Document:

f8k081909ex10i_iconic.htm

    Exhibit 10.1

     

    
      SUBSCRIPTION
AGREEMENT

      

      THIS SUBSCRIPTION AGREEMENT
(this “Agreement”),
dated as of August __, 2009, by and among ICONIC BRANDS, INC., a Nevada
corporation (the “Company”), 1174 Route 109,
Lindenhurst, New York 11757,  and DOUBLE U MASTER FUND L.P.., a
British Virgin Islands limited partnership, with an office at  Harbour
House, Waterfront Drive, P.O. Box 972, Road Town, Tortola, British Virgin
Islands  (the “Subscriber”) under such
agreement and the Transaction Documents, as defined in Section 5(c) of this
Agreement, referred to herein).

      

      WHEREAS, the Company and the
Subscriber 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 Subscriber, as provided herein, and the Subscriber
shall purchase up to $500,000 (the “Aggregate Purchase Price”) of
the Company's common stock, $0.0001 par value (the “Common Stock”) consisting of
(a) 1,000,000 shares of Common Stock at a per share purchase price of $0.50 (the
“Share Purchase Price”);
(b) 1,000,000 Class I Warrants to purchase shares of Common Stock (the “Class I Warrants”) in the form
attached hereto as Exhibit
A; and (c) 1,000,000 Class J Warrants to purchase shares of Common Stock
(the “Class J Warrants”)
in the form attached hereto as Exhibit B.  The
Class I Warrants and the Class J Warrants shall hereinafter be collectively
referred to as the “Warrants”.  The
shares underlying the Class I Warrants and Class J Warrants shall hereinafter be
collectively referred to as the “Warrant
Shares”.  The Purchased Shares, the Warrants and the Warrant
Shares shall hereinafter collectively be referred to as the “Securities”.

      

      WHEREAS, the Class I Warrants
shall have a per share exercise price of One Dollar ($1.00) and an expiration
date five years after the date of issuance.  The Class I Warrants
shall also have a cashless exercise feature.  The Class J Warrants
shall have a per share exercise price of One Dollar Fifty Cents ($1.50) and an
expiration date five years after the date of issuance.  The Class J
Warrants shall also have a cashless exercise feature.   The Class
I Exercise Price and the Class J Exercise Price shall hereinafter be
collectively referred to as the “Exercise Price” and such
Exercise Price shall be subject to adjustment as described in each Class I
Warrant and Class J Warrant.

      

      WHEREAS, the purchase price to
be paid by Subscriber, as identified on the signature page to this Agreement, is
referred to as the “Purchase
Price” and the shares being purchased by and issued to such Subscriber,
as identified on the signature page to this Agreement, are referred to as the
“Purchased Shares.” The
Purchased Shares, the Warrants and the Warrant Shares are collectively referred
to herein as the “Securities”; and

       

       

      
        
          
          

        

        
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      WHEREAS, the aggregate
proceeds of the sale of the Purchased Shares and the Warrants contemplated
hereby shall be held in escrow pending the closing of the transactions
contemplated by this Agreement.

      

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

      

      1.           Closing Date. The
“Closing Date” shall be
the date that the sum of Five Hundred Thousand Dollars ($500,000) or such other
amount as the parties mutually agree is transmitted by wire transfer or
otherwise to or for the benefit of the Company.  At such Closing Date,
the Company shall deliver a Closing Certificate substantially in the form of
Exhibit E as set forth
in Paragraph 2(b) of the Agreement.  The consummation of the
transactions contemplated herein (the “Closing”) shall take place at
the offices of Krieger & Prager, LLP, 39 Broadway, Suite 920, New York, New
York 10006, upon the satisfaction of all conditions to Closing set forth in this
Agreement.

      

      2.           Closing.

      

      (a)           On
the Closing Date and subject to the satisfaction or waiver of the terms and
conditions of this Agreement, the Subscriber, in the amounts set forth on the
signature page hereto, shall purchase and the Company shall sell to each such
Subscriber in the amount set forth on the signature page hereto, the Purchased
Shares and the Warrants as described in Section 3 of this
Agreement.

      

                    
 (b)           The
occurrence of the Closing is expressly contingent on (i) payment by the
Subscriber of the Purchase Price, (ii) delivery by the Company to Krieger &
Prager, LLP, to be held in escrow pending the Closing, of one or more original
signed stock certificates representing the Purchased Shares, issued in the name
of the Subscriber and original ink-signed Warrants issued by the Company to the
Subscriber (such stock certificates and Warrants, the “Delivered
Certificates”),  (iii) the truth and accuracy, on the Closing
Date of the representations and warranties of the Company and Subscriber
contained in this Agreement, (iv) the continued compliance with the covenants of
the Company set forth in this Agreement through such date, (v) the
non-occurrence prior to that date of any event that with the passage of time or
the giving of notice could become an Event of Default, as defined in Section 7
hereof or other default by the Company of its obligations and undertakings
contained in this Agreement, (vi) the delivery by the Company on the Closing
Date of a certificate substantially in the form of Exhibit E (the “Closing Certificate”) signed
by its chief executive officer or chief financial officer (1) representing the
truth and accuracy of all the representations and warranties made by the Company
contained in this Agreement, as of the Closing Date, as if such representations
and warranties were made and given on such date, except for changes that will
not have alone, or in any combination in the aggregate, a Material Adverse
Effect (as defined in Section 5(a) of this Agreement), (2) certifying that the
information contained in the schedules and exhibits hereto is substantially
accurate as of the Closing Date, except for changes that do not constitute a
Material Adverse Effect, (3) adopting and renewing the covenants and
representations set forth in Sections 5, 7, 8, 9, 10, 11, and 12 of this
Agreement in relation to the Closing Date, the Purchased Shares and the
Warrants, and (4) certifying that no Event of Default has occurred, and (vii) a
legal opinion of Company Counsel nearly identical to the legal opinion referred
to in Section 6 of this Agreement shall be delivered to the Subscriber on the
Closing Date in relation to the Company, the Purchased Shares and the Warrants
(the “Closing Legal Opinion
”).

       

       

      
        
          
          

        

        
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      3.           Warrants.  On
the Closing Date, the Company will issue and deliver Warrants to the Subscribers
as follows:

      

      (a) Each Class I Warrant shall (i) be
for the purchase of a number of shares of Common Stock equal to the number of
Purchased Shares of the Subscriber; (ii) have a per share exercise price of
$1.00; the Class I Exercise Price will be subject to adjustment as provided in
the Warrant; (iii) be exercisable from the Closing Date through the close of
business on the date which is the last day of the calendar month in which the
fifth annual anniversary of the Closing Date occurs (the “Class I Warrant Expiration
Date”); and (iv) have cashless exercise rights as provided in the Class I
Warrant.

      

      (b)  Each Class J Warrant
shall (i) be for the purchase of a number of shares of Common Stock equal to the
number of Purchased Shares of the Subscriber;  (ii) have a per share
exercise price of $1.50; the Class J Exercise Price will be subject to
adjustment as provided herein and in the Warrant; (iii) be exercisable from the
Closing Date through the close of business on the date which is the last day of
the calendar month in which the fifth annual anniversary of the Closing Date
occurs (the “Class J Warrant
Expiration Date”); and (iv) have cashless exercise rights as provided in
the Class J Warrant.

      

      Except as specified above, each Warrant
shall generally be in the form annexed hereto as Exhibit A and Exhibit B. The
Warrant Shares shall be subject to the registration rights
provisions.

      

      4.           Subscriber's Representations
and Warranties.  Subscriber, for himself, hereby represents and
warrants to and agrees with the Company that:

      

      (a)           Organization and Standing of
the Subscriber. Subscriber is a limited partnership, 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.  The Subscriber has the requisite power and authority to
enter into and perform this Agreement and to purchase the Securities. The
execution, delivery and performance of this Agreement by the Subscriber and, if
the Subscriber is an entity, the consummation by the Subscriber 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 the 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 terms
thereof.

       

       

      
        
          
          

        

        
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      (c)           No
Conflicts.  The execution, delivery and performance of this
Agreement and the consummation by the Subscriber of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of the Subscriber’s charter documents or bylaws or other
organizational documents, each as currently in effect, 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 the 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 the Subscriber). The 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 Securities in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, the 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 or has had
access at the EDGAR Website of the Commission to the financial status (and any
amendments thereto) as of June 30, 2009, and all periodic and current reports
filed with the Commission thereafter, but not later than five business days
before the Closing Date (hereinafter referred to as the “Reports”).  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. Subscriber
acknowledges that on or about July 10, 2009, the Company filed a Form 8-K in
connection with a Merger Transaction (“Merger”).   Subscriber has
had access to and the opportunity to review said Form 8-K.

      

      (e)           Information on
Subscriber.  The Subscriber (i) is, and will be on the Closing
Date and upon each exercise of the Warrants, an “accredited investor”, as such
term is defined in Regulation D promulgated by the Commission under the 1933
Act, (ii) is experienced in investments and business matters, (iii) has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, (iv)
alone or 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 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 and complete in all material
respects.

       

       

      
        
          
          

        

        
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      (f)           Purchase of Purchased Shares
and Warrants.  On the Closing Date, the Subscriber will
purchase the Purchased Shares and Warrants as principal for its own account for
investment only and not with a view toward, or for resale in connection with,
the public sale or any distribution thereof, but Subscriber does not agree to
hold the Purchased Shares and Warrants for any minimum amount of
time.  The Subscriber acknowledges that such Purchased Shares and
Warrants shall be “restricted” securities in accordance with securities
laws.

      

      (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 the
Subsidiary (as defined in Section 5(a) of this Agreement) 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.

      

      (h)           Legends on Purchased Shares
and Warrant Shares. The Purchased Shares and the Warrant 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 AND ANY APPLICABLE STATE SECURITIES LAW OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ICONIC BRANDS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”

      

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

      

      “THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ICONIC
BRANDS, INC. THAT SUCH  REGISTRATION IS NOT REQUIRED.”

       

       

      
        
          
          

        

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

      

      (m)           Correctness of
Representations. The Subscriber represents that the foregoing
representations and warranties are true and correct as of the date hereof and,
unless the 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 until three years after
the Closing Date.

      

      5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with the Subscriber that, except as set forth in the Reports or in the Schedules
hereto, and as otherwise qualified in the Transaction Documents:

       

       

      
        
          
          

        

        
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      (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 5(a).

      

      (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.  The Company’s capitalization and outstanding shares
are substantially as reported in the most recently filed Reports reflecting such
information.

      

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

      

      (d)           Additional
Issuances.  Except as disclosed in Schedule 5(d) or Schedule
5(d)-1, there are no outstanding agreements or preemptive or similar rights
affecting the Company's Common Stock or other equity securities and, other than
(i) pursuant to this Agreement with other Subscribers, (ii) pursuant to the
Merger Transaction described in Section 4(d)  (the “Merger”) or (iii)
as described on Schedule
5(d), and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of Common
Stock or other equity securities of the Company or other equity interest in any
of the Subsidiaries of the Company. The Common Stock of the Company on a fully
diluted basis outstanding as of immediately following the Closing is set forth
on Schedule
5(d)-1.

       

       

      
        
          
          

        

        
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      (e)           Consents.  Except
as otherwise obtained, 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.

      

      (f)           No Violation or
Conflict.  Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale of
the Securities nor the performance of the Company’s obligations under this
Agreement and all other Transaction Documents entered into by the Company
relating thereto or contemplated thereby 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) of a material
nature under (A) the articles or certificate of incorporation, charter or bylaws
of the Company, each as currently in effect, (B) any decree, judgment, order,
law, treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any “lock-up” or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect; or

      

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

       

       

      
        
          
          

        

        
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      (g)           The
Securities.  Upon their issuance, the Securities (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 Purchased Shares, and upon
exercise of the Warrants, the Purchased Shares and Warrant Shares, will be duly
and validly issued, fully paid and nonassessable or if registered pursuant to
the 1933 Act, and resold pursuant to an effective registration statement will be
free trading and unrestricted; (iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company; (iv) will not subject the holders thereof to personal
liability by reason of being such holders, provided the Subscriber’s
representations herein are true and accurate; and (v) provided the Subscriber’s
representations herein are true and accurate, 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.

      

      (h)           
Litigation.  Except as disclosed in Schedule 5(h), there is no
pending 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 that would affect the execution by the Company
or the performance by the Company of its obligations under the Transaction
Documents. There is no pending, or, to the knowledge of the Company, basis for
any, 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 of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has filed all
reports and other materials required to be filed thereunder with the Commission
during the preceding twelve (12) months, or such shorter period as may be
required by law.

      

      (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 Effect 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.

       

       

      
        
          
          

        

        
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      (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, if so required, unless contemporaneous notice of such instruction is given
to the Subscriber).

      

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

      

      (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”) or
any Principal Market which would impair the exemptions relied upon in the
purchase and sale of the Securities 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 the purchase and sale of the Securities 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 the purchase and sale of the
Securities 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.

       

       

      
        
          
          

        

        
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      (p)           Listing.  The
Common Stock is quoted on the Bulletin Board under the symbol: ICNB. The Company
has not received any oral or written notice that the Common Stock is not
eligible nor will become ineligible for quotation on the Bulletin Board nor that
the Common Stock does not meet all requirements for the continuation of such
quotation.

      

      (q)           No Undisclosed
Liabilities.  Except as disclosed on Schedule 5(q), 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.

      

      (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 are set forth on Schedule 5(d) and Schedule
5(d)-1. Except as set forth on Schedules 5(d) and 5(d)-1,
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. 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 Warrant
Shares upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive equity of the
Company.

      

      (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.

       

       

      
        
          
          

        

        
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      (v)           Transfer
Agent.  The name, address, telephone number, fax number,
contact person and email address of the Company current transfer agent is set
forth on Schedule 5(v)
hereto.  The Company’s transfer agent at any time is referred to as
the “Transfer
Agent.”

      

      (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)           Absence of Certain Company
Control Person Actions or Events.  The term “Company Control
Person” means each director, executive officer, promoter, and such other Persons
as may be deemed in control of the Company pursuant to Rule 405 under the 1933
Act or Section 20 of the 1934 Act. To the Company’s knowledge, none of the
following has occurred during the past five (5) years with respect to a Company
Control Person:

      

      

      (i)           A
petition under the federal bankruptcy laws or any state insolvency law was filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such Company Control Person, or any
partnership in which he was a general partner at or within two years before the
time of such filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;

      

      (ii)           Such
Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);

      

      (iii)           Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:

      

      (A)           acting,
as an investment advisor, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator, floor
broker, any other Person regulated by the Commodity Futures Trading Commission
(“CFTC”) or engaging in or continuing any conduct or practice in connection with
such activity;

      

      (B)           engaging
in any type of business practice; or

      

      (C)           engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;

      
 

      
        
          
          

        

        
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      (iv)           Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such Company Control Person to engage in any activity described in paragraph
(iii) of this item, or to be associated with Persons engaged in any such
activity; or

      

      (v)           Such
Company Control Person was found by a court of competent jurisdiction in a civil
action or by the CFTC or Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
Commission has not been subsequently reversed, suspended, or
vacated.

      

      

      (y)           Subsidiary
Representations.  The Company makes each of the representations
contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m), (q), (r), (u),
and (w) of this Agreement, as same relate to the Subsidiary of the
Company.

      

      (z)           Company
Predecessor.  Except as disclosed in Schedule (z), 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.

      

      (aa)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date.

      

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

      

      6.           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. The Company will
provide, at the Company’s expense, such other legal opinions in the future as
are reasonably necessary for (i) the issuance of the Warrant Shares and (ii) the
resale of the Purchased Shares and the Warrant Shares pursuant to an effective
registration statement, pursuant to Rule 144 under the 1933 Act (“Rule 144"), or pursuant to
another available exemption from registration.

       

       

      
        
          
          

        

        
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      7.           Events of
Default.  The occurrence of any of the following events is an
event of default under this Agreement (each, an “Event of
Default”):

      

      (a)           Breach of
Covenant.  The Company breaches any material covenant or other
term or condition of any Transaction Document in any material respect; provided,
however, that if such breach is capable of being cured, such breach continues
for a period of ten business days after written notice to the Company from the
Subscriber.

      

      (b)           Breach of Representations
and Warranties.  Any material representation or warranty of the
Company made herein in any Transaction Document or in connection therewith shall
be false or misleading in any material respect as of the date made or as of the
Closing Date.

      

      (c)           Receiver or
Trustee.  The Company or any Subsidiary shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.

      

      (d)           Judgments.  Any
money judgment, writ or similar final process shall be entered or filed against
Company or any Subsidiary or any of their property or other assets for more than
$100,000, and shall remain unvacated, unbonded or unstayed for a period of
forty-five (45) days.

      

      (e)           Bankruptcy.  Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Company or any Subsidiary and if instituted against is not dismissed
within 45 days of initiation.

      

      (f)           
Delisting.  Delisting of the Common Stock from any Principal
Market; failure to comply with the requirements for continued listing on a
Principal Market; or notification from a Principal Market that the Company is
not in compliance with the conditions for such continued listing on such
Principal Market.

      

      (g)           Non-Payment.  A
default by the Company or any Subsidiary under any one or more obligations in an
aggregate monetary amount in excess of $500,000 for more than ten days after the
due date.

      

      (h)           Stop
Trade.  A Commission or judicial stop trade order or Principal
Market trading suspension that lasts for five or more consecutive trading
days.

      

      (i)           Reservation
Default.  Failure by the Company to comply with its obligation
to reserve shares from its authorized Common Stock to be issued upon exercise of
the Warrants.

      

      (j)           Cross
Default.  A default by the Company of a material term,
covenant, warranty or undertaking of any other agreement to which the Company or
any Subsidiary are parties, or the occurrence of a material event of default
under any such other agreement which is not cured after any required notice
and/or cure period.

       

       

      
        
          
          

        

        
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      8.           Finder/Legal Fees.
(a)  Finder.  Each
of the Company on the one hand, and the Subscriber 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 finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. Notwithstanding the
foregoing, (i) the Company will be responsible for all fees and other
compensation due to V3 Funding, which compensation may include a cash fee of 10%
of the Purchase Price paid by those Subscribers identified by such finder,
provided however that V3 agrees to pay one half of the legal fees listed in
Subsection 8(a)(ii), below, and (ii) the Company will be responsible for all
legal fees due to Krieger & Prager, LLP in the amount of
$10,000.

      

      Except as disclosed on Schedule 8, there are no
finder’s fees or brokerage commissions due at Closing in connection with this
Agreement.

      

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

      

      (a)           Stop
Orders.  The Company will advise the Subscriber, 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 of the Purchased Shares and the
Warrant Shares upon each national securities exchange, or electronic or
automated quotation system upon which they are or become eligible for listing
and shall use commercially reasonable efforts to maintain such listing so long
as any Purchased Shares, Warrants or Warrant Shares are outstanding. The Company
will maintain the listing of its Common Stock on the American Stock Exchange,
Nasdaq Capital Market, Nasdaq National Market System, OTC Bulletin Board, or New
York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the “Principal Market”)), and will
comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscriber with copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement, the Bulletin Board
is the Principal Market.

       

       

      
        
          
          

        

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

      

      (d)           Filing
Requirements.  From the date of this Agreement and until the
earliest of

      

      (i)           the
later of: (i) the date which is one year after the date (the “Last Exercise Date”) on which
the Warrants have been exercised in full; or (ii) the Class I Warrant Expiration
Date,

      

      (ii)           the
date on which all of the Purchased Shares and the Warrant Shares have been
resold or transferred by the Subscriber provided, however, that if any
outstanding Warrant may still be exercised, such date shall not be determined
until the earlier of the date such Warrants have been exercised in full or the
Class I Warrant Expiration Date, or

      

      (iii)           the
date on which all of the Purchased Shares and the Warrant Shares which were
issued upon exercise of the Warrants may be resold or transferred pursuant to
Rule 144, without regard to volume limitations; provided, however, that if any
outstanding Warrant may still be exercised, such date shall not be determined
until the earlier of the date such Warrants have been exercised in full or the
Warrant Expiration Date,

      

      the
Company will (A) cause its Common Stock to continue to be registered under
Section 15 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 commercially reasonable 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 years after the
Closing Date. Until the earlier of the resale of the Purchased Shares and the
Warrant Shares by the Subscriber or two years after the Warrants have been
exercised, the Company will use its commercially reasonable 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 the Subscriber promptly after such
filing.

       

      
        
          
          

        

        
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      (e)           Failure to Make Timely
Filings.  Until such time as the Subscriber may sell the Common
Stock without limitation under Rule 144 the Company agrees that, if the Company
fails to file in a timely manner, beyond any applicable extension period, on the
SEC’s EDGAR system any information required to be filed by it, whether on a Form
10-K, Form 10-Q, Form 8-K, Proxy Statement or otherwise, the Company shall be
liable to pay to the Subscriber an amount based on the following schedule
(where “No. Business Days Late” refers to each Trading Day after the latest due
date for the relevant filing):

      

      Late Filing Payment For Each 10,000
Shares of

                 No. Business Days
Late                                          of Common  Stock
(or portion thereof)

      1                                                      $100

      2                                                      $200

      3                                                      $300

      4                                                      $400

      5                                                      $500

      6                                                      $600

      7                                                      $700

      8                                                      $800

      9                                                      $900

      10                                                 $1,000

      >10                                               $1,000
+ $200 for each TradingDay Late beyond 10 days

      

      The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand by the Subscriber; provided, however, that the
Subscriber  making the demand may specify that the payment shall be made in
shares of Common Stock at the Conversion Price applicable to the date of such
demand.

      

      (f)           Use of
Proceeds.  The proceeds of the sale of the Securities will be
employed by the Company for general corporate purposes including working capital
as set forth on Schedule
9(f) hereto.

      

      (g)           Reservation.  Prior
to the Closing Date, the Company undertakes to reserve on behalf of the
Subscriber from its authorized but unissued common stock, a number of common
shares equal to the number of Warrant Shares issuable upon exercise of the
Warrants. Failure to have sufficient shares reserved pursuant to this Section
9(g) shall be a material default of the Company’s obligations under this
Agreement and an Event of Default.

      

      (h)           Taxes.  From
the date of this Agreement and until the sooner of (i) the date which is two (2)
years after the Closing Date, or (ii) the date as of which all of the Purchased
Shares and Warrants Shares have been resold or transferred by all the
Subscribers pursuant to a registration statement or pursuant to Rule 144,
without regard to volume limitations, 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.

       

      
        
          
          

        

        
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      (i)           Books and
Records.  From the date of this Agreement and until the sooner
of (i) (i) the date which is two (2) years after the Closing Date, or (ii) the
date as of which all of the Purchased Shares and Warrants 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 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
sooner of (i) the date which is two (2) years after the Closing Date, or (ii)
the date as of which all of the Purchased Shares and Warrants 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 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 sooner
of (i) the date which is two (2) years after the Closing Date, or (ii) the date
as of which all of the Purchased Shares and Warrants Shares have been resold or
transferred by the Subscriber pursuant to a registration statement or pursuant
to Rule 144, without regard to volume limitations, 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.

      

      (l)           Properties.  From
the date of this Agreement and until the sooner of (i) the date which is two (2)
years after the Closing Date, or (ii) the date as of which all of the Purchased
Shares and Warrants Shares have been resold or transferred by the Subscriber
pursuant to a registration statement or pursuant to Rule 144, without regard to
volume limitations, the Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
Material Adverse Effect.

       

       

      
        
          
          

        

        
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      (m)           Confidentiality/Public
Announcement.  From the date of this Agreement and until the
sooner of (i) the date which is two (2) years after the Closing Date, or (ii)
the date as of which all of the Purchased Shares and Warrants Shares have been
resold or transferred by the Subscriber pursuant to a 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 a registration statement or as
otherwise required in any other Commission filing or in a filing required by any
other government or agency having jurisdiction over the Company, it will not
disclose publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber, only to the extent required by law. In
any event and subject to the foregoing, the Company shall file a Form 8-K or
make a public announcement describing this Agreement not later than the fourth
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)           Non-Public
Information.  The Company covenants and agrees that neither it
nor any other person acting on its behalf will provide the Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto in each instance such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that the Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company. The
Company will offer to a single firm of counsel designated by the Subscriber
(which, until further notice, shall be deemed to be Krieger & Prager llp,
Attn: Samuel M. Krieger, Esq., which firm has requested to receive such
notification; the “Investor’s Counsel”) an opportunity to review and comment on
any registration statement and all amendments and supplements thereto between
three and five business days prior to the proposed filing date thereof for any
registration statement that includes the Purchased Shares or Warrant Shares, and
not file any document in a form to which such counsel reasonably
objects.

      

      (o)           Offering
Restrictions.  Until the expiration of the date on which all of
the Purchased Shares and  Warrant Shares have been resold or
transferred by the Subscriber pursuant to a registration statement or Rule 144,
without regard to volume limitations, (the “Exclusion
Period”),  or except as indicated on the Schedules hereto, and
during the pendency of an Event of Default, the only officer, director, employee
and consultant stock option or stock incentive plan currently in effect or
contemplated by the Company has been submitted to the Subscribers. No other plan
will be adopted nor may any options or equity not included in such plan be
issued until the end of the Exclusion Period, except for strategic issuances
(other than for cash) in connection with license or similar agreements.
..

      

      (p)           Additional Negative
Covenants.  From the date of this Agreement and until the
sooner of (i) the date which is two (2) years after the Closing Date, or (ii)
the date as of which all of the Purchased Shares and Warrants Shares have been
resold or transferred by the Subscriber pursuant to a registration statement or
pursuant to Rule 144, without regard to volume limitations, the Company will not
and will not permit any of its Subsidiaries, without the written consent of the
Subscribers, to directly or indirectly:

      

      (i)           amend
its certificate of incorporation, bylaws or its charter documents so as to
adversely affect any rights of the Subscriber;

       

       

      
        
          
          

        

        
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      (ii)           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; or as set forth in Schedule 9(p)(ii);
or

      

      (iii)           take
any action pursuant to which it would be deemed to be a “Shell Company” as
defined in Rule 405  under the Act.

      

      10.           Covenants of the Company and
Subscriber Regarding Indemnification.

      

      (a)           Company
Indemnification.  The Company agrees to indemnify, hold
harmless, reimburse and defend the Subscriber, the Subscriber’s 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 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 breach or default in performance by the Company of any
material covenant or undertaking to be performed by the Company hereunder, or
any other agreement entered into by the Company and Subscriber relating
hereto.  Any or all of the foregoing are deemed Events of
Default.

      

      (b)           Subscriber
Indemnification.  The 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 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.

      

      (c)           Limitation on Subscriber
Indemnification.  In no event shall the liability of the
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.

      

      (d)           Limitation on Company
Indemnification.  In no event shall the liability of the
Company be greater in amount than the dollar amount of the Purchase Price and
Warrant Exercise Price received by the Company.

      

      (e)           Procedures.  The
procedures set forth in Section 11(f) shall apply to the indemnification set
forth in Sections 10(a) and 10(b) above.

       

       

      
        
          
          

        

        
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      11.           Registration Rights; Rule
144 Provisions.

      

      (a)           Piggy-Back
Rights.

      

      (i)           In
the event the Securities are not sold and the Securities are not able to be sold
pursuant to Rule 144, without limitation, the Subscriber shall have piggy-back
registration rights with respect to all of the Purchased Shares and Warrant
Shares then held by the Subscriber, subject to the conditions set forth below.
If the Company participates (whether voluntarily or by reason of an obligation
to a third party) in the registration of any shares of the Company’s stock
(other than a registration on Form S-4, S-8 or successor form), the Company
shall give written notice thereof to the Subscriber and the Subscriber shall
have the right, exercisable within ten (10) business days after receipt of such
notice, to demand inclusion of all or a portion of the Shares then held by the
Subscriber in such registration statement, subject, in the event of an
underwritten offering, to customary cutbacks and lock-ups requested by the
managing underwriter of all selling stockholders thereunder, on a pro-rata basis
with such other selling stockholders.

      

      (ii)           In
the event of an underwritten offering, the right of the Subscriber to
registration pursuant to the piggyback registration rights granted to the
Subscriber pursuant to this Section shall be conditioned upon the Subscriber's
participation in such underwriting and the inclusion of such Subscriber’s Shares
in the underwriting. If the Subscriber proposes to distribute the Subscriber’s
Shares through such underwriting, the Subscriber shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the
Company.  If the Subscriber exercises such election, the Shares so
designated (subject to the preceding provisions) shall be included in the
registration statement at no cost or expense to the Subscriber (other than any
commissions, if any, relating to the sale of the Subscriber’s
shares).

      

      (iii)           The
Subscriber’s rights under this Section 11(a) shall expire at such time as such
Subscriber can sell all of such Subscriber’s remaining Securities under Rule 144
without volume or other restrictions or limit.

      

      (iv)           Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the registration statement, the Company notifies the Subscriber
in writing of the existence of a Potential Material Event (as defined below),
the Subscriber shall not offer or sell any Securities covered by such
registration statement (“Registrable Securities”), or engage in any other
transaction involving or relating to the Registrable Securities, from the time
of the giving of notice with respect to a Potential Material Event until the
Subscriber receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event.  The term “Potential Material Event” means
any of the following: (i) the possession by the Company of material information
not ripe for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.

       

      
        
          
          

        

        
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      (b)           Expenses. All
expenses incurred by the Company in complying with this 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 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.

      

      (c)           Indemnification and
Contribution.

      

      (i)           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 was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11(f)(iii) 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.

       

       

      
        
          
          

        

        
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      (ii)           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.

      

      (iii)           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(f)(iii) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11(f)(iii),
except and only if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11(f)(iii) 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.

       

       

      
        
          
          

        

        
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      (iv)           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(f) 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(f) 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(f); 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.

      

      (d)           Delivery of Unlegended
Shares.

      

      (i)           Within
five  (5) business days (such fifth business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
notice that Purchased Shares or Warrant Shares have been sold pursuant to the
Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144, as
applicable and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or Subscriber's broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its Transfer
Agent (with copies to Subscriber) an appropriate instruction and opinion of such
counsel, directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 4(h) above, 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
certificates, 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. Transfer fees shall be the responsibility
of the Seller.

       

       

      
        
          
          

        

        
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      (ii)           In
lieu of delivering physical certificates representing the Unlegended Shares, if
the Company's Transfer Agent is then participating in the Depository Trust
Company (“DTC”) Fast
Automated Securities Transfer program, upon request of a Subscriber, so long as
the certificates therefore do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its Transfer Agent to electronically transmit the Unlegended
Shares by crediting the account of Subscriber's prime Broker with DTC through
its Deposit Withdrawal Agent Commission system. Such delivery must be made on or
before the Unlegended Shares Delivery Date.

      

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

       

       

      
        
          
          

        

        
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      (iv)           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 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.

      

      (v)           In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11(g) or the Subscriber has exercised the Warrant and the Company is
required to deliver such Warrant Shares, the Company may not refuse to deliver
Unlegended Shares or Warrant Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall have
been sought and obtained and the Company has posted a surety bond for the
benefit of such Subscriber in the amount of 120% of the amount of the aggregate
purchase price of the Common Stock and Warrant Shares which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.

      

      (e)           Reports under 1933 Act and
1934 Act.  With a view to making available to the Subscriber
the benefits of Rule 144 or any other similar rule or regulation of the
Commission that may at any time permit the Subscriber to sell securities of the
Company to the public without Registration (“Rule 144”), the Company agrees
to:

      

      (i)           make
and keep public information available, as those terms are understood and defined
in Rule 144;

      

      (ii)           file
with the Commission in a timely manner all reports and other documents required
of the Company under the 1933 Act and the 1934 Act; and

      

      (iii)           furnish
to the Subscriber so long as the Subscriber owns Registrable Securities,
promptly upon request, (x) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the 1934
Act, (y) if not available on the Commission’s EDGAR system, a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (z) such other information as may be
reasonably requested to permit the Subscriber to sell such securities pursuant
to Rule 144 without registration; and

       

       

      
        
          
          

        

        
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      (iv)           at
the request of the Subscriber holding Purchased Shares or Warrant
Shares  (a “Holder”), give its Transfer
Agent instructions (supported by an opinion of Company Counsel or other counsel
to the Company, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent’s receipt from such Holder of

      

      (1) a
certificate (a “Rule 144 Certificate”) certifying (A) that the Holder’s holding
period (as determined in accordance with the provisions of Rule 144) for the
shares of Purchased Shares or Warrant Shares which the Holder proposes to sell
(the “Securities Being Sold”) is not less than six (6) months and (B) as to such
other matters as may be appropriate in accordance with Rule 144 under the 1933
Act, and

      

      (2) an
opinion of counsel acceptable to the Company (for which purposes it is agreed
that the opinion of Krieger & Prager LLP shall be deemed acceptable if not
given by Company counsel) that, based on the Rule 144 Certificate, Securities
Being Sold may be sold pursuant to the provisions of Rule 144, even in the
absence of an effective Registration Statement,

      

      the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue
to the Subscriber(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s  books and records (except to the
extent any such legend or restriction results from facts other than the identity
of the Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Holder). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.

      

      (i)           Assignment of the
Registration Rights.  The rights to have the Company register
Registrable Securities pursuant to this Agreement and the rights of the
Subscriber under this Section 11 shall be automatically assigned by the
Subscriber to any transferee of all or any portion of any unexercised Warrants
(excluding any transfer of such Registrable Securities by a sale pursuant to an
effective Registration Statement or pursuant to Rule 144), but , only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned, and (c) written evidence of the transferee’s
assumption of the Subscriber’s obligations under this Agreement.

       

       

      
        
          
          

        

        
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      12.           Right of First Refusal; Most
Favored Nation Provision; Other Provisions.

      

      (a)           Right of First
Refusal. Subject to the rights of Cresta Capital Strategies, LLC under an
Exclusive Investment Banking Agreement effective as of August 4, 2009, during
the period from the Closing Date through and including the first anniversary of
the Closing Date, the Subscriber shall be given not less than seven (7) business
days’ prior written notice of any proposed sale by the Company to any party of
its common stock or other securities or debt obligations of the Company, except
in connection with (i) full or partial consideration in connection with a
strategic merger, acquisition, consolidation or purchase of substantially all of
the securities or assets of corporation or other entity which holders of such
securities or debt are not at any time granted registration rights, (ii) the
Company's issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital and which holders of such securities or debt are not
at any time granted registration rights, (iii) the Company's issuance of Common
Stock or the issuances or grants of options to purchase Common Stock pursuant to
stock option plans and employee stock purchase plans, if any, described on
Schedule 5(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
Merger, or (v) as a result of the exercise of Warrants or conversion of which
are granted or issued pursuant to this Agreement or that have been issued prior
to the Closing Date all on the original terms thereof, the issuance of which has
been disclosed in a Report filed not less than five (5) days prior to the
Closing Date (collectively the foregoing are “Excepted Issuances”). The
Subscribers who exercise their rights pursuant to this Section 12(a) shall have
the right during the seven (7) business days following receipt of the notice to
purchase such offered common stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale in the same proportion
to each other as their purchase of the Securities.  The Subscriber may
exercise such right independent of the exercise thereof by the other
Subscribers.  In the event such terms and conditions are modified
during the notice period, the Subscribers shall be given prompt notice of such
modification and shall have the right during the seven (7) business days
following the notice of modification to exercise such right.

      

      (b)           Most Favored Nation
Provision.  Other than the Excepted Issuances, if, at any time
from the earlier of (i) while the Subscriber holds any Purchased Shares,
Warrants or Warrant Shares, or (ii) the Class I Warrant Expiration Date, the
Company shall offer, issue or agree to issue any common stock or securities
(including preferred stock, debentures, warrants, options or other rights,
howsoever denominated) convertible into or exercisable for shares of common
stock (or modify any of the foregoing which may be outstanding) (collectively,
“New Securities”) to any
person or entity  (“Third Party Purchaser”) at a
purchase or conversion price per share and/or an exercise price per share,
respectively, which shall be less than the Share Purchase Price (adjusted for
capital adjustments such as stock splits or dividends paid in shares of common
stock) or the then effective Exercise Price of the Warrants, without the consent
of the 

       

       

      
        
          
          

        

        
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      Subscriber
holding such Purchased Shares, Warrants or Warrant Shares, then the such
Subscriber shall have the right to apply the lowest such purchase price,
conversion price or exercise price of the offering or sale of such New
Securities to the purchase price of the Purchased Shares then held by the
Subscriber (and, if necessary, the Company will issue additional shares to
Subscriber to take into account the amount paid by the Subscriber as of the
Closing Date and the adjustment made to the per share purchase price
contemplated by this paragraph), to the warrant exercise price of Warrant Shares
then held by the Subscriber (and, if necessary, the Company will issue
additional shares to Subscriber to take into account the amount paid whether in
cash or by cashless exercise paid by the Subscriber for the Warrant Shares then
held and the adjustment made to the per share exercise price) and to the
exercise price for all unexercised Warrants, each as of the date of the offering
or sale of such New Securities, and the appropriate adjustments to each relevant
Transaction Document will be deemed made accordingly.  If the Company
enters into a transaction that has a variable rate, despite the prohibition
thereon in the Subscription Agreement, the Company shall be deemed to have
issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised.  The rights of the Subscriber set forth in this Section
12(b) are in addition to any other rights the Subscriber has pursuant to this
Agreement, any Transaction Document, and any other agreement referred to or
entered into in connection herewith.

      

      (c)           Option Plan
Restrictions.  The only officer, director, employee and
consultant stock option or stock incentive plan currently in effect or
contemplated by the Company has been submitted to the Subscriber or filed with
the Reports. No other plan will be adopted nor may any options or equity not
included in such plan be issued until the end of the Exclusion
Period.

      

      (d)           Maximum Exercise of
Rights. In the event the exercise of the rights described in Sections
12(a) and 12(b) 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 2.3 of the Warrants, 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 contemplated by Section 2.2 of the Warrants. The
determination of when such common stock may be issued shall be made by the
Subscriber as to only such Subscriber.

      

      13.           Miscellaneous.

      

      (a)           Notices. All notices,
demands, requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation 

       

       

      
        
          
          

        

        
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      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 the
address set forth above Tel: (631) 991-3174, telecopier (516)
377-2509,  ATTN: Richard DeCicco, its Chairman and CEO with a copy by
telecopier only to (which shall not constitute notice): Anslow & Jaclin,
Attn: Eric M. Stein, 195 Route 9 South, Suite 204, Manalapan, New Jersey 07726
Tel: (732) 409-1212, telecopier: (732) 577-1188, and (ii) if to the Subscribers,
to: the one or more addresses and telecopier numbers indicated on the signature
pages hereto, with an additional copy by telecopier only to: Krieger &
Prager, LLP, Attn: Samuel M. Krieger, Esq., 39 Broadway, Suite 920, New York,
New York 10006, telecopier number: (212) 363-2999.

      

      (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 and the Transaction Documents 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 state courts of New York sitting in
the City of New York or in the federal courts located in the state of New York
sitting in the City Counties of New York. 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.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      (e)           Specific Enforcement,
Consent to Jurisdiction.  The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to 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 13(e) hereof, each of the Company, Subscriber and any signatory 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 this Agreement, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.

      

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

       

       

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      
 

      [SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT]

      

      IN WITNESS WHEREOF, with
respect to the Purchase Price specified below, each the undersigned represents
that the foregoing statements made by it above are true and correct and that it
has caused this Agreement to be duly executed on its behalf (if an entity, by
one of its officers thereunto duly authorized) as of the date first above
written.

       

      
        
          
            
              	
                      PURCHASE
      PRICE:

                    	 	$	500,000	 
	 
      	 	 	 	 
	
                      NO.
      OF SHARES

                    	 	 	1,000,000	 
	
                      NO.
      OF WARRANTS

                    	 	 	I-1,000,000	 
	 
      	 	 	J-1.000,000	 

            

          

        

      

      

 

      SUBSCRIBER:

      

                            ________________________________        DOUBLE
U MASTER FUND, L.P.          
Printed

      ______________        C/0___
Beacon Fund Advisors Ltd.

      Harbour
House

      Waterfront
Drive

      P.O. Box
972

      Road
Town, Tortola

      British
Virgin Islands

      

       

      
        
          
            
              
                	
                        Telephone
      No. 284) 494-4770

                      	 
      	
                        By:
      

                      
	
                        Telecopier
      No. (284) 494-4771

                      	 
      	 
      
	
                        (Signature of Authorized
      Person)

                      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                        BVI

                      	 
      	
                        Printed
      Name and Title

                      
	
                        Jurisdiction
      of Incorporation

                      	 
      	 
      
	
                        or
      Organization

                      	 
      	 
      
	
                        Tax
      ID No. N/A

                      	 
      	 
      

              

            

          

        

      

      
 

      

      

      COMPANY:

      ICONIC
BRANDS, INC.

      a Nevada
Corporation

      

      By:
_________________________________

      (Signature
of Authorized Person)

      _____________________________________

      Printed
Name and Title

      

      

      

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      

      

      LIST OF
EXHIBITS AND SCHEDULES

       

       

      
        
          
            	
                    Exhibit
      A

                  	
                    Form
      of Warrant

                  
	 
      	 
      
	
                    Exhibit
      B

                  	
                    Form
      of Warrant

                  
	 
      	 
      
	
                    Exhibit
      C

                  	
                    Form
      of Legal Opinion

                  
	 
      	 
      
	
                    Exhibit
      D

                  	
                    Form
      of Public Announcement or Form 8-K

                  
	 
      	 
      
	
                    Exhibit
      E

                  	
                    Closing
      Certificate

                  
	 
      	
                      

                  
	
                    Schedule
      5(a)

                  	
                    Subsidiaries

                  
	 
      	 
      
	
                    Schedule
      5(d)

                  	
                    Additional
      Issuances / Capitalization

                  
	 
      	 
      
	
                    Schedule
      5(d)-1

                  	
                    Post
      Closing Capitalization Table

                  
	 
      	 
      
	
                    Schedule
      5(h)

                  	
                    Litigation

                  
	 
      	 
      
	
                    Schedule
      5(q)

                  	
                    Undisclosed
      Liabilities

                  
	 
      	 
      
	
                    Schedule
      5(v)

                  	
                    Transfer
      Agent

                  
	 
      	 
      
	
                    Schedule
      5(z)

                  	
                    Predecessor
      Companies

                  
	 
      	 
      
	
                    Schedule
      8

                  	
                    Finder’s
      Fees

                  
	 
      	 
      
	
                    Schedule
      9(f)

                  	
                    Use
      of Proceeds

                  
	 
      	 
      
	
                    Schedule
      9(p)(ii)

                  	
                    Permitted
      Repaymentsf8k081909ex10ii_iconic.htm

    Exhibit 10.2

     

    
      Neither
this security nor the securities for which this security is exercisable have
been registered with the Securities and Exchange Commission or the securities
commission of any state in reliance upon an exemption from registration under
the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly,
may not be offered or sold except pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act and in accordance with applicable state securities laws as
evidenced by a legal opinion of counsel to the transferor to such effect, the
substance of which shall be reasonably acceptable to the
Company.  This security and the securities issuable upon exercise of
this security may be pledged in connection with a bona fide margin account or
other loan secured by such securities to the extent permitted by applicable
law.

       

      Common
Stock Purchase Warrant

       

      ICONIC
BRANDS, INC.

       

      
        
          	
                  Class
      I Warrant Shares:  _________________

                	
                  Issue
      Date:  ______________

                

        

      

      Exercise
Price (subject to adjustment herein):  $1.00

       

      This
Common
Stock Purchase Warrant (the “Warrant”) certifies
that, for value received, DOUBLE U FUND
Ltd. (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from ICONIC BRANDS, INC., a Nevada
corporation (the “Company”), up to One
Million (1,000,000) shares (the “Warrant Shares”) of
common stock of the Company (the “Common
Stock”).  The purchase price (the “Purchase Price”) of
one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2.2.

       

      1.           Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Subscription Agreement (the “Subscription
Agreement”), dated of even date herewith, among the Company and the
purchasers signatory thereto; and the following terms shall have the following
meanings:

       

      “Trading
Day” means a day on which the principal Trading Market is open for
business.

       

      “Trading
Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board.

       

      “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)); (b) if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      2.           Exercise.

      

      
        

      

      2.1           Exercise
of Warrant.  Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
the Company of a duly executed facsimile copy of the Notice of Exercise Form
annexed hereto (or such other office or agency of the Company as it may
designate by notice in writing to the registered Holder at the address of the
Holder appearing on the books of the Company); and, within three (3) Trading
Days of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Purchase Price for all
Shares purchased pursuant to such Notice of Exercise:

       

      (i)           in
cash or by certified or official bank check, payable to the order of the
Company, in the amount equal to the Exercise Price multiplied by the number of
Shares specified in such form, together with all taxes applicable upon such
exercise;

       

      (ii)           by
surrendering to the Company that number of Shares owned by the Holder whose
value is equal to the Exercise Price multiplied by the number of Shares
specified in the Notice of Exercise Form;

       

      (iii)           by
surrendering the right to acquire a number of Shares having an aggregate value
such that the amount by which the aggregate value of such Shares exceeds the
aggregate Exercise Price of such Shares is equal to the Purchase
Price;

       

      (iv)           any
combination of the foregoing; or

       

      (v)           any
other manner acceptable to the Company.

       

      For
purposes of surrendering Shares to satisfy the Purchase Price, the value of the
Shares shall be equal to the current market price for Common Stock (the “Market Price”) on the
relevant date of such exercise of this Warrant from time to time (the “Exercise
Date”).  The Market Price shall be determined as
follows:  if the Common Stock is traded on a stock exchange or other
public market, the Market Price shall be the greater of (i) the average of the
mid-points of the closing bid and asked prices of the Common Stock for each of
the five (5) trading days immediately preceding the date of exercise of the
Warrant or (ii) the average of the closing prices for the Common Stock on each
of the five (5) trading days immediately preceding the date of exercise of the
Warrant.  If the Common Stock is not traded on a stock exchange or
market, the Market Price shall be the price at which the Company sold Common
Stock previous to the Exercise Date.  Notwithstanding anything
herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in full, in which
case, the Holder shall surrender this Warrant to the Company for cancellation
within three (3) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases. The Company
shall deliver any objection to any Notice of Exercise Form within one (1)
Business Day of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face
hereof.

       

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      2.2           Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be one dollar ($1.00), subject to adjustment hereunder (the
“Exercise
Price”).

       

      
        

      

      2.3           Exercise
Limitations; Holder’s Restrictions.  The Company shall not
effect any exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as set forth on
the applicable Notice of Exercise, the Holder (together with the Holder’s
Affiliates, and any other person or entity acting as a group together with the
Holder or any of the Holder’s Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 2.3, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this
Section 2.3 applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2.3, in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the Company
shall within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.  In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than sixty-one (61) days’ prior notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 2.3,
provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the Holder and the
provisions of this Section 2.3 shall continue to apply.  Any such
increase or decrease will not be effective until the 61st day after such notice
is delivered to the Company.  The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2.3 to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such
limitation.  The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.

       

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      2.4           Mechanics
of Exercise.

       

      2.4.1           Delivery
of Certificates Upon Exercise.  Certificates for
shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder’s prime broker with
the Depository Trust Company through its Deposit Withdrawal Agent Commission
(“DWAC”) system if the Company is then a participant in such system and the
shares are eligible for resale without volume or manner-of-sale limitations
pursuant to Rule 144, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within three (3) Trading Days
from the delivery to the Company of the Notice of Exercise Form, surrender of
this Warrant (if required) and payment of the aggregate Exercise Price as set
forth above (“Warrant  Share
Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the Exercise Price
and all taxes required to be paid by the Holder, if any, pursuant to Section
2.5.6 prior to the issuance of such shares, have been paid.  If the
Company fails for any reason to deliver to the Holder certificates evidencing
the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Common Stock on the date of the applicable Notice of
Exercise), ten dollars ($10) per Trading Day (increasing to twenty dollars ($20)
per Trading Day on the seventh (7th) Trading
Day after such liquidated damages begin to accrue) for each Trading Day after
the second (2nd) Trading
Day after such Warrant Share Delivery Date until such certificates are
delivered.

       

      2.4.2           Delivery
of New Warrants Upon Exercise. If this Warrant shall have
been exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.

       

      2.4.3           Rescission
Rights.  If the Company
fails to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 2.4.3 by
the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.

       

      2.4.4           Compensation
for Buy-In on Failure to Timely Deliver Certificate Upon Exercise.  In addition to
any other rights available to the Holder, if the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount 

       

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

       

      obtained
by multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder.  For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000, under clause (1)
of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

       

      2.4.5           No
Fractional Shares or Scrip.  No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.  As to any fraction of a share which Holder would otherwise
be entitled to purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the next
whole share.

       

      2.4.6                          Charges;
Taxes and Expenses.  Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by the
Holder; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental
thereto.

       

      2.4.7           Closing
of Books.  The Company will
not close its stockholder books or records in any manner which prevents the
timely exercise of this Warrant, pursuant to the terms hereof.

       

      3.           Certain
Adjustments.

      

      3.1           Stock
Dividends and Splits. If the
Company, at any time while this Warrant is outstanding: (A) pays a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this Warrant), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
in each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant to
this Section 3.1 shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.

       

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      
 

      3.2           Subsequent
Equity Sales.  If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant
any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive  Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price and the number of Warrant Shares issuable hereunder
shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to
the aggregate Exercise Price prior to such adjustment. Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustments shall be made, paid or issued
under this Section 3.2 in respect of an Excepted Issuances (as defined in the
Subscription Agreement).  The Company shall notify the Holder in
writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 3.2, indicating
therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3.2, upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

       

      
        

      

      3.3           Subsequent
Rights Offerings.  If the Company, at any time while the
Warrant is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP at the record
date mentioned below, then the Exercise Price shall be multiplied by a fraction,
of which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or
warrants.

       

      3.4           Pro
Rata Distributions.  If the Company, at any time while this
Warrant is outstanding, shall distribute to all holders of Common Stock (and not
to Holders of the Warrants) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3.2),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      3.5      
Adjustment
for Spin Off.  If, for any reason, prior to the exercise of this
Warrant in full, the Company spins off or otherwise divests itself of a part of
its business or operations [or disposes all or a part of its assets] in a
transaction (the “Spin Off”) in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the “Spin Off Securities”) to be issued to security holders of the Company,
then:

      

      (i)  the Company shall cause (a)
to be reserved Spin Off Securities equal to the number thereof which would have
been issued to the Holder had all of the Holder’s unexercised Warrants
outstanding on the record date (the “Record Date”) for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the “Outstanding Warrants”) been exercised as of the close of business
on the Trading Day immediately before the Record Date (the “Reserved Spin Off
Shares”), and (b) to be issued to the Holder on the exercise of all or any of
the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to
(x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being exercised, and
(II) the denominator is the amount of the Outstanding Warrants; and

      

      (ii) the Exercise Price on the
Outstanding Warrants shall be adjusted immediately after consummation of the
Spin Off by multiplying the Exercise Price by a fraction (if, but only if, such
fraction is less than 1.0), the numerator of which is the average closing bid
price of the Common Stock for the five (5) Trading Days immediately following
the fifth Trading Day after the Record Date, and the denominator of which is the
average Closing Bid Price of the Common Stock on the five (5) Trading Days
immediately preceding the Record Date; and such adjusted Exercise Price shall be
deemed to be the Exercise Price with respect to the Outstanding Warrants after
the Record Date.

                                                                         

      3.6           Fundamental
Transaction.  If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate 

       

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration.  The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3.6
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
entity shall pay at the Holder’s option, exercisable at any time concurrently
with or within thirty (30) days after the consummation of the Fundamental
Transaction, an amount of cash equal to the value of this Warrant as determined
in accordance with the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg L.P. using (i) a price per share of Common Stock equal to
the VWAP of the Common Stock for the Trading Day immediately preceding the date
of consummation of the applicable Fundamental Transaction, (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction and (iii) an expected volatility equal to the 100 day
volatility obtained from the “HVT” function on Bloomberg L.P. determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction:

       

      3.7           Calculations.  All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

       

      3.8           Notice
to Holder.

       

      3.8.1           Adjustment
to Exercise Price.  Whenever the
Exercise Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.  If the Company enters into a transaction
that has a variable rate, despite the prohibition thereon in the Subscription
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised.

       

                                    
3.8.2           Notice
to Allow Exercise by Holder.  If (A) the Company shall declare
a dividend (or any other distribution in whatever form) on the Common Stock; (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights; (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date of the event
triggering such notice.

       

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      4.           Transfer
of Warrant.

      

      4.1           Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in the Subscription Agreement, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or
its designated agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of Warrant Shares without having a new Warrant
issued.

       

      4.2           New
Warrants.  This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4.1, as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the original Issue Date and shall be identical with
this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.

       

      4.3           Warrant
Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute owner hereof for
the purpose of any exercise hereof or any distribution to the Holder, and for
all other purposes, absent actual notice to the contrary.

       

      4.4           Transfer
to Comply with the Securities Act; Registration
Rights.   Reference is made to Section 11 of the
Subscription Agreement for the registration rights of the Warrant Holder. This
Warrant has not been registered under the Securities Act of 1933, as amended,
(the “Act”) and
has been issued to the Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Shares.  Except for
transfers to officers, employees and Affiliates of the Holder, neither this
Warrant nor any of the Warrant Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act relating to
such security or an opinion of counsel satisfactory to the Company that
registration is not required under the Act.  Each certificate for the
Warrant, the Warrant Shares and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.

       

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      
 

      5.           Miscellaneous.

      

      5.1           No
Rights as Shareholder Until Exercise.  This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof as set forth in Section 2.

       

      5.2           Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock
certificate.

       

      
        

      

                     5.3           Saturdays,
Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be taken or
such right may be exercised on the next succeeding Business Day.

       

      5.4           Authorized
Shares.

       

      5.4.1           The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed. The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).

       

      5.4.2           Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (c) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      
        

      

      5.4.3           Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.

       

      5.5           Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the
provisions of the Subscription Agreement.

       

      5.6           Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

       

      5.7           Nonwaiver
and Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

       

      5.8           Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Subscription Agreement.

       

      5.9           Limitation
of Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

       

      5.10           Remedies.  Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.

       

      5.11           Successors
and Assigns. Subject to applicable securities laws, this Warrant and the
rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.

       

      5.12           Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

       

      5.13           Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

       

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      5.14           Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

       

      
        

      

      
        

      

                 IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

       

      ICONIC
BRANDS, INC.

      

      

      

      By:    ______________________________                                                                       

      Name:

      Title:

       

       

       

       

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      
 

      NOTICE
OF EXERCISE

       

      TO:           ICONIC
BRANDS, INC.

       

      The
undersigned hereby elects to purchase Warrant Shares of the Company pursuant to
the terms of the attached Warrant (only if exercised in full), and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.

       

      Payment
shall take the form of lawful money of the United States.

       

      Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

       

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

       

      

       

        
          

        

        

          
            

          

        

      

      

        
          

        

      

      

       

      Accredited
Investor.

      

      The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.

       

      [SIGNATURE
OF HOLDER]

       

      Name of
Investing Entity:
_______________________________________________________________

      Signature
of Authorized Signatory of investing Entity:
_________________________________________

      Name of
Authorized Signatory:
___________________________________________________________

      Title of
Authorized Signatory:
____________________________________________________________

      Date:
________________________________________________________________________________

      

       

       

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      ASSIGNMENT
FORM

       

      (To
assign the foregoing warrant, execute

       

      this form
and supply required information.

       

      Do not
use this form to exercise the warrant.)

       

      

      FOR VALUE
RECEIVED, [                                                                 ] all of or
[                                           ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

       

                                         whose address is

      
        

          
            

          

        

         

        
          

        

      .

      Dated:  _________________________________________

      Holder’s
Signature: _______________________________

      Holder’s
Address: ________________________________

                                    ________________________________

      

      

      

      Signature
Guaranteed:  ________________________________________________

      

      NOTE:  The signature
to this Assignment Form must correspond with the name as it appears on the face
of the Warrant, without alteration or enlargement or any change whatsoever, and
must be guaranteed by a bank or trust company. Officers of corporations and
those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.

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