      the Registration Statement as a result of the limitation described in this
      Section 11.1(v), then the Company will file additional Registration Statements
      each registering the Rule 415 Amount (each such Registration Statement a
“Subsequent Registration Statement”), seriatim, until
      all of the Initial Registrable Securities have been registered.  The
      Filing Date and Effective Date of each such additional Registration Statement
      shall be, respectively, fourteen (14) and forty-five (45) days after the first
      day such Subsequent Registration Statement may be filed without objection by
      the
      Commission based on Rule 415 of the 1933 Act.  The Subscribers agree
      and acknowledge that notwithstanding anything contained herein to the contrary,
      the Registration Statement will include for registration on behalf of the
      Subscribers not fewer than 135,000,000 shares of Common Stock for the Shares
      issuable upon conversion of the Notes and thereafter may include, at the
      Company’s discretion, up to zero shares of Common Stock on behalf of the holders
      thereof (“Other Holders”) described on Schedule
      11.1.  In the event for any reason the amount of Common Stock
      to be registered must be reduced, then such reduction must come entirely from
      the Common Stock being registered on behalf of the Other Holders and not the
      Subscribers.


    
      
        
        

      

      
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    (vi)           Unless
      otherwise instructed in writing by a holder of Registrable Securities and only
      if the initial Registration Statement does not include all of the Registrable
      Securities, the Registrable Securities will be registered on behalf of each
      such
      holder in the Registration Statements based in the following order and
      priority:

     

    (A)           Shares.

     

    (B)           Conversion
      Shares issued and issuable upon conversion of the Notes (based on the multiple
      set forth above).

     

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

     

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

     

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

     

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

     

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


    
      
        
        

      

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

     

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

     

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

     

    (h)           provide
      to the Sellers copies of the Registration Statement and amendments thereto
      three (3) business days prior to the filing thereof with the
      Commission.  Any Subscriber’s failure to comment on any Registration
      Statement or other document provided to a Subscriber or its counsel shall not
      be
      construed to constitute approval thereof nor the accuracy thereof.

     

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

     

    11.4.           Non-Registration
      Events.  The Company agrees that the Sellers will suffer damages
      if the Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1(i) or 11.1(ii) is not filed within sixty
      (60) days after written request and declared effective by the Commission within
      one hundred twenty (120) days after such request, and maintained in the manner
      and within the time periods contemplated by Section 11 hereof, and it would
      not
      be feasible to ascertain the extent of such damages with
      precision.  Accordingly, if (A) the Registration Statement is not
      filed on or before the Filing Date, (B) the Registration Statement is not
      declared effective on or before the required Effective Date, (C) due to the
      action or inaction of the Company the Registration Statement is not declared
      effective within three (3) business days after receipt by the Company or its
      attorneys of a written or oral communication from the Commission that the
      Registration Statement will not be reviewed or that the Commission has no
      further comments, (D) if the registration statement described in Sections
      11.1(i) or 11.1(ii) is not filed within sixty (60) days after such written
      request, or is not declared effective within one hundred twenty (120) days
      after
      such written request, or (E) any registration statement described in Sections
      11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but shall
      thereafter cease to be effective without being succeeded within twenty-five
      (25)
      business days by an effective replacement or amended registration statement
      or
      for a period of time which shall exceed forty-five (45) days in the aggregate
      per year (defined as every rolling period of three hundred sixty-five (365)
      consecutive days commencing on the Actual Effective Date (each such event
      referred to in clauses A through E of this Section 11.4 is referred to herein
      as
      a “Non-Registration Event”), then the Company shall deliver,
      pari passu, to the holder of Registrable Securities, as Liquidated
      Damages, an amount equal to 2% for each thirty (30) days (or such
      lesser pro-rata amount for any period of less than thirty (30) days) of the
      principal amount of the outstanding Notes and purchase price of Shares and
      Warrant Shares issued upon conversion of Notes and exercise of Warrants held
      by
      Subscriber which are subject to such Non-Registration Event. The Company
      may pay the Liquidated Damages in cash, or in registered shares of Common Stock
      valued at 75% of the average of the closing bid prices of the Common Stock
      for
      the five (5) trading days preceding such payment.  The Liquidated
      Damages must be paid within ten (10) days after the end of each thirty (30)
      day
      period or shorter part thereof for which Liquidated Damages are payable. In
      the event a Registration Statement is filed by the Filing Date but is withdrawn
      prior to being declared effective by the Commission, then such Registration
      Statement will be deemed to have not been filed and Liquidated Damages will
      be
      calculated accordingly.  All oral or written comments received from
      the Commission relating to the Registration Statement must be satisfactorily
      responded to within fifteen (15) business days after receipt of comments from
      the Commission.  Failure to timely respond to Commission comments is a
      Non-Registration Event for which Liquidated Damages shall accrue and be payable
      by the Company to the holders of Registrable Securities at the same rate and
      amounts set forth above calculated from the date the response was required
      to
      have been made.


    
      
        
        

      

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

     

    11.6.           Indemnification
      and Contribution.

     

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


    
      
        
        

      

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

     

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


    
      
        
        

      

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

     

    11.7.       Delivery
      of Unlegended Shares.

     

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

     

    (b)           In
      lieu of delivering physical certificates representing the Unlegended Shares,
      upon request of a Subscriber, so long as the certificates therefor do not bear
      a
      legend and the Subscriber is not obligated to return such certificate for the
      placement of a legend thereon, the Company 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.


    
      
        
        

      

      
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    (c)           The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof later than two (2) business days after the
      Unlegended Shares Delivery Date could result in economic loss to a
      Subscriber.  As compensation to a Subscriber for such loss, the
      Company agrees to pay late payment fees (as liquidated damages and not as a
      penalty) to the Subscriber for late delivery of Unlegended Shares in the amount
      of $100 per business day after the Delivery Date for each $10,000 of purchase
      price of the Unlegended Shares subject to the delivery default.  If
      during any three hundred sixty (360) day period, the Company fails to deliver
      Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
      (30) days, then each Subscriber or assignee holding Securities subject to such
      default may, at its option, require the Company to redeem all or any portion
      of
      the Shares and Warrant Shares subject to such default at a price per share
      equal
      to the greater of (i) 120%, or (ii) a fraction in which the numerator is the
      highest closing price of the Common Stock during the aforedescribed thirty
      (30)
      day period and the denominator of which is the lowest conversion price during
      such thirty (30) day period, multiplied by the Purchase Price of such Common
      Stock and exercise price of such Warrant Shares (“Unlegended Redemption
      Amount”).  The Company shall pay any payments incurred under
      this Section in immediately available funds upon demand.

    


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

    


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


    
      
        
        

      

      
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    12.           (a)           Right
      of First Refusal.  Until the later of (i) one year after the
      Effective Date of the Registration Statement, and (ii) such time as less than
      25% of the principal amount of the Notes are outstanding, the Subscribers shall
      be given not less than ten (10) business days prior written notice of any
      proposed sale by the Company of its Common Stock or other securities or equity
      linked debt obligations, except in connection with (i) full or partial
      consideration in connection with a strategic merger, acquisition, consolidation
      or purchase of substantially all of the securities or assets of corporation
      or
      other entity which holders of such securities or debt are not at any time
      granted registration rights, (ii) the Company’s issuance of securities in
      connection with strategic license agreements and other partnering arrangements
      so long as such issuances are not for the purpose of raising capital 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), (iv) as a result
      of the exercise of Warrants or conversion of Notes which are granted or issued
      pursuant to this Agreement on the terms described in the Transaction Documents
      as of the Closing Date, and (v) the payment of any interest on the Notes and
      Liquidated Damages pursuant to the Transaction Documents (collectively the
      foregoing are “Excepted Issuances”).  The Subscribers
      who exercise their rights pursuant to this Section 12(a) shall have the right
      during the ten (10) business days following receipt of the notice to purchase
      in
      cash or by using the outstanding balance including principal, interest,
      liquidated damages and any other amount then owing to such Subscriber by the
      Company, 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 in the same proportion to each other as their purchase of Notes in
      the
      Offering.  In the event such terms and conditions are modified during
      the notice period, the Subscribers shall be given prompt notice of such
      modification and shall have the right during the ten (10) business days
      following the notice of modification to exercise such right.  The
      Subscribers who exercise their rights pursuant to this Section 12(a) shall
      have
      the right during the ten (10) business days following receipt of the notice
      to
      participate in such offered Common Stock, debt or other securities in accordance
      with the terms and conditions set forth in the notice of sale by using the
      outstanding balance including principal, interest, liquidated damages and any
      other amount then owing to such Subscriber by the Company, to pay for such
      participation.

     

    (b)           Favored
      Nations Provision.   Other than in connection with the
      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 respect of the Shares, or if less than the Warrant
      exercise price in respect of the Warrant Shares, without the consent of each
      Subscriber, then the Company shall issue, for each such occasion, additional
      shares of Common Stock to each Subscriber respecting those Notes, Warrants
      and
      Shares that remain outstanding at the time of the Lower Price Issuance so that
      the average per share purchase price of the shares of Common Stock issued to
      each Subscriber (of only the Common Stock or Warrant Shares still owned by
      a
      Subscriber) is equal to such other lower price per share and the Conversion
      Price and Warrant exercise price shall automatically be reduced to such other
      lower price.  The average Purchase Price of the Shares and average
      exercise price in relation to the Warrant Shares shall be calculated separately
      for the Shares and Warrant Shares.  The foregoing calculation and
      issuance shall be made separately for Shares received upon conversion of the
      Notes and separately for Warrant Shares.  The delivery to a Subscriber
      of the additional shares of Common Stock shall be not later than the closing
      date of the transaction giving rise to the requirement to issue additional
      shares of Common Stock.  Each Subscriber is granted the registration
      rights described in Section 11 hereof in relation to such additional shares
      of
      Common Stock.  For purposes of the issuance and adjustment described
      in this paragraph, the issuance of any security of the Company carrying the
      right to convert such security into shares of Common Stock or of any warrant,
      right or option to purchase Common Stock shall result in the issuance of the
      additional shares of Common Stock upon the sooner of the agreement to or actual
      issuance of such convertible security, warrant, right or option and again at
      any
      time upon any subsequent issuances of shares of Common Stock upon exercise
      of
      such conversion or purchase rights if such issuance is at a price lower than
      the
      Conversion Price or Warrant exercise price in effect upon such
      issuance.  The rights of each Subscriber set forth in this Section 12
      are in addition to any other rights the Subscriber has pursuant to this
      Agreement, the Note, any Transaction Document, and any other agreement referred
      to or entered into in connection herewith or to which such Subscriber and
      Company are parties.  Each Subscriber is also given the right to elect
      to substitute any term or terms of any other offering in connection with which
      such Subscriber has rights as described in Section 12(a), for any term or terms
      of the Offering in connection with Securities owned by such Subscriber as of
      the
      date the notice described in Section 12(a) is required to be given to such
      Subscriber.


    
      
        
        

      

      
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               (c)           Maximum
      Exercise of Rights.   In the event the exercise of the rights
      described in Sections 12(a) and 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.  The determination
      of when such Common Stock may be issued shall be made by each Subscriber as
      to
      only such Subscriber.

     

    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: Rim
      Semiconductor Company, 305 NE 102nd Avenue,
      Suite 350,
      Portland, Oregon 97220, Attn: Brad Ketch, CEO, telecopier: (503) 257-6700,
      with
      a copy, which shall not constitute notice, by telecopier only to: Lawrence
      B.
      Mandala, Esq., Munck Butrus Carter, P.C., 600 Banner Place, 12770 Coit Road,
      Dallas, Texas 75251, telecopier: (972) 628-3616, (ii) if to the Subscriber,
      to:
      the one or more addresses and telecopier numbers indicated on the signature
      pages hereto, with an additional copy by telecopier only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
      telecopier: (212) 697-3575, and (iii) if to the Finder, to: the address and
      telecopier number set forth on Schedule 8 hereto.

     

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

     

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


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (i)           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.

     

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

     

    (k)           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.

     

    (l)           Acts
      Prohibited.  Notwithstanding anything to the contrary in this
      Agreement or the Transaction Documents, nothing in the Transaction Documents
      will require the Company to take, and the Company will not be liable hereunder
      for failing to take, any action prohibited by law, applicable securities
      regulation or any governmental authority.

     

    


     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

    



    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


     

    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.

    


    RIM
      SEMICONDUCTOR COMPANY

    a
      Utah
      corporation

    


    


    By: _______________________________________________

    Name:

    Title:

    


    Dated:
      December 5, 2007

    


    


    


    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE

            	
              PRINCIPAL
                

              AMOUNT
                OF NOTE

            	
              CLASS
                A WARRANTS

            
	
              Name
                of Subscriber:

               

              _____________________________________________________

               

              Address:

               

              _____________________________________________________

               

              _____________________________________________________

               

              Fax
                No.:

              _____________________________________________________

               

               

              Taxpayer
                ID# (if applicable): 

              _____________________________________________________

               

               

              _____________________________________________________

              (Signature)

              By: __________________________________________________

               

            	 	 	 


    

    



    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    LIST
      OF EXHIBITS AND SCHEDULES

     

    
      
        	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	 
	
                Exhibit
                  B

              	
                Form
                  of Class A Warrant

              
	 	 
	
                Exhibit
                  C

              	
                Escrow
                  Agreement

              
	 	 
	
                Exhibit
                  D

              	
                Form
                  of Security Agreement

              
	 	 
	
                Exhibit
                  E

              	
                Form
                  of Subsidiary Guaranty

              
	 	 
	
                Exhibit
                  F

              	
                Form
                  of Collateral Agent Agreement

              
	 	 
	
                Exhibit
                  G

              	
                Form
                  of Legal Opinion

              
	 	 
	
                Exhibit
                  H

              	
                Form
                  of Lockup Agreement

              
	 	 
	
                Schedule
                  5(a)

              	
                Subsidiaries

              
	 	 
	
                Schedule
                  5(d)

              	
                Additional
                  Issuances / Capitalization / Reset Rights

              
	 	 
	
                Schedule
                  5(f)

              	
                Outstanding
                  Registration Rights

              
	 	 
	
                Schedule
                  5(o)

              	
                Undisclosed
                  Liabilities

              
	 	 
	
                Schedule
                  5(x)

              	
                Transfer
                  Agent

              
	 	 
	
                Schedule
                  8

              	
                Finder/Due
                  Diligence Fee

              
	 	 
	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	 
	
                Schedule
                  9(p)

              	
                Permitted
                  Payments

              
	 	 
	
                Schedule
                  9(t)

              	
                Lockup
                  Agreement Providers

              
	 	 
	
                Schedule
                  11.1

              	
                Other
                  Registrable Shares

              


      

    

     


    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    EXHIBIT
      I

    


    LOCKUP
      AGREEMENT

    


    


    This
      AGREEMENT (the “Agreement”) is
      made as of the 5th day of December, 2007, by ______ (“Holder”), maintaining an
      address at c/o Rim Semiconductor Company, 305 NE 102nd Avenue,
      Suite 350,
      Portland, Oregon 97220, telecopier: (503) 257-6700, in connection with his
      ownership of shares of Rim Semiconductor Company, a Utah corporation (the
“Company”).

    


    NOW,
      THEREFORE, for good and valuable
      consideration, the sufficiency and receipt of which consideration are hereby
      acknowledged, Holder agrees as follows:

    


    1.           Background.

    


    a.           Holder
      is the beneficial owner of the amount of shares of the Common Stock, $.001
      par
      value, of the Company (“Common Stock”) designated on the signature page
      hereto.

    


    b.           Holder
      acknowledges that the Company has entered into or will enter into at or about
      the date hereof agreements with subscribers to the Company’s Notes, convertible
      into Common Stock and Warrants (the “Subscribers”).  Holder
      understands that, as a condition to proceeding with the Offering, the
      Subscribers have required, and the Company has agreed to obtain on behalf of
      the
      Subscribers an agreement from the Holder to refrain from selling any securities
      of the Company from the date of the Subscription Agreement until one year after
      the Actual Effective Date (as defined in the Subscription Agreement) (the
“Restriction Period”).

    


    2.           Sale
      Restriction.

    


    a.           Holder
      hereby agrees that during the Restriction Period, the Holder will not sell,
      transfer or otherwise dispose of any shares of Common Stock or any options,
      warrants or other rights to purchase shares of Common Stock or any other
      security of the Company which Holder owns or has a right to acquire as of the
      date hereof, other than in connection with an offer made to all shareholders
      of
      the Company in connection with merger, consolidation or similar transaction
      involving the Company.  Holder further agrees that the Company is
      authorized to and the Company agrees to place “stop orders” on its books to
      prevent any transfer of shares of Common Stock or other securities of the
      Company held by Holder in violation of this Agreement.  The Company
      agrees not to allow to occur any transaction inconsistent with this
      Agreement.

    


    b.           Any
      subsequent issuance to and/or acquisition by Holder of Common Stock or options
      or instruments convertible into Common Stock will be subject to the provisions
      of this Agreement.

    


    c.           Notwithstanding
      the foregoing restrictions on transfer, the Holder may, at any time and from
      time to time during the Restriction Period, exercise options, warrants or other
      rights to purchase securities of the Company, and may transfer the Common Stock
      (i) as bona fide gifts or transfers by will or intestacy, (ii) to any trust
      for
      the direct or indirect benefit of the undersigned or the immediate family of
      the
      Holder, provided that any such transfer shall not involve a disposition for
      value, (iii) to a partnership which is the general partner of a partnership
      of
      which the Holder is a general partner, provided, that, in the case of any gift
      or transfer described in clauses (i), (ii) or (iii), each donee or transferee
      agrees in writing to be bound by the terms and conditions contained herein
      in
      the same manner as such terms and conditions apply to the undersigned. For
      purposes hereof, “immediate family” means any relationship by blood, marriage or
      adoption, not more remote than first cousin.



    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    3.           Miscellaneous.

    


    a.           At
      any time, and from time to time, after the signing of this Agreement Holder
      will
      execute such additional instruments and take such action as may be reasonably
      requested by the Subscribers to carry out the intent and purposes of this
      Agreement.

    


    b.           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 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 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.  Notices hereunder shall be given in the same manner as set
      forth in the Subscription 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.  Holder irrevocably appoints Rim Semiconductor Company its true
      and lawful agent for service of process upon whom all processes of law and
      notices may be served and given in the manner described above; and such service
      and notice shall be deemed valid personal service and notice upon Holder with
      the same force and validity as if served upon Holder.

    


    c.           The
      restrictions on transfer described in this Agreement are in addition to and
      cumulative with any other restrictions on transfer otherwise agreed to by the
      Holder or to which the Holder is subject to by applicable law.

    


    d.           This
      Agreement shall be binding upon Holder, its legal representatives, successors
      and assigns.

    


    e.           This
      Agreement may be signed and delivered by facsimile and such facsimile signed
      and
      delivered shall be enforceable.

    


    f.           The
      Company agrees not to take any action or allow any act to be taken which would
      be inconsistent with this Agreement.

    


    g.           The
      Holder acknowledges that this Lockup Agreement is being entered into for the
      benefit of the Subscribers identified in the Subscription Agreement dated
      December 5, 2007 among the Company and the Subscribers, may be enforced by
      the
      Subscribers and may not be amended without the consent of the Subscribers (as
      the term “consent of the Subscribers” is defined in the Subscription Agreement),
      which may be withheld for any reason.


    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, and intending to be
      legally bound hereby, Holder has executed this Agreement as of the day and
      year
      first above written.

    


    
      	 	 
              
              HOLDER:

              


              


              ___________________________________________

                (Signature
                of Holder)

              


              
___________________________________________

                (Print
                Name of Holder)

              


              
___________________________________________

              Number
                of Shares of Common Stock

              Beneficially
                Owned

              


              COMPANY:

              


              RIM
                SEMICONDUCTOR COMPANY

              


              


              By: ________________________________________

              Name: ______________________________________

              Title: _______________________________________

            


    

    



    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    


    


    


    SCHEDULES
      TO

     

    SUBSCRIPTION
      AGREEMENT

     

    by
      and among

     

    RIM
      SEMICONDUCTOR COMPANY

     

    and

     

    


    THE
      SUBSCRIBERS IDENTIFIED THEREIN

     

     


    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    


    Schedule
      5(a)

    


    Subsidiaries

    


    The
      following companies are wholly-owned subsidiaries of Rim Semiconductor
      Company:

    


    Impact
      Multimedia, Inc., a Nevada
      corporation

    


    NV
      Entertainment, Inc., a California
      corporation

    


    Infinity
      Vision Entertainment, Inc.,
      a California corporation

    


    Siliwood
      Entertainment, Inc., a
      California corporation

    


    Intelecon
      Acquisition Corporation, a
      Delaware corporation

    


    3D2Net.com,
      Inc., a Nevada
      corporation

    


    Astounding.com,
      Inc. a Delaware
      corporation

    


    NV
      Entertainment, Inc. owns a 50% interest in Top Secret Productions, LLC, a
      California limited liability company.

    


    NV
      Entertainment, Inc. is the only active subsidiary listed above. None of the
      other subsidiaries listed above have any assets or engage in active business
      operations. No representations are made by or with respect to any above listed
      subsidiary other than NV Entertainment, Inc. With respect to representations
      set
      forth in Section 5(z) in the Subscription Agreement (and specifically its
      reference to the representations in Section 5(a) as they pertain to the
      Subsidiary), Rim Semiconductor Company makes no representations as to the valid
      existence or good standing of NV Entertainment, Inc. under the laws of the
      jurisdiction of its incorporation.


    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    Schedule
      5(d)

     

    Purchase
      Rights, Options, Warrants and Convertible Debt

    


    As
      of
      December 5, 2007, the Company had outstanding warrants (“Warrants”) for the
      purchase of up to 127,712,937 shares of the Company’s Common Stock, par value
      $.001 per share (“Common Stock”). The Warrants are exercisable at prices ranging
      from $0.05 to $0.3094 per share. Additional information regarding the Warrant
      agreements is available in the Company’s Reports (as defined in the Subscription
      Agreement).

    


    As
      of
      December 5, 2007, the Company had outstanding options (“Options”) for the
      purchase of up to 39,043,750 shares of the Company’s Common Stock. The Options
      are exercisable at prices ranging from $0.027 to $3.920 per share. Additional
      information regarding the Option agreements is available in the Company’s
      Reports.

    


    The
      Company currently has $75,000 of three-year 7% Convertible Debentures (the
“2003
      Debentures”) outstanding. Under the agreements with the purchasers of the 2003
      Debentures the Company is obligated to pay to the 2003 Debenture holders
      liquidated damages associated with the late filing of the Registration Statement
      and a missed Registration Statement required effective date. At their option,
      the 2003 Debenture holders are entitled to be paid such amount in cash or shares
      of Common Stock at a per share rate equal to the effective conversion price
      of
      the 2003 Debentures. The 2003 Debentures are convertible into shares of Common
      Stock at a conversion rate equal to $0.15 per share. This conversion price
      is
      subject to adjustment if there are certain capital adjustments or similar
      transactions, such as a stock split or merger. Additional information regarding
      the 2003 Debentures is available in the Company’s Reports.

     

    The
      Company currently has $4,280 of three-year 7% Senior Secured Convertible
      Debentures (the “2005 Debentures”) outstanding. Interest on the 2005 Debentures
      is payable at the option of the Company, either in cash or in shares of Common
      Stock. The 2005 Debentures are convertible into shares of Common Stock at a
      conversion price equal to 70% of the 5 day volume weighted average price of
      the
      Company’s Common Stock immediately prior to conversion. Additional information
      regarding the 2005 Debentures is available in the Company’s
      Reports.

    


    The
      Company currently has $652,000 of two-year 7% Senior Secured Convertible
      Debentures (the "2006 Debentures") outstanding. Interest is payable, at the
      option of the Company, either in cash, or in shares of Common Stock at the
      then
      applicable conversion price. The 2006 Debentures are convertible into shares
      of
      Common Stock at the conversion price for any such conversion equal to 70% of
      the
      volume weighted average price ("VWAP") of the Common Stock for the twenty days
      ending on the trading day immediately preceding the conversion date. Additional
      information regarding the 2006 Debentures is available in the Company’s
      Reports.

    


    Pursuant
      to the terms of a Bridge Loan Agreement dated as of July 26, 2007, if prior
      to
      the payment in full of certain Senior Secured Promissory Notes issued pursuant
      thereto, the Company offers any new transaction for the issuance of shares
      of
      the Company’s Common Stock or securities convertible into or exercisable for
      shares of Common Stock (each such transaction, a “New Equity Transaction,”) to
      any third party (each, a “New Party”), where the aggregate purchase price of all
      New Parties for such securities is $2,000,000 or more, the Company is obligated
      to provide three (3) trading days’ notice thereof and give the opportunity to
      subscribe to the New Equity Transaction on the same terms as any other New
      Party, except that the holders of the Senior Secured Promissory Notes
      (the  “Lenders”) may elect to make all or a portion of the Lender’s
      payment therefor by an offset against all or a portion of the amount due to
      the
      Lender from the Company under the Transaction Agreements. Additional information
      regarding this bridge loan and the related agreements is available in the
      Company’s Reports.

     

    
      Common
        Stock Outstanding On a Fully Diluted Basis

      


      The
        number of shares of the Company’s Common Stock, par value $.001 per share,
        outstanding on a fully diluted basis as of December 5,
        2007, was 663,220,710.  The foregoing includes 127,712,937 shares
        issuable upon exercise of outstanding warrants, 39,043,750 shares issuable
        upon
        exercise of outstanding options, 27,577,833 shares issuable upon conversion
        of
        convertible debt principal and interest, and 468,886,190 currently issued
        and
        outstanding shares.

    


    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    


    Authorized
      and Outstanding Capital Stock of the Company

    


    As
      of December 5, 2007:

    Common
      stock - $0.001 par value; Authorized - 900,000,000 shares; Outstanding –
468,886,190 shares

    Preferred
      stock - $0.01 par value; Authorized - 15,000,000 shares; Issued - 0 shares;
      Outstanding - 0 shares

    


    


    Authorized
      and Outstanding Capital Stock of NV Entertainment,
      Inc.

    


    As
      of
      December 5, 2007:

    Common
      stock - no par value; Authorized – 1,000 shares; Outstanding – 1,000
      shares

    


    


    Outstanding
      Equity and Rights to Receive Equity of Subsidiaries Not Held 100% By the
      Company

    


    NV
      Entertainment, Inc. only owns a 50% interest in Top Secret Productions, LLC,
      a
      California limited liability company.

    


    Stock
      Option or Stock Incentive Plans

     

    The
      Company currently has four compensation plans (excluding individual stock option
      grants outside of such plans) under which equity securities are authorized
      for
      issuance to employees, directors and consultants in exchange for
      services:

     

    
      	
               

            	
              ·

            	
              The
                2000 Omnibus Securities Plan (the “2000
                Plan”);

            


    

     

    
      	
               

            	
              ·

            	
              The
                2001 Stock Incentive Plan (the “2001
                Plan”);

            


    

     

    
      	
               

            	
              ·

            	
              The
                2003 Consultant Stock Plan (the “Consultant Plan”);
                and

            


    

     

    
      	
               

            	
              ·

            	
              The
                2006 Stock Incentive Plan (the “2006
                Plan”).

            


    

    


    The
      2000
      Plan was adopted on April 20, 2000 by the Company’s Board of Directors, and
      subsequently approved by the shareholders of the Company on May 31, 2000. The
      2000 Plan authorizes the granting of incentive stock options, non-qualified
      stock options or stock awards. A total of 2,500,000 shares of common stock
      are
      reserved for issuance under the 2000 Plan.

    


    The
      2001
      Plan was adopted August 30, 2001, and subsequently approved by the shareholders
      of the Company on July 2, 2002. The 2001 Plan authorizes the issuance of
      incentive stock options, non-qualified stock options, stock awards, dividend
      equivalent rights, and stock appreciation rights to directors, officers,
      employees and certain consultants to the Company. A total of 2,500,000 shares
      of
      common stock were initially reserved for issuance under the 2001
      Plan.

    


    
      The
        Consultant Plan was adopted in January 2003 and subsequently approved by
        the
        shareholders of the Company on May 2, 2007. The Consultant Plan authorizes
        the
        issuance of up to 6,000,000 non-qualified stock options or stock awards to
        consultants to the Company.  Directors, officers and employees are not
        eligible to participate in the Consultant Plan. 

       

      


    

    The
      2006
      Plan was adopted in November 2006 and subsequently approved by the shareholders
      of the Company on May 2, 2007. The 2006 Plan authorizes the issuance of up
      to
      30,000,000 incentive stock options, non-qualified stock options or stock awards
      to directors, officers, employees and certain consultants to the
      Company.


    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    


    Schedule
      5(f)

     

    


    Potential
      Violations, Conflicts, Breaches, or Defaults

    


    Except
      to
      the extent that any of the Company’s outstanding convertible securities, or
      convertible securities to be issued under the Transaction Documents (as defined
      in the Subscription Agreement) may require reservation or issuance of shares
      in
      excess of the 900,000,000 shares of common stock currently authorized, no
      violation, conflict, breach, default (or any event which with the giving of
      notice or the lapse of time or both would reasonably likely constitute a
      default) would be caused by the proposed transaction documentation under (A)
      the
      articles or certificate of incorporation, charter or bylaws of the Company,
      (B)
      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 (as defined in the Subscription
      Agreement), (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 (as defined in the Subscription
      Agreement).

    


    


    Potential
      Anti-dilution, Reset, Repricing or Acceleration Rights

    


    Common
      Stock Purchase Warrants issued in connection with the Company’s Bridge Loan
      agreement dated March 26, 2007 are subject to exercise price adjustment in
      the
      event that the (1) purchase price, (2) conversion price, (3) put or call price,
      or (4) exercise price applicable to warrants, option or similar instruments
      for
      of shares of Common Stock in a new transaction is lower than the effective
      Exercise Price of such warrants, which was $0.10 per share upon issuance of
      such
      warrants.

    


    


    Piggy-Back
      Registration Rights

    


    No
      person
      or entity holding securities of the Company or having the right to receive
      securities of the Company has any piggy-back registration rights that would
      be
      triggered by the transaction.



    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    Schedule
      5(l)

     

    


     

    Defaults

    


    The
      Company is currently in default on its Convertible Promissory Note dated May
      24,
      2007 made in favor of The Charles R. Cono Trust (the “Cono Note”). The Company
      plans to pay all outstanding obligations due on the Cono Note from the proceeds
      of the Notes, as described on Schedule 9(e).


    



    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    Schedule
      5(o)

     

    


     

    Certain
      Material Liabilities and Obligations of the Company

     

    


     

    None


    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    


    Schedule
      8

    


    


    FINDER: 
      BLUMFIELD INVESTMENTS

    


    


     

    Cash
      Fee.   The Company agrees that it will pay the Finder, on the
      Closing Date a fee of ten percent (10%) of the Purchase Price (“Finder’s Cash
      Fee”).  The Company represents that there are no other parties
      entitled to receive fees, commissions, or similar payments in connection with
      the Offering except the Finder.

    


    Warrant
      Exercise Compensation.   The Finder will also be paid by the
      Company ten percent (10%) of the cash proceeds received by the Company from
      exercise of the Warrants (“Warrant Exercise Compensation”).  The
      Warrant Exercise Compensation must be paid by the Company to the Finder within
      five (5) days after each receipt by the Company of Warrant Exercise cash
      proceeds.

    


    Finder’s
      Warrants.  On the Closing Date, the Company will issue to the
      Finder, ten (10) Warrants for each one hundred (100) Shares and Warrants
      issuable on the Closing Date to the Subscribers (“Finder’s Warrants”) similar to
      and carrying the same rights as the Class A Warrants issuable to the Subscribers
      except that Warrant Exercise Compensation will not be payable in connection
      with
      such Finder’s Warrants.

    


    All
      the
      representations, covenants, warranties, undertakings, remedies, liquidated
      damages, indemnification, and other rights including but not limited to
      reservation requirements and registration rights made or granted to or for
      the
      benefit of the Subscribers are hereby also made and granted to and for the
      benefit of the Finder in respect of the Finder’s Warrants and the Warrant Shares
      issuable upon exercise of the Finder’s Warrants.


    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    Schedule
      9(e)

     

     

    Use
      of Proceeds

    


    The
      proceeds of the Offering will be employed by the Company as
      follows:

    


    1.           To
      satisfy the following payment obligations under the Transaction
      Documents:

    


    a.           Payment
      of ten percent (10%) of the Purchase Price to the Finder(s) (as defined in
      the
      Subscription Agreement) on the Closing Date;

     

    
      	
            	
              b.

            	
              Payment
                of $25,000 to Grushko & Mittman, P.C., as reimbursement for services
                rendered to the Subscribers on the Closing
                Date;

            


    

     

    2.           Payment
      of all outstanding obligations in the amount of $421,480 under that certain
      Convertible Promissory Note dated May 24, 2007 made by the Company in favor
      of
      The Charles R. Cono Trust;

     

    3.           Payment
      of all outstanding obligations in the amount of
      $1,100,000 under those certain Senior Secured Promissory
      Notes issued pursuant to a Bridge Loan Agreement dated as of July 26, 2007
      by
      and between Rim Semiconductor Company and the Lenders parties
      thereto;

     

    4.           Payment
      of accrued and unpaid Officer and Director Salaries in the aggregate amount
      of $81,625.02.

    


    5.           For
      working capital and general corporate purposes, including liabilities reflected
      in the Company’s most recent balance sheet included in its Reports or incurred
      in the ordinary course of business (other than accrued and unpaid Officer and
      Director salaries not specifically listed in this Schedule 9(e))
      .



    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    Schedule
      9(t)

     

    


    Lockup
      Agreements

    


    The
      Company will deliver to the Subscribers on or before the Closing Date an
      irrevocable lockup agreement in the form annexed to the Subscription Agreement
      as Exhibit H, with Brad Ketch and Ray Willenberg, Jr.

     


    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    Schedule
      11.1

     

    


    Registration
      of Additional Common Stock

    


    None


     

    47