SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of March 30, 2007, by and among Conspiracy Entertainment Holdings, Inc.,
      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 subscribe to Eighty Thousand
      Dollars ($80,000) (the "Purchase
      Price")
      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”).
      The
      Notes and the shares of Common Stock issuable upon conversion of the Notes
      (the
“Shares”)
      are
      collectively referred to herein as the "Securities";
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Notes contemplated hereby shall be held
      in
      escrow pursuant to the terms of a Funds Escrow Agreement to be executed by
      the
      parties substantially in the form attached hereto as Exhibit
      B
      (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.
      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 set forth on the signature page hereto. 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, as soon as practicable following the satisfaction or waiver
      of
      all conditions to closing set forth in this Agreement (the “Closing
      Date”).

    


    2. Intentionally
      Deleted.

    


    3. Subscriber's
      Representations and Warranties.
      Such
      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 the
      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 and
      has
      the requisite corporate power to own its assets and to carry on its
      business.

    


    (b) Authorization
      and Power.
      Each
      Subscriber has the requisite power and authority to enter into and perform
      this
      Agreement and to purchase the Notes being sold to it hereunder. The execution,
      delivery and performance of this Agreement 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
      has been duly authorized, executed and delivered by such Subscriber and
      constitutes, or shall constitute when executed and delivered, a valid and
      binding obligation of the Subscriber enforceable against the Subscriber in
      accordance with the term hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the consummation
      by
      such Subscriber of the transactions contemplated hereby 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 or to purchase
      the Notes in accordance with the terms hereof, provided that for purposes of
      the
      representation made in this sentence, such Subscriber is assuming and relying
      upon the accuracy of the relevant representations and agreements of the Company
      herein.

    


    (d) Information
      on Company.
      The
      Subscriber has been furnished with the audited financial statements of the
      Company for the year ended December 31, 2005 (hereinafter referred to as the
      "Reports").
      Such
      financial statements were prepared pursuant to General Accepted Accounting
      Practices in the United States and fairly present in all material respects
      the
      financial position of the Company and its consolidated subsidiaries, if any,
      as
      of and for the dates thereof and the results of operations and cash flows for
      the periods then ended, subject to normal, immaterial adjustments. In addition,
      the Subscriber has received in writing from the Company such other information
      concerning its operations, financial condition and other matters as the
      Subscriber has requested in writing (such other information is collectively,
      the
      "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities.

     

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Notes, an
      "accredited investor", as such term is defined in Regulation D promulgated
      by
      the Commission under the 1933 Act, is experienced in investments and business
      matters, has made investments of a speculative nature and has purchased
      securities of United States publicly-owned companies in private placements
      in
      the past and, with its representatives, has such knowledge and experience in
      financial, tax and other business matters as to enable the 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. The Subscriber has the
      authority and is duly and legally qualified to purchase and own the Securities.
      The 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 the Subscriber is accurate.

    (f) Purchase
      of Notes.
      On the
      Closing Date, the Subscriber will purchase the Notes 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, but Subscriber
      does not agree to hold the Notes for any minimum amount of time.

     

    (g) Compliance
      with Securities Act.
      The
      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
      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. Notwithstanding anything to the contrary contained
      in
      this Agreement, such Subscriber may transfer (without restriction and without
      the need for an opinion of counsel) the Securities to its Affiliates (as defined
      below) provided that each such Affiliate is an “accredited investor” under
      Regulation D and such Affiliate agrees to be bound by the terms and conditions
      of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate when employed in connection with the Company
      includes each Subsidiary [as defined in Section 4(a)] 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.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

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

     

    "THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
      OR AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONSPIRACY ENTERTAINMENT HOLDINGS,
      INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

     

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

     

    "THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
      FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO CONSPIRACY ENTERTAINMENT HOLDINGS, INC. THAT SUCH REGISTRATION
      IS NOT REQUIRED."

     

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

     

    (k) 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 Subscriber has full corporate 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 the Subscriber relating
      hereto.

    


    (l) 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.

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (m) Correctness
      of Representations.
      Such
      Subscriber represents 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.

    


    (n) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date until
      three years after the Closing Date.

     

    4. Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber that except
      as set forth in the Reports or the Other Written Information and as otherwise
      qualified in the Transaction Documents:

     

    (a) Due
      Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has the requisite
      corporate power to own its properties and to carry on its business is disclosed
      in the Reports.
      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 purpose of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company taken individually, or in
      the
      aggregate, 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 50% 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. All the Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      4(a)
      hereto.


     

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

     

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

     

    (d) Additional
      Issuances.
      There
      are no outstanding agreements or preemptive or similar rights affecting the
      Company's or any of its Subsidiaries’ Common Stock or other 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 Common Stock or equity of the Company except as
      described on Schedule
      4(d).
      The
      Common Stock and all other equity of the Company and its Subsidiaries on a
      fully
      diluted basis outstanding as of the last trading day preceding the Closing
      Date
      is set forth on Schedule
      4(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, any Principal Market (as defined in Section 9(b) of this Agreement),
      nor 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.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 3
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      agreements entered into by the Company relating thereto by the Company
      will:

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default in any material respect) 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 (as defined in Section 9(r)(i)) upon
      the
      Securities or any of the assets of the Company or any of its Affiliates other
      then Permitted Liens (as defined in Section 9(r)(i)); or

     

    (iii) 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) result
      in
      the activation of any piggy-back registration rights of any person or entity
      holding securities or debt of the Company or having the right to receive
      securities of the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

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

    


    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares, will be duly and validly issued, fully paid and nonassessable and,
      if
      registered pursuant to the 1933 Act and resold pursuant to an effective
      registration statement, will be free trading and unrestricted except to the
      extent of any restrictions pursuant to the 1933 Act or the Exchange Act that
      may
      be applicable to any Subscriber due to such Subscriber’s affiliate or insider
      status with respect to the Company or such Subscriber’s possession of material
      non-public information with respect to the Company;

     

    (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;

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders provided Subscriber’s representations herein are true and accurate and
      Subscribers take no actions or fail to take any actions required for their
      purchase of the Securities to be in compliance with all applicable laws and
      regulations; and

     

    (v) will
      have
      been issued in reliance upon an exemption from the registration requirements
      of
      and will not result in a violation of Section 5 under the 1933 Act provided
      Subscriber’s representations herein are true and accurate and Subscribers take
      no actions or fail to take any actions required for their purchase of the
      Securities to be in compliance with all applicable laws and
      regulations.

     

    (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 of any of the Transaction Documents
      or
      the performance by the Company of its obligations under the Transaction
      Documents. 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) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13 of the Securities Exchange Act of 1934 (the “1934
      Act”)
      and
      has a
      class of common shares registered pursuant to Section 12(g) of the 1934 Act.
      Pursuant to the provisions of the 1934 Act, the Company has timely filed all
      reports and other materials required to be filed thereunder with the Commission
      during the preceding thirty-six months.

     

    (j) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold, provided, however, that this provision
      shall
      not prevent the Company from engaging in investor relations/public relations
      activities consistent with past practices.

     

    (k) Information
      Concerning Company.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition as of their respective dates and all the
      information required to be disclosed therein. Since the last day of the fiscal
      year of the most recent audited financial statements included in the Reports
      (“Latest
      Financial Date”),
      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
      including the financial statements therein do not contain any untrue statement
      of a material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading in light
      of
      the circumstances when made.

     

    (l) 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.

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (n) Not
      an
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the OTC Bulletin Board (“Bulletin
      Board”)
      which
      would impair the exemptions relied upon in this Offering or the Company’s
      ability to timely comply with its obligations hereunder. Nor will the Company
      or
      any of its Affiliates 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, which would impair the exemptions
      relied upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder.

     

    (o) 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.

     

    (p) Listing.
      The
      Company's common stock is quoted on the Bulletin Board under the symbol CPYE.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.

     

    (q) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company’s
      businesses since the Latest Financial Date and which, individually or in the
      aggregate, would reasonably be expected to have a Material Adverse
      Effect,
      except
      as disclosed on Schedule
      4(q).

     

    (r) No
      Undisclosed Events or Circumstances.
      Since
      the Latest Financial Date, 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.

     

    (s)  Capitalization.
      The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
Schedule
      4(d).
      Except
      as set forth on Schedule
      4(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. All of the outstanding shares of Common Stock of the Company
      have
      been duly and validly authorized and issued and are fully paid and
      nonassessable.

     

    (t)  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 is binding upon the Company and enforceable against
      the
      Company 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.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (u)  No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or 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.

    


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

    


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

    


    (x) Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 4(a), (b),
      (c),
      (d), (e), (f), (h), (k), (m), (q), (r), (u) and (w) of this Agreement, as same
      relate to each Subsidiary of the Company.

    


    (y) Company
      Predecessor.
      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, if
      any.

     

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

     

    (AA) Preservation
      of Corporate Existence.
      The
      Company shall preserve and maintain its corporate existence, rights, privileges
      and franchises in the jurisdiction of its incorporation, and qualify and remain
      qualified, as a foreign corporation in each jurisdiction in which such
      qualification is necessary in view of its business or operations and where
      the
      failure to qualify or remain qualified might reasonably have a Material Adverse
      Effect upon the financial condition, business or operations of the Company
      and
      its Subsidiaries taken as a whole.

     

    (BB) 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.

     

    (CC) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    5. Regulation
      D Offering.
      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 Subscriber 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
      C.
      At the
      Company’s option, the Company will provide, at the Company's expense or
      reimburse Subscribers, such other legal opinions in the future as are reasonably
      necessary for the issuance and resale of the Common Stock issuable upon
      conversion of the Notes pursuant to an effective registration statement, Rule
      144 under the 1933 Act or an exemption from registration.

     

    6.1. 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 the 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) the Subscriber confirms in writing to
      the
      transfer agent that the Subscriber has complied with the prospectus delivery
      requirements, the restrictive legend can be removed 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). 

    


    (b) Subscriber
      will give notice of its decision to exercise its right to convert the Note,
      interest, any sum due to the Subscriber under the Transaction Documents or
      part
      thereof by telecopying an executed and 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. The 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
      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 the Subscriber via express courier for receipt by
      such
      Subscriber within four (4) business days after receipt by the Company of the
      Notice of Conversion (such fourth 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
      and the Subscriber has complied with all applicable securities laws in
      connection with the sale of the Common Stock, including, without limitation,
      the
      prospectus delivery requirements. A Note representing the balance of the Note
      not so converted will be provided by the Company to the Subscriber if requested
      by Subscriber, provided the 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, the
      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. “Business
      day”
and
      “trading
      day”
as
      employed in the Transaction Documents is a day that the New York Stock Exchange
      is open for trading for three or more hours.

     

    (c) The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 6.1 hereof, or the Mandatory Redemption Amount
      described in Section 6.2 hereof, respectively after the Delivery Date or the
      Mandatory Redemption Payment Date (as hereinafter defined) could result in
      economic loss to the Subscriber. As compensation to the Subscriber for such
      loss, the Company agrees to pay (as liquidated damages and not as a penalty)
      to
      the Subscriber for late issuance of Shares in the form required pursuant to
      Section 6.1 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
      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 by the Delivery Date or make
      payment by the Mandatory Redemption Payment Date, the Subscriber may 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 the 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.

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (d) 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.

    


    6.2. Mandatory
      Redemption at Subscriber’s Election.
      In the
      event (i) the Company is prohibited from issuing Shares, (ii) the Company fails
      to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of any
      other Event of Default (as defined in the Note or in this Agreement), any of
      the
      foregoing that continues for more than twenty (20) business days, (iv) a Change
      in Control (as defined below), or (v) of the liquidation, dissolution or winding
      up of the Company, then at the Subscriber's election, the Company must pay
      to
      the Subscriber ten (10) business days after request by the Subscriber
      (“Calculation
      Period”),
      a sum
      of money determined by multiplying up to the outstanding principal amount of
      the
      Note designated by the Subscriber by 120%, together with accrued but unpaid
      interest thereon ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by the 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 6.1(c) hereof, that have been paid or accrued
      for
      the ten day period prior to the actual receipt of the Mandatory Redemption
      Payment by the Subscriber shall be credited against the Mandatory Redemption
      Payment. For purposes of this Section 6.2, “Change
      in Control”
shall
      mean (i) the Company no longer having a class of shares publicly traded,
      included for quotation 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)
      a
      majority of the board of directors of the Company as of the Closing Date no
      longer serving as directors of the Company except due to natural causes, (iv)
      the sale, lease or transfer of substantially all the assets of the Company
      or
      Subsidiaries, (v) if the holders of the Company’s Common Stock as of the Closing
      Date beneficially own at any time after the Closing Date less than forty percent
      of the Common Stock owned by them on the Closing Date, or (vi) if the Chief
      Executive Officer of the Company, as of the Closing Date, no longer serves
      as
      Chief Executive Officer of the Company. 

    


    6.3. Maximum
      Conversion.
      The
      Subscriber shall not 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 the 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 the Subscriber
      and its Affiliates of more than 4.99% of the outstanding shares of common stock
      of the Company on such Conversion Date. Beneficial ownership shall be determined
      in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
      Subscriber shall not be limited to aggregate exercises which would result in
      the
      issuance of more than 4.99%. The
      restriction described in this paragraph may be waived, in whole or in part,
      upon sixty-one (61) days prior notice from the Subscriber to the Company to
      increase such percentage to up to 9.99%, but not in excess of 9.99%. The
      Subscriber may decide whether to convert a Convertible Note to achieve an actual
      4.99% or up to 9.99% ownership position as described above, but not in excess
      of
      9.99%.

    


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    6.4. Injunction
      Posting of Bond.
      In the
      event a Subscriber shall elect to convert a Note or part thereof, the Company
      may not refuse conversion based on any claim that 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.

    


    6.5. Buy-In.
      In
      addition to any other rights available to the Subscriber, if the Company fails
      to deliver to the Subscriber such shares issuable upon conversion of a Note
      by
      the Delivery Date and if after seven (7) business days after the Delivery Date
      the Subscriber or a broker on the Subscriber’s behalf, purchases (in an open
      market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by such Subscriber of the Common Stock which the
      Subscriber was entitled to receive upon such conversion (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 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, 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 the 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 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.

    


    6.6. Adjustments.
      The
      Conversion Price and amount of Shares issuable upon conversion of the Notes
      shall be adjusted as described in this Agreement and the Notes.

     

    6.7. Redemption.
      The
      Note shall not be redeemable or mandatorily convertible except as described
      in
      the Note. 

    


    7. Finder/Due
      Diligence Fee.

     

    (a) Finder’s
      Commission.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agrees to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or similar
      fees other than the party identified on Schedule
      8
      hereto
      (the “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 on the Closing Date
      directly out of the funds held pursuant to the Escrow Agreement (“Finder’s
      Fees”)
      as
      more fully described on Schedule
      8
      hereto.
      The Company represents that there are no other parties entitled to receive
      fees,
      commissions, or similar payments in connection with the Offering.

    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (b) Due
      Diligence Fee.
      The
      Company will pay a due diligence fee (“Due
      Diligence Fee”)
      described on Schedule
      8 hereto
      to
      the parties identified on Schedule
      8
      hereto
      (“Due
      Diligence Fee Recipient”).

     

    8. Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a cash fee of $5,000
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes (the “Offering”).
      The
      Legal Fees and reimbursement for estimated UCC searches, if any (less any
      amounts paid prior to a Closing Date), and estimated printing and shipping
      costs
      for the closing statements to be delivered to Subscribers, will be payable
      on
      the Closing Date out of funds held pursuant to the Escrow
      Agreement.

     

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

     

    (a) Stop
      Orders.
      The
      Company will advise the Subscribers, within two hours after the Company 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.
      The
      Company shall promptly secure the listing or the inclusion for quotation of
      the
      shares of Common Stock upon each national securities exchange, or electronic
      or
      automated quotation system upon which they are or become eligible for listing
      or
      quotation and shall maintain such listing or quotation so long as any Notes
      are
      outstanding. The Company will maintain the listing or quotation of its Common
      Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq National
      Market System, Bulletin Board, Pink Sheets 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 or exclusion from
      quotation of the Common Stock from any Principal Market. As of the date of
      this
      Agreement, the Bulletin Board is 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 Subscriber.

     

    (d) Filing
      Requirements.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the 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, the Company will (A) cause its Common
      Stock to continue to be registered under Section 12(b) or 12(g) of the 1934
      Act,
      (B) comply in all respects with its reporting and filing obligations under
      the
      1934 Act, (C) voluntarily comply with all reporting requirements that are
      applicable to an issuer with a class of shares registered pursuant to Section
      12(g) of the 1934 Act, if 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 two (2) years after the Closing Date. Until the earlier of the resale
      of
      the Shares by each Subscriber or two (2) years after the Closing Date, the
      Company will use its best efforts to 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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.
      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, litigation related expenses or
      settlements, brokerage fees, nor non-trade obligations outstanding on a Closing
      Date.

     

    (f) Reservation.
      Prior
      to the Closing Date, the Company undertakes to reserve, pro rata,
      on
      behalf of the Subscribers from its authorized but unissued common stock, a
      number of common shares equal to 150%
      of
      the amount of Common Stock necessary to allow each Subscriber to be able to
      convert all Notes issuable pursuant to this Agreement and interest thereon.
      Failure to have sufficient shares reserved pursuant to this Section 9(f) shall
      be a material default of the Company’s obligations under this Agreement and an
      Event of Default under the Note.

     

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

     

    (h) Insurance.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company will keep its assets which are of an insurable
      character insured by financially sound and reputable insurers against loss
      or
      damage by fire, explosion and other risks customarily insured against by
      companies in the Company’s line of business, in amounts sufficient to prevent
      the Company from becoming a co-insurer and not in any event less than one
      hundred percent (100%) of the insurable value of the property insured less
      reasonable deductible amounts; and the Company will maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner customary
      for
      companies in similar businesses similarly situated and to the extent available
      on commercially reasonable terms.

     

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

     

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

     

    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, 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.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (l) Properties.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company will keep its properties in good repair, working
      order
      and condition, reasonable wear and tear excepted, and from time to time make
      all
      necessary and proper repairs, renewals, replacements, additions and improvements
      thereto; and the Company will at all times comply with each provision of all
      leases to which it is a party or under which it occupies property if the breach
      of such provision could reasonably be expected to have a Material Adverse
      Effect.

     

    (m) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the sooner of (i) three (3) years after the
      Closing Date, or (ii) until all the 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, the Company agrees that except in
      connection with a Form 8-K or the Registration Statement or as otherwise
      required in any other Commission filing, it will not disclose publicly or
      privately the identity of the Subscribers unless expressly agreed to in writing
      by a Subscriber, only to the extent required by law and then only upon five
      days
      prior notice to Subscriber. In any event and subject to the foregoing, the
      Company shall file
      a
      Form 8-K or make a public announcement describing the Offering not later than
      the first business day after the Closing Date. In the Form 8-K or public
      announcement, the Company will specifically disclose the amount of common stock
      outstanding immediately after the Closing. A form of the proposed Form 8-K
      or
      public announcement to be employed in connection with the Closing is annexed
      hereto as Exhibit
      D.

     

    (n) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement and registration of the Company’s securities issued
      under certain Securities Purchase Agreements dated as of August 31, 2004,and
      January 31, 2005, as amended pursuant to an Amendment, Modification and Consent
      to Transaction Documents Agreement, dated as of August 5,2005 and further
      amended pursuant to the Second Amendment, Modification and Consent to
      Transaction Documents Agreement, dated as of August 11, 2006, the Company will
      not file with the Commission or with state regulatory authorities, any
      registration statements including but not limited to Forms S-8, 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 without the consent of the Subscriber until the expiration of the
“Exclusion
      Period”,
      which
      shall be defined as the first to occur 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 365
      days,
      (ii) until all the Shares have been resold or transferred by the Subscribers
      pursuant to the Registration Statement or Rule 144, without regard to volume
      limitations, or (iii) the satisfaction of the Notes. The Exclusion Period will
      be tolled during the pendency of an Event of Default as defined in the
      Note.

     

    (o) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will 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 receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company. The Company will offer to the Subscriber an opportunity to
      review and comment on the Registration Statement thereto between three and
      five
      business days prior to the proposed filing date thereof.

     

    (p) Additional
      Negative Covenants.
      So long
      as the Notes are outstanding and during the pendency of an Event of Default
      (as
      defined in the Note), 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 (i)
      the
      Excepted Issuances, (ii) (a) Liens imposed by law for taxes that are not yet
      due
      or are being contested in good faith and for which adequate reserves have been
      established in accordance with generally accepted accounting principles; (b)
      carriers’, warehousemen’s, mechanics’, material men’s, repairmen’s and other
      like Liens imposed by law, arising in the ordinary course of business and
      securing obligations that are not overdue by more than 30 days or that are
      being
      contested in good faith and by appropriate proceedings; (c) pledges and deposits
      made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
      regulations; (d) deposits to secure the performance of bids, trade contracts,
      leases, statutory obligations, surety and appeal bonds, performance bonds and
      other obligations of a like nature, in each case in the ordinary course of
      business; (e) Liens created with respect to the financing of the purchase of
      new
      property in the ordinary course of the Company’s business up to the amount of
      the purchase price of such property, or (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 (g), a “Permitted
      Lien”)
      and
      (iii) indebtedness for borrowed money which is not senior or pari passu in
      right
      of payment to the payment of the Notes;

     

    
      
        
        

      

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

     

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

     

    (iv) prepay
      any financing related or other outstanding debt obligations; or

     

    (v) 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 $10,000
      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.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a) The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers' officers, directors, agents, Affiliates, 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 material breach of any 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 material
      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) Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons against any claim, cost, expense, liability, obligation, loss or damage
      (including reasonable legal fees) of any nature, incurred by or imposed upon
      the
      Company or any such person which results, arises out of or is based upon (i)
      any
      material misrepresentation by such Subscriber 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 material
      breach or default in performance by such Subscriber of any covenant or
      undertaking to be performed by such Subscriber hereunder, or any other agreement
      entered into by the Company and Subscribers, relating hereto.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (c) In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of Registrable Securities
      (as
      defined herein).

     

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

     

    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities. If the Company at any time proposes to file a registration statement
      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 other shares of Common Stock held
      by
      or purchasable by Subscriber as set forth on Schedule
      11.1
      (“Registrable
      Securities”),
      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 fifteen (15) 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”).
      Unless instructed in writing to the contrary, the Subscribers hereby
      automatically exercise the registration rights granted in this Section 11.1.
      The
      Seller is hereby given the same rights and benefits as any other party
      identified in such registration. In the event that any registration pursuant
      to
      this Section 11.1 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 without thereby incurring any liability to
      the
      Seller due to such withdrawal or delay.

     

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1 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 Subscribers (by telecopier and by e-mail addresses provided by
      Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com)
      on or
      before the first 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);


     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (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
commercially
      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; 

     

    (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 two 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, 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; and 

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission. 

     

    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 and the Subscribers agree that the Sellers will suffer damages if the
      Company does not comply with its obligations set forth in Section
      11.1.

     

    11.5. Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses, 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 the National
      Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
      and registrars, costs of insurance and fee of one counsel for all Sellers are
      called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities, including any fees and disbursements of any additional
      counsel to the Seller, 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.

     

    
      
        
        

      

      
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    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 officer of the Seller, each
      director 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 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
      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,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus. 

     

    (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, 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 covered by such registration
      statement.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (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 reasonably
      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 indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      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 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.

     

    (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.

     

    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 representation that
      the
      prospectus delivery requirements, or the requirements of Rule 144, as applicable
      and if required, have been satisfied, and (ii) the original share certificates
      representing the shares of Common Stock that have been sold, and (iii) in the
      case of sales under Rule 144, customary representation letters of the Subscriber
      and/or 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
      above,
      reissuable pursuant to any effective and current Registration Statement
      described in Section 11 of this Agreement or pursuant to Rule 144 under the
      1933
      Act (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 Shares 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. 

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, 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 must cause its transfer agent to electronically transmit the Unlegended
      Shares by crediting the account of Subscriber’s prime Broker with DTC through
      its Deposit Withdrawal Agent Commission system. Such delivery must be made
      on or
      before the Unlegended Shares Delivery Date.

    


    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
      result in economic loss to Subscriber. As compensation to 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 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 subject
      to such default at a price per share equal to 120% of the Purchase Price of
      such
      Shares (“Unlegended
      Redemption Amount”).

    (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 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares shall have been sought and obtained by the Company 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 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.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    12. (a) Favored
      Nations Provision.
      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 provided such issuances
      are
      not for the purpose of raising capital 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 pursuant to stock option plans and employee stock purchase
      plans described on Schedule
      4(d)
      hereto
      at prices equal to or higher than the closing price of the Common Stock on
      the
      issue date of any of the foregoing, (iv) as a result of the conversion of Notes
      which are granted or issued pursuant to this Agreement or that have been issued
      prior to the Closing Date, the issuance of which has been disclosed in a Report
      filed not less than five (5) days prior to 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”),
      if at
      any time while Notes are outstanding the Company shall offer, issue or agree
      to
      issue 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, without
      the consent of each Subscriber holding Notes or Shares, then the Company shall
      issue, for each such occasion, additional shares of Common Stock to each
      Subscriber so that the average per share purchase price of the shares of Common
      Stock issued to the Subscriber (of only the Common Stock still owned by the
      Subscriber) is equal to such other lower price per share and the Conversion
      Price shall automatically be adjusted as provided in the Notes. The delivery
      to
      the Subscriber of the additional shares of Common Stock shall be not later
      than
      two (2) business days after the closing date of the transaction giving rise
      to
      the requirement to issue additional shares of Common Stock. The Subscriber
      is
      granted the registration rights described in Section 11 hereof in relation
      to
      such additional shares of Common Stock except that the Filing Date and Effective
      Date vis-à-vis such additional common shares shall be, respectively, the
      thirtieth (30th)
      and
      ninetieth (90th)
      date
      after the closing date giving rise to the requirement to issue the 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 in effect upon such issuance. The rights of the 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. The Subscriber
      is
      also given the right to elect to substitute any term or terms of any other
      offering in connection with which the Subscriber has rights as described in
      Section 12(a), for any term or terms of the Offering in connection with
      Securities owned by Subscriber as of the date the notice described in Section
      12(a) is required to be given to Subscriber.

     

    (b) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Section 12(a) would
      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 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.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    13. Security
      Interest.
      On or
      about August 31, 2004 and January 31, 2005, the Subscribers were granted a
      security interest in assets of the Company, as amended pursuant to the Amendment
      and Security Interest Agreements on August 5, 2005 and August 11, 2006. The
      security interest was memorialized in Security Agreements. The Company will
      execute such other agreements, documents and financing statements reasonably
      requested by Subscribers to affirm such security agreement, which will be filed
      at the Company’s expense with such jurisdictions, states and counties designated
      by the Subscribers. The
      Company will also execute all such documents reasonably necessary in the opinion
      of Subscribers to memorialize and further protect the security interest
      described herein. The Subscribers appointed a Collateral Agent to represent
      them
      collectively in connection with the security interest. The appointment was
      pursuant to a Collateral Agent Agreement. The Notes and all sums due under
      the
      Notes and the Transaction Documents are included in the term “Obligations”
as
      defined in the Security Agreements and are secured by the Collateral (as defined
      in the Security Agreements) in the same manner and having the same priority
      as
      granted to the Subscribers pursuant to the Security Agreements.

     

    14. 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: Conspiracy
      Entertainment Holdings, Inc., 612 Santa Monica Boulevard, Santa Monica, CA
      90401, Attn: Keith Tanaka, CFO, telecopier: (310) 260-1450, with a copy by
      telecopier only to: Sichenzia
      Ross Friedman Ference LLP, 1065 Avenue of Americas, 18th
      Floor,
      New York, NY 10018, Attn: Marc J. Ross, Esq., telecopier:
      (212) 930-9725, and (ii) if to the Subscriber, to: the one or more addresses
      and
      telecopier numbers indicated on the signature pages hereto, with an additional
      copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
      1601, New York, New York 10176, telecopier: (212) 697-3575.

     

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

     

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

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts
      of laws
      principles that would result in the application of the substantive laws of
      another jurisdiction. Any action brought by either party against the other
      concerning the transactions contemplated by this Agreement shall be brought
      only
      in the civil or state courts of New York or in the federal courts located in
      New
      York County. The
      parties and the individuals executing this Agreement and other agreements
      referred to herein or delivered in connection herewith on behalf of the Company
      agree to submit to the jurisdiction of such courts and 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.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      To the
      extent permitted by law, 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 one or more preliminary and final 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 14(d) hereof, each
      of
      the Company, Subscriber and any signator hereto in his personal capacity hereby
      waives, and agrees not to assert in any such suit, action or proceeding, any
      claim that it is not personally subject to the jurisdiction in New York of
      such
      court, that the suit, action or proceeding is brought in an inconvenient forum
      or that the venue of the suit, action or proceeding is improper. Nothing in
      this
      Section shall affect or limit any right to serve process in any other manner
      permitted by law.

     

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

     

    (g) 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.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (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 parties to the
      Transaction Documents.

     

    


     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    


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

    


    
      	 	 	 
	 	
              CONSPIRACY
                ENTERTAINMENT HOLDINGS, INC.

              a
                Utah corporation

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:
                

              


              Dated:
                March ____, 2007

            


    

    
 

    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL AND 

              PURCHASE
                PRICE

            
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

              ________________________________________

              (Signature)

              By:
                

               

            	
              $40,000.00

            


    

    


     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    


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

     

    
      
        	 	 	 
	 	
                
                  CONSPIRACY
                    ENTERTAINMENT HOLDINGS, INC.

                  a
                    Utah corporation

                

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:
                  

                Title:
                  

                


                Dated:
                  March ____, 2007

              


      

       

    

    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL AND 

              PURCHASE
                PRICE

            
	
              WHALEHAVEN
                CAPITAL FUND LIMITED

              3rd
                Floor, 14 Par-Laville Road

              Hamilton,
                Bermuda HM08

              Fax:
                (441) 292-1373

               

               

               

               

              ________________________________________

              (Signature)

              By:
                

               

            	
              $40,000.00

            


    

    


     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


     

    LIST
      OF EXHIBITS AND SCHEDULES

     

     

    
      
        	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	 
	
                Exhibit
                  B

              	
                Escrow
                  Agreement

              
	 	 
	
                Exhibit
                  C

              	
                Form
                  of Legal Opinion

              
	 	 
	
                Exhibit
                  D

              	
                Form
                  of Form 8-K or Public Announcement

              
	 	 
	
                Schedule
                  4(a)

              	
                Subsidiaries

              
	 	 
	
                Schedule
                  4(d)

              	
                Additional
                  Issuances / Capitalization

              
	 	 
	
                Schedule
                  4(q)

              	
                Undisclosed
                  Liabilities

              
	 	 
	
                Schedule
                  4(v)

              	
                Transfer
                  Agent

              
	 	 
	
                Schedule
                  8

              	
                Finder/Due
                  Diligence Fee

              
	 	 
	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	 
	
                Schedule
                  11.1

              	
                Other
                  Registrable Securities

              


      

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULES

     

    
      	Schedule
              4(a)	
              Subsidiaries

            


    

     

    NONE

     

    
      	Schedule
              4(d)	
              Additional
                Issuances / Capitalization

            


    

     

    Capital
      Stock

     

    100,000,000
      shares of common stock authorized, [37,785,509] issued and
      outstanding

     

    Convertible
      Securities

     

    
      	
              Investor

            	 	
              Note
                Amount

            	
               

            	
              A
                Warrants

            	
               

            	
              Exp
                Date

            	
               

            	
              B
                Warrants

            	
               

            	
              Exp
                Date

            	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stonestreet
                Limited Partnership

            	 	 	
              350,000
                

            	 	 	
              7,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              7,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Fund Limited

            	 	 	
              100,000
                

            	 	 	
              2,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              2,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital LP

            	 	 	
              100,000
                

            	 	 	
              2,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              2,000,000
                

            	 	 	
              expired

            	 
	
              Alpha
                Capital LG

            	 	 	
              500,000
                

            	 	 	
              10,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              10,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital LP

            	 	 	
              50,000
                

            	 	 	
              1,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              1,000,000
                

            	 	 	
              expired

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stonestreet
                Limited Partnership

            	 	 	
              150,000
                

            	 	 	
              3,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              3,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              250,000
                

            	 	 	
              5,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              5,000,000
                

            	 	 	
              expired

            	 
	
              Alpha
                Capital LG

            	 	 	
              250,000
                

            	 	 	
              5,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              5,000,000
                

            	 	 	
              expired

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              111,800
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	
              Alpha
                Capital Aktiengselleschaft

            	 	 	
              111,800
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Alpha
                Capital Anstalt

            	 	 	
              123,500
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              123,500
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 


    

     

     

    
      	Schedule
              4(q)	
              Undisclosed
                Liabilities

            


    

     

    NONE

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    
      	Schedule
              4(v)	
              Transfer
                Agent

            


    

     

    Michael
      Ajzenman

     

    Madison
      Stock Transfer, Inc.

     

    PO
      Box
      145-290

     

    Brooklyn,
      NY  11229

     

    P:
      718-627-4453

     

    F:
      718-627-6341

     

    
      	Schedule8	
              Finder/Due
                Diligence Fee

            


    

     

    NONE

     

    
      	Schedule
              9(e)	
              Use
                of Proceeds

            


    

     

    $67,500  Investor
      Relations

     

    
      	Schedule
              11.1	
              Other
                Registrable Securities

            


    

    


    Pursuant
      to the terms under
      certain Securities Purchase Agreements dated as of August 31, 2004,and January
      31, 2005, as amended pursuant to an Amendment, Modification and Consent to
      Transaction Documents Agreement, dated as of August 5,2005 and further amended
      pursuant to the Second Amendment, Modification and Consent to Transaction
      Documents Agreement, dated as of August 11, 2006, the Company has granted
      registration rights to Alpha Capital Anstalt, Whalehaven Fund Limited,
      Whalehaven Capital Fund Ltd., Stonestreet Limited Partnership and Whalehaven
      Capital LP in connection with the issuance of the Company’s securities.


    


    See
      Schedule 4(d) above for a list of such securities.