Document:

Global
Plan (Rosetta)

     

    ROSETTA GENOMICS LTD.

     

    GLOBAL SHARE INCENTIVE PLAN (2006)

     

    
      	
              1.

            	
              NAME AND PURPOSE.

            

    

     

    
      	
              1.1

            	
              This
      plan, which has been adopted by the Board of Directors of the Company,
      Rosetta Genomics Ltd., as amended from time to time, shall be known as the
      Rosetta Genomics Ltd. Global Share Incentive Plan (2006) (the “Plan”).

            

    

     

    
      
        	
                1.2

              	
                The
      purposes of the Plan are to attract and retain the best available
      personnel for positions of substantial responsibility, to provide
      additional incentive to Service Providers of the Company and its
      affiliates and subsidiaries, if any, and to promote the Company's business
      by providing such individuals with opportunities to receive Awards
      pursuant to the Plan and to strengthen the sense of common interest
      between such individuals and the Company's
  Shareholders.

              

      

    

     

    
      	
              1.3

            	
              Awards
      granted under the Plan to Service Providers in various jurisdictions may
      be subject to specific terms and conditions for such grants may be set
      forth in one or more separate Appendix to the Plan, as may be approved by
      the Board of Directors of the Company from time to
  time.

            

    

     

    
      	
              2.

            	
              DEFINITIONS

            

    

     

    “Administrator”
shall mean the Board of Directors or a Committee.

     

    "Affiliate"
shall mean a company directly or indirectly controlled by, controlling or under
common control with the Company, unless otherwise defined in an
Appendix.

     

    “Appendix”
shall mean any appendix to the Plan adopted by the Board of Directors containing
country-specific or other special terms relating to Awards including additional
terms with respect to grants of restricted stock and/or other equity-based
Awards.

     

    “Award”
shall mean a grant of Options or allotment of Shares or other equity based award
hereunder. All Awards shall be confirmed by an Award Agreement, and subject to
the terms and conditions of such Award Agreement.

     

    “Award
Agreement” shall mean a written instrument setting forth the terms
applicable to a particular Award.

     

    “Board
of Directors” shall mean the board of directors of the
Company.

     

    “Cause”
shall have the meaning ascribed to such term or a similar term as set
forth in the Participant's employment agreement or the agreement governing the
provision of services by a non-employee Service Provider, or, in the absence of
such a definition: (i) conviction (or plea of nolo
contendere) of any felony or crime involving moral turpitude or affecting
the Company; (ii) repeated and unreasonable refusal to carry out a reasonable
and lawful directive of the Company or of Participant’s supervisor which
involves the business of the Company or its affiliates and was capable of being
lawfully performed; (iii) fraud or embezzlement of funds of the Company or its
affiliates; (iv) any breach by a director of his / her fiduciary duties or
duties of care towards the Company; and (v) any disclosure of confidential
information of the Company or breach of any obligation not to compete with the
Company or not to violate a restrictive covenant.

     

    “Committee”
shall mean a compensation committee or other committee as may be appointed and
maintained by the Board of Directors, in its discretion, to administer the Plan,
to the extent permissible under applicable law, as amended from time to
time.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Companies
Law” shall mean the Israeli Companies Law 5759-1999, as amended from time
to time.

     

    “Company”
shall mean Rosetta Genomics Ltd., an Israeli company, and its successors
and assigns.

     

    “Consultant”
means any entity or individual who (either directly or, in the case of an
individual, through his or her employer) is an advisor or consultant to the
Company or any Subsidiary.

     

    “Corporate
Charter” shall mean the Articles of Association of the Company, and any
subsequent amendments or replacements thereto.

     

    “Disability”
shall have the meaning ascribed to such term or a similar term in the
Appendix under which an Award is made and/or a Participant's employment
agreement (where applicable), or in the absence of such a definition, the
inability of the Participant, in the opinion of a qualified physician acceptable
to the Company, to perform the major duties of the Participant’s position with
the Company because of the sickness or injury of the Participant for a
consecutive period of 180 days.

     

    “Fair
Market Value” shall mean, unless otherwise provided in an Appendix, the
value of Shares as of any date, determined as follows:

     

    (i) If
the Shares are listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq Small Cap Market, the Fair Market Value of a Share
of common stock of the Company shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
market (or the exchange or market with the greatest volume of trading in the
common stock) on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable.

     

    (ii) In
the absence of such markets for the Shares, the Fair Market Value shall be
determined in good faith by the Board.

     

    “Options”
shall mean options to purchase Shares awarded under the Plan.

     

    “Participant”
shall mean a recipient of an Award hereunder who executes an Award
Agreement.

     

    “Restricted
Stock” means an Award of Shares under this Plan that is subject to the
terms and conditions of Section 7.

     

    “Service
Provider” shall mean an employee, director, office holder or Consultant
of the Company or its subsidiaries or affiliates.

     

    “Shares”
shall mean Ordinary Shares, nominal value NIS 0.01 per share, of the
Company.

     

    “Transaction”
shall have the meaning set forth in Section 10.2.

     

    
      	
              3.

            	
              ADMINISTRATION OF THE
      PLAN.

            

    

     

    
      	
              3.1

            	
              The
      Plan will be administered by the Administrator. If the Administrator is a
      Committee, such Committee will consist of such number of Directors of the
      Company (not less than two in number), as may be determined from time to
      time by the Board of Directors. The Board of Directors shall appoint such
      members of the Committee, may from time to time remove members from, or
      add members to, the Committee, and shall fill vacancies in the Committee
      however caused.

            

    

     

    
      	
              3.2

            	
               The
      Committee, if appointed, shall select one of its members as its Chairman
      and shall hold its meetings at such times and places as it shall
      determine. Actions at a meeting of the Committee at which a majority of
      its members are present or acts approved in writing by all members of the
      Committee, shall be the valid acts of the Committee. The Committee shall
      appoint a Secretary, who shall keep records of its meetings and shall make
      such rules and regulations for the conduct of its business and the
      implementation of the Plan, as it shall deem advisable, subject to the
      directives of the Board of Directors and in accordance with applicable
      law.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              3.3

            	
              Subject
      to the general terms and conditions of the Plan, and in particular Section
      3.4 below, the Administrator shall have full authority in its discretion,
      from time to time and at any time, to determine (i) eligible Participants,
      (ii) the number of Options or Shares to be covered by each Award, (iii)
      the time or times at which the Award shall be granted, (iv) the vesting
      schedule and other terms and conditions applying to Awards, (v) the
      form(s) of written agreements applying to Awards, and (vi) any other
      matter which is necessary or desirable for, or incidental to, the
      administration of the Plan and the granting of Awards. The Board of
      Directors may, in its sole discretion, delegate some or all of the powers
      listed above to the Committee, to the extent permitted by the Companies
      Law, its Corporate Charter or other applicable
  law.

            

    

     

    
      	
              3.4

            	
              No
      member of the Board of Directors or of the Committee shall be liable for
      any action or determination made in good faith with respect to the Plan or
      any Award granted hereunder. Subject to the Company’s decision and to all
      approvals legally required, each member of the Board or the Committee
      shall be indemnified and held harmless by the Company against any cost or
      expense (including counsel fees) reasonably incurred by him or her, or any
      liability (including any sum paid in settlement of a claim with the
      approval of the Company) arising out of any act or omission to act in
      connection with the Plan unless arising out of such member's own willful
      misconduct or bad faith, to the fullest extent permitted by applicable
      law. Such indemnification shall be in addition to any rights of
      indemnification the member may have as a director or otherwise under the
      Company's Charter Documents, any agreement, any vote of stockholders or
      disinterested directors, insurance policy or
  otherwise.

            

    

     

    
      	
              3.5

            	
              The
      interpretation and construction by the Administrator of any provision of
      the Plan or of any Option hereunder shall be final and conclusive. In the
      event that the Board appoints a Committee, the interpretation and
      construction by the Committee of any provision of the Plan or of any
      Option hereunder shall be conclusive unless otherwise determined by the
      Board of Directors. To avoid doubt, the Board of Directors may at any time
      exercise any powers of the Administrator, notwithstanding the fact that a
      Committee has been appointed.

            

    

     

    
      	
              3.6

            	
              The
      Administrator shall have the authority to adopt, alter and repeal such
      administrative rules, guidelines and practices governing the Plan and
      perform all acts, including the delegation of its responsibilities (to the
      extent permitted by applicable law and applicable stock exchange rules),
      as it shall, from time to time, deem advisable; to construe and interpret
      the terms and provisions of the Plan and any Award issued under the Plan
      (and any agreements relating thereto); and to otherwise supervise the
      administration of the Plan. The Administrator may correct any defect,
      supply any omission or reconcile any inconsistency in the Plan or in any
      agreement relating thereto in the manner and to the extent it shall deem
      necessary to effectuate the purpose and intent of the Plan.
      Notwithstanding the foregoing, no action of the Administrator under this
      Section 3.7 not otherwise provided for herein or in an Award Agreement
      shall reduce the rights of any Participant without the Participant’s
      consent.

            

    

     

    
      	
              3.7

            	
              Without
      limiting the generality of the foregoing, the Administrator may adopt
      special Appendices and/or guidelines and provisions for persons who are
      residing in or employed in, or subject to, the taxes of, any domestic or
      foreign jurisdictions, to comply with applicable laws, regulations, or
      accounting, listing or other rules with respect to such domestic or
      foreign jurisdictions.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              4.

            	
              ELIGIBLE PARTICIPANTS.

            

    

     

    
      	
              4.1

            	
              No
      Award may be granted pursuant to the Plan to any person serving as a
      member of the Committee or to any other Director of the Company at the
      time of the grant, unless such grant is approved in the manner prescribed
      for the approval of compensation of directors under the Companies
      Law.

            

    

     

    
      	
              4.2

            	
              Subject
      to the limitation set forth in Sub-section 4.1 above and any restriction
      imposed by applicable law, Awards may be granted to any Service Provider
      of the Company, whether or not a director of the Company or its
      affiliates. The grant of an Award to a Participant hereunder shall neither
      entitle such Participant to receive an additional Award or participate in
      other incentive plans of the Company, nor disqualify such Participant from
      receiving and additional Award or participating in other incentive plans
      of the Company.

            

    

     

    
      	
              5.

            	
              RESERVED SHARES.

            

    

     

    The
Company shall determine the number of Shares reserved hereunder from time to
time, and such number may be increased or decreased by the Company from time to
time. Any Shares under the Plan, in respect of which the right hereunder of a
Participant to purchase the same shall for any reason terminate, expire or
otherwise cease to exist, shall again be available for grant as Awards under the
Plan. Any Shares that remain unissued and are not subject to Awards at the
termination of the Plan shall cease to be reserved for purposes of the Plan.
Until termination of the Plan the Company shall at all times reserve a
sufficient number of Shares to meet the requirements of the Plan.

     

    
      	
              6.

            	
              AWARD AGREEMENT.

            

    

     

    
      
        	
                6.1

              	
                The
      Board of Directors in its discretion may award to Participants Awards
      available under the Plan. The terms of the Award will be set forth in the
      Award Agreement. The date of grant of each Award shall be the date
      specified by the Board of Directors at the time such award is made, or in
      the absence of such specification, the date of approval of the award by
      the Board of Directors.

              

      

    

     

    
      	
              6.2

            	
              The
      Award Agreement shall state, inter
      alia, the number of Options,Shares or equity-based units covered
      thereby, the type of Option, Share-based or other grant awarded, any
      special terms applying to such Award (if any), including the terms of any
      country-specific or other applicable Appendix, as determined by the Board
      of Directors.

            

    

     

    
      	
              7.

            	
              RESTRICTED
      STOCK AND
      OTHER
      EQUITY-BASED
      AWARDS.

            

    

     

    
      	
              7.1

            	
              Eligibility.
      Restricted Stock may be issued to all Participants either alone or
      in addition to other Awards granted under the Plan. The Administrator
      shall determine the eligible Participants to whom, and the time or times
      at which, grants of Restricted Stock will be made, the number of shares to
      be awarded, the purchase price (if any) to be paid by the Participant
      (subject to Section 7.2), the time or times at which such Awards may be
      subject to forfeiture (if any), the vesting schedule (if any) and rights
      to acceleration thereof, and all other terms and conditions of the Awards.
      The Administrator may condition the grant or vesting of Restricted Stock
      upon the attainment of specified performance targets or such other factors
      as the Administrator may determine, in its sole discretion. Unless
      otherwise determined by the Administrator, the Participant shall not be
      permitted to sell or transfer shares of Restricted Stock awarded under
      this Plan during a period set by the Administrator (if any) (the “Restriction
      Period”) commencing with the date of such Award, as set forth in
      the applicable Award Agreement.

            

    

     

    
      	
              7.2

            	
              Terms.
      A Participant selected to receive Restricted Stock shall not have any
      rights with respect to such Award, unless and until such Participant has
      delivered a fully executed copy of the ward Agreement evidencing the Award
      to the Company and has otherwise complied with the applicable terms and
      conditions of such Award. The purchase price of Restricted Stock shall be
      determined by the Administrator, but shall not be less than as permitted
      under applicable law. Awards of Restricted Stock must be accepted within a
      period of 60 days (or such shorter period as the Administrator may specify
      at grant) after the grant date, by executing an Award Agreement and by
      paying whatever price (if any) the Administrator has designated
      thereunder.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              7.3

            	
              Legend.
      Each Participant receiving Restricted Stock shall be issued a stock
      certificate in respect of such shares of Restricted Stock, unless the
      Administrator elects to use another system, such as book entries by the
      transfer agent, as evidencing ownership of Restricted Stock. Such
      certificate shall be registered in the name of such Participant, and shall
      bear an appropriate legend referring to the terms, conditions, and
      restrictions applicable to such Award, substantially in the following form
      (as well as other legend required by the Administrator pursuant to Section
      19.3 below):

            

    

     

    “The
anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or harge of the shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of the Rosetta Genomics Ltd.
Global Incentive Plan (2006), and an Award Agreement entered into between the
registered owner and the Company dated ____________. Copies of  such
Plan and Award Agreement are on file at Rosetta Genomics Ltd.”

     

    
      	
              7.4

            	
              Custody.
      The Administrator may require that any certificates evidencing such
      shares be held in custody by the Company until the restrictions thereon
      shall have lapsed, and that, as a condition of any Restricted Stock Award,
      the Participant shall have delivered a duly signed power, endorsed in
      blank, relating to the Shares covered by such
  Award.

            

    

     

    
      	
              7.5

            	
              Rights
      as Shareholder. Except as provided in this Section and Section 7.4
      above and as otherwise determined by the Administrator and set forth in
      the Award Agreement, the Participant shall have, with respect to the
      Shares of Restricted Stock, all of the rights of a holder of Shares
      including, without limitation, the right to receive any dividends, the
      right to vote such shares and, subject to and conditioned upon the full
      vesting of shares of Restricted Stock, the right to tender such shares.
      Notwithstanding the foregoing, the payment of dividends shall be deferred
      until, and conditioned upon, the expiration of the applicable Restriction
      Period, unless the Administrator, in its sole discretion, specifies
      otherwise at the time of the Award.

            

    

     

    
      	
              7.6

            	
              Lapse
      of Restrictions. If and when the Restriction Period expires without
      a prior forfeiture of the Restricted Stock subject to such Restriction
      Period, the certificates for such Shares shall be delivered to the
      Participant. All legends shall be removed from said certificates at the
      time of delivery to the Participant except as otherwise required by this
      Plan, the Award Agreement and applicable
law.

            

    

     

    Notwithstanding
the foregoing, actual certificates shall not be issued to the extent that book
entry recordkeeping is used.

     

    
      	
              7.7

            	
              Other
      Equity-Based Awards. Other equity-based Awards (including, without
      limitation, restricted stock units and performance share awards) may be
      granted either alone or in addition to or other Awards granted under the
      Plan to all eligible Participants pursuant to such terms and conditions as
      the Administrator may determine, including without limitation, in one or
      more appendix adopted by the administrator and appended to this
      Plan.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              8.

            	
              EXERCISE OF OPTION.

            

    

     

    
      	
              8.1

            	
              Options
      shall be exercisable pursuant to the terms under which they were awarded
      and subject to the terms and conditions of the Plan and any applicable
      Appendix, as specified in the Award
Agreement.

            

    

     

    
      	
              8.2

            	
              The
      exercise price for each share to be issued upon exercise of an Option
      shall be such price as is determined by the Board in its discretion,
      provided that the price per Share is not less than the nominal value of
      each Share, or to the extent required pursuant to applicable law, not less
      than 100% of the Fair Market Value of a Share on the date of
      grant.

            

    

     

    
      	
              8.3

            	
              An
      Option, or any part thereof, shall be exercisable by the Participant's
      signing and returning to the Company at its principal office (and to the
      Trustee, where applicable), a "Notice of Exercise" in such form and
      substance as may be prescribed by the Board of Directors from time to
      time, together with full payment for the Shares underlying such
      Option.

            

    

     

    
      	
              8.4

            	
              Each
      payment for Shares under an Option shall be in respect of a whole number
      of Shares, shall be effected in cash or by check payable to the order of
      the Company, or such other method of payment acceptable to the Company as
      determined by the Administrator, and shall be accompanied by a notice
      stating the number of Shares being paid for
  thereby.

            

    

     

    
      	
              8.5

            	
              Until
      the Shares are issued (as evidenced by the appropriate entry in the share
      register of the Company or of a duly authorized transfer agent of the
      Company) a Participant shall have no right to vote or right to receive
      dividends or any other rights as a shareholder shall exist with respect to
      such Shares, notwithstanding the exercise of the Option. The Company shall
      issue (or cause to be issued) such Shares promptly after the Option is
      exercised. No adjustment will be made for a dividend or other right the
      record date for which is prior to the date the Shares are issued, except
      as provided in Section 10 of the
Plan.

            

    

     

    
      	
              8.6

            	
              To
      the extent permitted by law, if the Share is traded on a national
      securities exchange, The Nasdaq Share Market or quoted on a national
      quotation system sponsored by the National Association of Securities
      Dealers or otherwise publicly traded or quoted, payment for the Shares
      underlying an Option may be made all or in part by the delivery (on a form
      prescribed by the Company) of an irrevocable direction to a securities
      broker approved by the Company to sell Shares and to deliver all or part
      of the sales proceeds to the Company in payment of the exercise price (or
      the relevant portion thereof, as applicable) and any withholding taxes, or
      on such other terms and conditions as may be acceptable to the
      Administrator (including, without limitation, the relinquishment of
      Options or by payment in full or in part in the form of Share owned by the
      Participant for a period of at least six months or such other period
      necessary to avoid accounting treatment adverse to the Company (and for
      which the Participant has good title free and clear of any liens and
      encumbrances) based on the fair market value of the Share on the payment
      date as determined by the Administrator). No Shares shall be issued until
      payment has been made or provided for, as provided
  herein.

            

    

     

    
      	
              9.

            	
              TERMINATION OF RELATIONSHIP AS SERVICE PROVIDER.

            

    

     

    
      	
              9.1

            	
              Effect
      of Termination; Exercise After Termination. Unless otherwise
      determined by the Administrator, if an Participant ceases to be a Service
      Provider, such Participant may exercise any outstanding Options within
      such period of time as is specified in the Award Agreement or the Plan to
      the extent that the Options are vested on the date of termination (but in
      no event later than the expiration of the term of the Option as set forth
      in the Option Agreement). If, on the date of termination, any Options are
      unvested, the Shares covered by the unvested portion of the Option shall
      revert to the Plan. If, after termination, the Participant does not
      exercise the vested Options within the time specified in the Award
      Agreement or the Plan, the Option shall terminate, and the Shares covered
      by such Option shall revert to the Plan. In the absence of a provision
      specifying otherwise in the relevant Award Agreement,
  then:

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (a) in
the event that the Participant ceases to be a Service Provider for any reason
other than termination for Cause, or as a result of the Participant's death or
Disability: (i) the vested Options shall remain exercisable for a period of
three (3) months from the Date of Termination or as set forth in Section 13 and
(ii) all Restricted Stock still subject to restriction under the applicable
Restriction Period as of the Date of termination, as set forth in the Award
Agreement, shall be forfeited;

     

    (b) in
the event that the Participant ceases to be a Service Provider for Cause, (i)
all Options will terminate immediately upon the date of such termination for
cause, such that the unvested portion of the Options will not vest, and the
vested portion of the Options will no longer be exercisable; and (ii) all
Restricted Stock still subject to restriction under the applicable Restriction
Period as of the Date of Termination, as set forth in the Award Agreement, shall
be forfeited.

     

    
      	
              9.2

            	
              Date
      of Termination. For purposes of the Plan and any Option or Option
      Agreement, and unless otherwise set forth in the relevant Award Agreement,
      the “Date of Termination”(whether for Cause or otherwise) shall be the
      effective date of termination of the Participant's employment or
      engagement as a Service Provider.

            

    

     

    
      	
              9.3

            	
              Leave
      of Absence. Unless the Administrator provides otherwise, vesting of
      Awards granted hereunder shall be suspended during any unpaid leave of
      absence.

            

    

     

    
      	
              9.4

            	
              Change
      of Status. A Service Provider shall not cease to be considered as
      such in the case of any (a) leave of absence approved by the Company, or
      (b) transfers between locations of the Company or between the Company, and
      its parent, subsidiary, affiliate, or any successor thereof; or (c)
      changes in status (employee to director, employee to consultant, etc.)
      provided that such change does not affect the specific terms applying to
      the Service Provider’s Award.

            

    

     

    
      
        	
                10. 

              	
                ADJUSTMENTS.

              

      

    

     

    Upon the
occurrence of any of the following described events, a Participant's rights to
purchase Shares under the Plan shall be adjusted as hereinafter
provided:

     

    
      	
              10.1

            	
              Changes
      in Capitalization. Subject to any required action by the
      shareholders of the Company, the number of Shares covered by each
      outstanding Award, and the number of Shares which have been authorized for
      issuance under the Plan but as to which no Options or other Award have yet
      been granted or which have been returned to the Plan upon cancellation or
      expiration of an Option or other Award, as well as the price per Share
      covered by each such outstanding Option, shall be proportionately adjusted
      for any increase or decrease in the number of, or other change in, issued
      Shares or the capitalization of the Company, resulting from a stock split,
      reverse stock split, stock dividend, combination, exchange or
      reclassification of the Shares, or any other increase or decrease in the
      number of issued Shares effected without receipt of consideration by the
      Company, or, subject to the discretion of the Board, any repurchase of
      Shares, recapitalization, merger, issuance of warrants or rights, dividend
      or other distribution (other than ordinary cash dividends) to shareholders
      of the Company, spinoff, split-up or other similar corporate event or
      transaction. The conversion of any convertible securities of the Company
      shall not be deemed to have been “effected without receipt of
      consideration.” Such adjustment shall be made by the Board, whose
      determination in that respect shall be final, binding and conclusive.
      Except as expressly provided herein, no issuance by the Company of shares
      of stock of any class, or securities convertible into shares of stock of
      any class, shall affect, and no adjustment by reason thereof shall be made
      with respect to, the number or price of Shares subject to an Option or
      other Award.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              10.2

            	
               Merger,
      Acquisition, or Asset Sale.

            

    

     

    (a) In
the event of (i) a merger or consolidation of the Company with or into another
corporation resulting in such other corporation being the surviving entity or
the direct or indirect parent of the Company or resulting in the Company being
the surviving entity and any other person or entity owning fifty percent (50%)
or more of the outstanding voting power of the Company's securities by virtue of
the transaction, (ii) an acquisition of all or substantially all of the shares
of the Company, or (iii) the sale of all or substantially all of the assets of
the Company (each such event, a “Transaction”), the unexercised or restricted
portion of each outstanding Award shall be assumed or an equivalent Award or
right substituted, by the successor corporation or an affiliate of the successor
corporation, as shall be determined by such entity, subject to the terms
hereof.

     

    In the
event that the successor corporation or a parent or subsidiary of the successor
corporation does not provide for such an assumption or substitution of Options,
all Options shall become exercisable in full on a date no later than ten (10)
days prior to the date of consummation of the Transaction, provided that unless
otherwise determined by the Administrator, the exercise of all Options that
otherwise would not have been exercisable in the absence of a Transaction, shall
be contingent upon the actual consummation of the Transaction.

     

    (b) For
the purposes of this Section 10.2, an Option shall be considered assumed or
substituted if, following a Transaction, the Option confers the right to
purchase or receive, for each Share subject to the Option immediately prior to
the Transaction, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of Shares or assets by holders of
Shares of the Company for each Share held on the effective date of the
Transaction (and if holders were offered a

     

    choice of
consideration, the type of consideration determined by the Administrator, at its
sole discretion); provided, however, that if the consideration received in the
Transaction is not solely ordinary shares or common stock (or the equivalent) of
the successor corporation or its direct or indirect parent, the Administrator
may, with the consent of the successor corporation, provide for the per share
consideration to be received upon the exercise of the Option to be solely
ordinary shares or common stock (or the equivalent) of the successor corporation
or its direct or indirect parent equal in fair market value to the per share
consideration received by holders of Shares in the Transaction, as determined by
the Administrator.

     

    (c) In
the event that the Board of Directors determines in good faith that, in the
context of a Transaction, certain Options have no monetary value and thus do not
entitle the holders of such Options to any consideration under the terms of the
Transaction, the Board of Directors may determine that such Options shall
terminate effective as of the effective date of the Transaction.

     

    (d) It is
the intention that the Administrator’s authority to make determinations,
adjustments and clarifications in connection with the treatment of Awards shall
be interpreted as widely as possible, to allow the Administrator maximal power
and flexibility to interpret and implement the provisions of the Plan in the
event of Transaction, provided that the Administrator shall determine in good
faith that a Participant’s rights previously accrued are not thereby materially
adversely affected without the Participant’s express written
consent.

     

    
      	
              11.

            	
              Non-Transferability
      of Options and Shares.

            

    

     

    
      	
              11.1

            	
               No
      Option may be transferred other than by will or by the laws of descent and
      distribution, and during the Participant's lifetime an Option may be
      exercised only by such Participant.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              11.2

            	
               Shares
      of Restricted Stock may not be assigned, transferred, pledged or
      mortgaged, other than by will or laws of descent and distribution, prior
      to the date on which the date on which any applicable restriction,
      performance or deferred period lapses. Shares for which full payment has
      not been made, may not be assigned, transferred, pledged or mortgaged,
      other than by will or laws of descent and
  distribution.

            

    

     

    For
avoidance of doubt, the foregoing shall not be deemed to restrict the transfer
of an Participant's rights in respect of Options or Shares purchasable pursuant
to the exercise thereof upon the death of such Participant to such Participant’s
estate or other successors by operation of law or will, whose rights therein
shall be governed by Section 9.1(a) hereof, and as may otherwise be determined
by the Administrator.

     

    
      	
              12.

            	
              TERM AND AMENDMENT OF THE PLAN.

            

    

     

    
      	
              12.1

            	
               The
      Plan shall expire on the date which is ten (10) years from the date ofits
      adoption by the Board of Directors (except as to Options outstanding on
      that date).

            

    

     

    
      	
              12.2

            	
               Notwithstanding
      any other provision of the Plan, the Board (or a duly authorized Committee
      thereof) may at any time, and from time to time, amend, in whole or in
      part, any or all of the provisions of the Plan (including any amendment
      deemed necessary to ensure that the Company may comply with any regulatory
      requirement), or suspend or terminate it entirely, retroactively or
      otherwise; provided, however, that, except (x) to correct obvious drafting
      errors or as otherwise required by law or (y) as specifically provided
      herein, the previously accrued rights of a Participant with respect to
      Awards granted prior to such amendment, suspension or termination, may not
      be materially impaired without the consent of such Participant. The
      Administrator may amend the terms of any Award theretofore granted,
      prospectively or retroactively, but except (x) to correct obvious drafting
      errors or as otherwise required by law or applicable accounting rules, or
      (y) as specifically provided herein, no such amendment or other action by
      the Committee shall materially impair the previously accrued rights of any
      Participant without the Participant’s
consent.

            

    

     

    
      	
              13.

            	
               TERM OF OPTION.

            

    

     

    Unless
otherwise explicitly provided in an Award Agreement, if any Option, or any part
thereof, has not been exercised and the Shares covered thereby not paid for
within ten (10) years after the date on which the Option was granted, as set
forth in the Award Agreement (or any other period set forth in the instrument
granting such Option pursuant to Section 6), such Option, or such part thereof,
and the right to acquire such Shares shall terminate, all interests and rights
of the Participant in and to the same shall expire, and, in the event that in
connection therewith any Shares are held in trust as aforesaid, such trust shall
expire.

     

    
      	
              14.

            	
              CONTINUANCE OF
      ENGAGEMENT.

            

    

     

    Neither
the Plan nor any offer of Shares or Options to a Participant shall impose any
obligation on the Company or a related company thereof, to continue the
employment or engagement of any Participant as a Service Provider, and nothing
in the Plan or in any Option granted pursuant thereto shall confer upon any
Participant any right to continue to serve as a Service Provider of the Company
or a related company thereof or restrict the right of the Company or a related
company thereof to terminate such employment or engagement at any
time.

     

    
      	
              15.

            	
              GOVERNING LAW.

            

    

     

    The Plan
and all instruments issued thereunder or in connection therewith, shall be
governed by, and interpreted in accordance with, the laws of the State of
Israel.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              16.

            	
              APPLICATION OF FUNDS.

            

    

     

    The
proceeds received by the Company from the sale of Shares pursuant to Options
granted under the Plan will be used for general corporate purposes of the
Company or any related company thereof.

     

    
      	
              17.

            	
              TAXES.

            

    

     

    
      	
              17.1

            	
               Any
      tax consequences arising from the grant, vesting or exercise of any Award,
      from the payment for Shares covered thereby, or from any other event or
      act (of the Company, and/or its affiliates, or the Participant), hereunder
      shall be borne solely by the Participant. The Company and/or its
      affiliates shall withhold taxes according to the requirements under the
      applicable laws, rules, and regulations, including withholding taxes at
      source. Furthermore, the Participant shall agree to indemnify the Company
      and/or its affiliates and hold them harmless against and from any and all
      liability for any such tax or interest or penalty thereon, including
      without limitation, liabilities relating to the necessity to withhold, or
      to have withheld, any such tax from any payment made to the Participant.
      The Company or any of its affiliates may make such provisions and take
      such steps as it may deem necessary or appropriate for the withholding of
      all taxes required by law to be withheld with respect to Awards granted
      under the Plan and the exercise thereof, including, but not limited, to
      (i) deducting the amount so required to be withheld from any other amount
      (or Shares issuable) then or thereafter to be provided to the Participant,
      including by deducting any such amount from a Participant’s salary or
      other amounts payable to the Participant, to the maximum extent permitted
      under law and/or (ii) requiring the Participant to pay to the Company or
      any of its affiliates the amount so required to be withheld as a condition
      of the issuance, delivery, distribution or release of any Shares and/or
      (iii) by causing the exercise of any Options and sale of Shares held by on
      behalf of the Participant to cover such liability. In addition, the
      Participant will be required to pay any amount due in excess of the tax
      withheld and transferred to the tax authorities, pursuant to applicable
      tax laws, regulations and rules.

            

    

     

    
      	
              17.2

            	
               The
      receipt of an Award and/or the acquisition of Shares issued upon the
      exercise of the Options may result in tax consequences. The description of
      tax consequences set forth in the Plan or any Appendix hereto does not
      purport to be complete, up to date or to take into account any special
      circumstances relating to a
Participant.

            

    

     

    
      	
              17.3

            	
               THE
      PARTICIPANT IS ADVISED TO CONSULT WITH A TAX ADVISOR WITH RESPECT TO THE
      TAX CONSEQUENCES OF RECEIVING OR EXERCISING ANY AWARD IN LIGHT OF HIS OR
      HER PARTICULAR CIRCUMSTANCES.

            

    

     

    
      	
              18.

            	
              MARKET STAND-OFF

            

    

     

    If so
requested by the Company or any representative of the underwriters (the
“Managing Underwriter”) in connection with any registration of the offering of
any securities of the Company under the securities laws of any jurisdiction, the
Participant shall not sell or otherwise transfer any Shares or other securities
of the Company during a 180-day period or such other period as may be requested
in writing by the Managing Underwriter and agreed to in writing by the Company
(the “Market Standoff Period”) following the effective date of registration
statement of the Company filed under such securities laws. The Company may
impose stop transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff
Period.

     

    
      	
              19.

            	
              CONDITIONS UPON ISSUANCE OF SHARES.

            

    

     

    
      	
              19.1

            	
               Legal
      Compliance. Shares shall not be issued pursuant to the exercise of
      an Option or with respect to any other Award unless the exercise of such
      Option or grant of such Award and the issuance and delivery of such Shares
      shall comply with applicable laws and shall be further subject to the
      approval of counsel for the Company with respect to such compliance. The
      inability of the Company to obtain authority from any regulatory body
      having jurisdiction, which authority is deemed by the Company’s counsel to
      be necessary to the lawful issuance and sale of any Shares hereunder,
      shall relieve the Company of any liability in respect of the failure to
      issue or sell such Shares as to which such requisite authority shall not
      have been obtained.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              19.2

            	
               Investment
      Representations. As a condition to the exercise of an Option or
      receipt of an Award, the Board may require the person exercising such
      Option or receiving such Award to represent and warrant at the time of any
      such exercise or the time of receipt of the Award that the Shares are
      being purchased only for investment and without any present intention to
      sell or distribute such Shares, and make other representations as may be
      required under applicable securities laws if, in the opinion of counsel
      for the Company, such representations are required, all in form and
      content specified by the Board.

            

    

     

    
      	
              19.3

            	
               Legend.
      The Administrator may require each person receiving Shares pursuant
      to an Award granted under the Plan to represent to and agree with the
      Company in writing that the Participant is acquiring the shares without a
      view to distribution thereof and such other securities law related
      representations as the Administrator shall request. In addition to any
      legend required by the Plan, the certificates for such shares may include
      any legend which the Administrator deems appropriate to reflect any
      applicable restrictions on transfer. All certificates for Shares delivered
      under the Plan shall be subject to such stock transfer orders and other
      restrictions as the Administrator may deem advisable under the rules,
      regulations and other requirements of any relevant securities authority,
      any stock exchange upon which the Shares are then listed or any national
      securities association system upon whose system the Shares are then
      quoted, any applicable securities law, and any applicable corporate law,
      and the Administrator may cause a legend or legends to be put on any such
      certificates to make appropriate reference to such restrictions.

            

    

     

    
      	
              20.

            	
              MISCELLANEOUS.

            

    

     

    Whenever
applicable in the Plan, the singular and the plural, and the masculine, feminine
and neuter shall be freely interchangeable, as the context requires. The Section
headings or titles shall not in any way control the construction of the language
herein, such headings or titles having been inserted solely for the purpose of
simplified reference. Words such as “herein”, “hereof”, “hereto”, “hereinafter”,
“hereby”, and “hereinabove” when used in the Plan refer to the Plan as a whole,
including any applicable Appendices, unless otherwise required by
context.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    APPENDIX
– ISRAELI TAXPAYERS

     

    ROSETTA
GENOMICS LTD.

     

    GLOBAL
SHARE INCENTIVE PLAN (2006)

     

    
      	
              1.

            	
              Special
      Provisions for Israeli Taxpayers

            

    

     

    
      	
              1.1

            	
              This
      Appendix (the “Appendix”)
      to the Rosetta Genomics Ltd. Global Share Incentive Plan (2006) (the “Plan”)
      is effective as of June 11, 2006 (the “Effective
      Date”).

            

    

     

    
      	
              1.2

            	
              The
      provisions specified hereunder apply only to persons who are deemed to be
      residents of the State of Israel for tax purposes, or are otherwise
      subject to taxation in Israel with respect to
  Awards.

            

    

     

    
      	
              1.3

            	
              This
      Appendix applies with respect to Awards granted as Options or Shares under
      the Plan. The purpose of this Appendix is to establish certain rules and
      limitations applicable to Options and Shares that may be granted or issued
      under the Plan from time to time, in compliance with the securities and
      other applicable laws currently in force in the State of Israel. Except as
      otherwise provided by this Appendix, all grants made pursuant to this
      Appendix shall be governed by the terms of the Plan. This Appendix is
      applicable only to grants made after the Effective
  Date.

            

    

     

    This
Appendix complies with, and is subject to the ITO and Section 102.

     

    
      	
              1.4

            	
              The
      Plan and this Appendix shall be read together. In any case of
      contradiction, whether explicit or implied, between the provisions of this
      Appendix and the Plan, the provisions of this Appendix shall
      govern.

            

    

     

    
      	
              2.

            	
              Definitions

            

    

     

    Capitalized
terms not otherwise defined herein shall have the meaning assigned to them in
the Plan. The following additional definitions will apply to grants made
pursuant to this Appendix:

     

    “3(i)
Option” means an Option which is subject to taxation pursuant to Section
3(i) of the ITO which has been granted to any person who is not an Eligible 102
Participant.

     

    “102
Capital Gains Track” means the tax alternative set forth in Section
102(b)(2) of the ITO pursuant to which income resulting from the sale of Shares
derived from Options is taxed as a capital gain.

     

    “102
Capital Gains Track Grant” means a 102 Trustee Grant qualifying for the
special tax treatment under the 102 Capital Gains Track.

     

    “102
Ordinary Income Track” means the tax alternative set forth in Section
102(b)(1) of the ITO pursuant to which income resulting from the sale of Stock
derived from Options is taxed as ordinary income.

     

    “102
Ordinary Income Track Grant” means a 102 Trustee Grant qualifying for the
ordinary income tax treatment under the 102 Ordinary Income Track.

     

    “102
Trustee Grant” means an Award of Options or Shares granted pursuant to
Section 102(b) of the ITO and held in trust by a Trustee for the benefit of the
Participant, and includes both 102 Capital Gains Track Grants and 102 Ordinary
Income Track Grants.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Affiliate”
means any “employing company” within the meaning of Section 102(a) of the
ITO.

     

    “Controlling
Shareholder” ameans a “controlling shareholder” within the meaning of
Section 32(9) of the Ordinance, currently defined as an individual who prior to
the grant or as a result of the grant or exercise of any Award, holds or would
hold, directly or indirectly, in his name or with a relative (as defined in the
Ordinance) (i) 10% of the outstanding shares of the Company, (ii) 10% of the
voting power of the Company, (iii) the right to hold or purchase 10% of the
outstanding equity or voting power, (iv) the right to obtain 10% of the “profit”
of the Company (as defined in the Ordinance), or (v) the right to appoint a
director of the Company.

     

    “Election”
means the Company's choice of the type (as between capital gains track or
ordinary income track) of 102 Trustee Grants it will make under the Plan, as
filed with the ITA.

     

    “Eligible
102 Participant” means a person who is employed by the Company or its
Affiliates, including an individual who is serving as a director or an office
holder, who is not a Controlling Shareholder.

     

    “Fair
Market Value” shall mean with respect to 102 Capital Gains Track Grants
only, for the sole purpose of determining tax liability pursuant to Section
102(b)(3) of the ITO, if at the date of grant the Company’s shares are listed on
any established stock exchange or a national market system or if the Company’s
shares will be registered for trading within ninety (90) days following the date
of grant, the fair market value of the Shares at the date of grant shall be
determined in accordance with the average value of the Company’s shares on the
thirty (30) trading days preceding the date of grant or on the thirty (30)
trading days following the date of registration for trading, as the case may
be.

     

    “ITA”
means the Israeli Tax Authorities.

     

    “ITO”
means the Israeli Income Tax Ordinance (New Version) 1961 and the rules,
regulations, orders or procedures promulgated thereunder and any amendments
thereto, including specifically the Rules, all as may be amended from time to
time.

     

    “Non-Trustee
Grant” means an Award granted to an Eligible 102 Participant pursuant to
Section 102(c) of the ITO and not held in trust by a Trustee.

     

    “Required
Holding Period” means the requisite period prescribed by the ITO and the
Rules, or such other period as may be required by the ITA, with respect to 102
Trustee Grants, during which Options or Shares granted by the Company must be
held by the Trustee for the benefit of the person to whom it was granted.
Currently, the Required Holding Period for 102 Capital Gains Track Grants is 24
months from the date of grant of the Options.

     

    “Rules”
means the Income Tax Rules (Tax benefits in Stock Issuance to Employees)
5763-2003.

     

    “Section
102” shall mean the provisions of Section 102 of the ITO, as amended from
time to time, including by the Law Amending the Income Tax Ordinance (Number
132), 2002, effective as of January 1, 2003 and by the Law Amending the Income
Tax Ordinance (Number 147), 2005.

     

    "Shares"
means shares of Stock, including Restricted or Unrestricted Stock or shares of
Stock issued upon exercise of Stock Options.

     

    “Stock
Option” means a Stock Option granted pursuant to the terms and conditions
of the Plan and the Appendix.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Trustee”
means a person or entity designated by the Board to serve as a trustee and
approved by the ITA in accordance with the provisions of Section 102(a) of the
ITO.

     

    
      	
              3.

            	
              Types
      of Awards and Section 102 Election

            

    

     

    
      	
              3.1

            	
              Awards
      made pursuant to Section 102, whether as grants of Options or as issuances
      of Shares under the Plan, shall be made pursuant to either (a) Section
      102(b)(2) of the ITO as 102 Capial Gains Track Grants or (b) Section
      102(b)(1) of the ITO as 102 Ordinary Income Track Grants. The Company’s
      Election regarding the type of 102 Trustee Grant it chooses to make shall
      be filed with the ITA. Once the Company has filed such Election, it may
      change the type of 102 Trustee Grant that it chooses to make only after
      the passage of at least 12 months from the end of the calendar year in
      which the first grant was made in accordance with the
    previous

            

    

     

    Election,
in accordance with Section 102. For the avoidance of doubt, such Election shall
not prevent the Company from granting Non-Trustee Grants to Eligible 102
Participants at any time.

     

    
      	
              3.2

            	
              Eligible
      102 Participants may receive only 102 Trustee Grants or Non- Trustee
      Grants under this Appendix. Participants who are not Eligible 102
      Participants may be granted only 3(i) Options under this
      Appendix.

            

    

     

    
      	
              3.3

            	
              No
      102 Trustee Grants may be made effective pursuant to this Appendix until
      30 days after the requisite filings required by the ITO and the Rules have
      been made with the ITA.

            

    

     

    
      	
              3.4

            	
              The
      option agreement or documents evidencing the Options granted or Shares
      issued pursuant to the Plan and this Appendix shall indicate whether the
      grant is a 102 Trustee Grant, a Non-Trustee Grant or a 3(i) Grant; and, if
      the grant is a 102 Trustee Grant, whether it is a 102 Capital Gains Track
      Grant or a 102 Ordinary Income Track
Grant.

            

    

     

    
      	
              4.

            	
              Terms
      And Conditions Of 102 Trustee
Options

            

    

     

    
      	
              4.1

            	
              Each
      102 Trustee Grant will be deemed granted on the date stated in a written
      notice by the Company, provided that effective as of such date (i) the
      Company has provided such notice to the Trustee and (ii) the Participant
      has signed all documents required pursuant to this Section
    4.

            

    

     

    
      	
              4.2

            	
              Each
      102 Trustee Grant granted to an Eligible 102 Participant and each
      certificate for shares of Stock acquired pursuant to the exercise of a
      Option or issued directly as Shares shall be issued to and registered in
      the name of a Trustee and shall be held in trust for the benefit of the
      Participant for the Required Holding Period. After termination of the
      Required Holding Period, the Trustee may release such Option and any such
      Shares, provided that (i) the Trustee has received an acknowledgment from
      the Israeli Income Tax Authority that the Eligible 102 Participant has
      paid any applicable tax due pursuant to the ITO or (ii) the Trustee and/or
      the Company or its Affiliate withholds any applicable tax due pursuant to
      the ITO. The Trustee shall not release any 102 Trustee Options or shares
      issued upon exercise of such Option prior to the full payment of the
      Eligible 102 Participant’s tax
liabilities.

            

    

     

    
      	
              4.3

            	
              Each
      102 Trustee Grant (whether a 102 Capital Gains Track Grant or a 102
      Ordinary Income Track Grant, as applicable) shall be subject to the
      relevant terms of Section 102 and the ITO, which shall be deemed an
      integral part of the 102 Trustee Option and shall prevail over any term
      contained in the Plan, this Appendix or any agreement that is not
      consistent therewith. Any provision of the ITO and any certificates or
      rulings of the ITA not expressly specified in this Appendix or Option
      Agreement which are necessary to receive or maintain any tax benefit
      pursuant to the Section 102 shall be binding on the Eligible 102
      Participant. The Trustee and the Eligible 102 Participant granted a 102
      Trustee Grant shall comply with the ITO, and the terms and conditions of
      the Trust Agreement entered into between the Company and the Trustee. For
      avoidance of doubt, it is reiterated that compliance with the ITO
      specifically includes compliance with the Rules. Further, the Eligible 102
      Participant agrees to execute any and all documents which the Company or
      the Trustee may reasonably determine to be necessary in order to comply
      with the provision of any applicable law, and, particularly, Section
      102.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              4.4

            	
              During
      the Required Holding Period, the Eligible 102 Participant shall not
      require the Trustee to release or sell the Options or Shares and other
      shares received subsequently following any realization of rights derived
      from Shares or Options (including stock dividends) to the Eligible 102
      Participant or to a third party, unless permitted to do so by applicable
      law. Notwithstanding the foregoing, the Trustee may, pursuant to a written
      request and subject to applicable law, release and transfer such Shares to
      a designated third party, provided that both of the following conditions
      have been fulfilled prior to such transfer: (i) all taxes required to be
      paid upon the release and transfer of the shares have been withheld for
      Transfer to the tax authorities and (ii) the Trustee has received written
      confirmation from the Company that all requirements for such release and
      transfer have been fulfilled according to the terms of the Company’s
      corporate documents, the Plan, any applicable agreement and any applicable
      law. To avoid doubt such sale or release during the Required Holding
      Period will result in different tax ramifications to the Eligible 102
      Participant under Section 102 of the ITO and the Rules and/or any other
      regulations or orders or procedures promulgated thereunder, which shall
      apply to and shall be borne solely by such Eligible 102
      Participant.

            

    

     

    
      	
              4.5

            	
              In
      the event a stock dividend is declared and/or additional rights are
      granted with respect to Shares which derive from Awards granted as 102
      Trustee Grants, such dividend and/or rights shall also be subject to the
      provisions of this Section 4 and the Required Holding Period for such
      shares and/or rights shall be measured from the commencement of the
      Required Holding Period for the Award with respect to which the dividend
      was declared and/or rights granted. In the event of a cash dividend on
      Shares, the Trustee shall transfer the dividend proceeds to the Eligible
      102 Participant after deduction of taxes and mandatory payments in
      compliance with applicable withholding
  requirements.

            

    

     

    
      	
              4.6

            	
              If
      an Option granted as a 102 Trustee Grant is exercised during the Required
      Holding Period, the Shares issued upon such exercise shall be issued in
      the name of the Trustee for the benefit of the Eligible 102 Participant.
      If such an Option is exercised after the Required Holding Period ends, the
      Shares issued upon such exercise shall, at the election of the Eligible
      102 Participant, either (i) be issued in the name of the Trustee, or (ii)
      be transferred to the Eligible 102 Participant directly, provided that the
      Participant first complies with all applicable provisions of the
      Plan.

            

    

     

    
      	
              5.

            	
              Assignability

            

    

     

    As long
as Options or Shares are held by the Trustee on behalf of the Eligible 102
Participant, all rights of the Eligible 102 Participant over the shares are
personal, can not be transferred, assigned, pledged or mortgaged, other than by
will or laws of descent and distribution.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              6.

            	
              Tax
      Consequences

            

    

     

    
      	
              6.1

            	
              Any
      tax consequences arising from the grant of any Award, exercise of any
      Option, from the issuance, sale or transfer of Shares, or from any other
      event or act (of the Company, and/or its Affiliates, and the Trustee or
      the Participant) relating to an Award or Shares issued thereupon , shall
      be borne solely by the Participant. The Company and/or its Affiliates,
      and/or the Trustee shall withhold taxes according to the requirements
      under the applicable laws, rules, and regulations, including withholding
      taxes at source. Furthermore, the Participant shall agree to indemnify the
      Company and/or its Affiliates and/or the Trustee and hold them harmless
      against and from any and all liability for any such tax or interest or
      penalty thereon, including without limitation, liabilities relating to the
      necessity to withhold, or to have withheld, any such tax from any payment
      made to the Participant. The Company or any of its Affiliates and the
      Trustee may make such provisions and take such steps as it/they may deem
      necessary or appropriate for the withholding of all taxes required by law
      to be withheld with respect to Awards granted under the Plan and the
      exercise, sale, transfer or other disposition thereof, including, but not
      limited, to (i) deducting the amount so required to be withheld from any
      other amount then or thereafter payable to a Participant, including by
      deducting any such amount from a Participant's salary or other amounts
      payable to the Participant, to the maximum extent permitted under law
      and/or (ii) requiring a Participant to pay to the Company or any of its
      Affiliates the amount so required to be withheld as a condition of the
      issuance, delivery, distribution or release of any Shares and/or (iii) by
      causing the execise of Options and/or sale of Shares held by or on behalf
      of the Participant to cover such liability. In addition, the Participant
      will be required to pay any amount that exceeds the tax to be withheld and
      transferred to the tax authorities, pursuant to applicable Israeli tax
      regulations.

            

    

     

    
      	
              6.2

            	
              With
      respect to Non-Trustee Grants, if the Participant ceases to be employed by
      the Company or any Affiliate, the Eligible 102 Participant shall extend to
      the Company and/or its Affiliate a security or guarantee for the payment
      of tax due at the time of sale of Shares to the satisfaction of the
      Company, all in accordance with the provisions of Section 102 of the ITO
      and the Rules.

            

    

     

    
      	
              7.

            	
              Governing
      Law and Jurisdiction

            

    

     

    Notwithstanding
any other provision of the Plan, with respect to Participants subject to this
Appendix, the Plan and all instruments issued thereunder or in connection
therewith shall be governed by, and interpreted in accordance with, the laws of
the State of Israel applicable to contracts made and to be performed
therein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    APPENDIX
– U.S. TAXPAYERS

     

    ROSETTA
GENOMICS LTD., GLOBAL SHARE INCENTIVE PLAN (2005)

     

    
      	
              1.

            	
              Special
      Provisions for Persons who are U.S.
Residents

            

    

     

    
      	
              1.1

            	
              This
      Appendix (the “Appendix”)
      to the Rosetta Genomics Ltd. Global Share Incentive Plan (2005) (the “Plan”)
      is effective as of June 11, 2006 (the “Effective
      Date”).

            

    

     

    
      	
              1.2

            	
              The
      provisions specified hereunder apply only to persons who are subject to
      U.S. federal income tax (any such person, a “U.S.
      Taxpayer”).

            

    

     

    
      	
              1.3

            	
              This
      Appendix applies with respect to Options granted under the Plan. The
      purpose of this Appendix is to establish certain rules and limitations
      applicable to Options that may be granted or issued under the Plan from
      time to time, in compliance with applicable tax, securities and other
      applicable laws currently in force. Except as otherwise provided by this
      Appendix, all grants made pursuant to this Appendix shall be governed by
      the terms of the Plan (including, without limitation, its provisions
      regarding adjustments). This Appendix is applicable only to grants made
      after the Effective Date.

            

    

     

    
      	
              1.4

            	
              The
      Plan and this Appendix shall be read together. In any case of an
      irreconcilable contradiction (as determined by the Administrator) between
      the provisions of this Appendix and the Plan, the provisions of the Plan
      shall govern unless expressly stated otherwise in this
      Appendix.

            

    

     

    
      	
              1.5

            	
              The
      Plan and this Appendix shall be submitted to the Company’s shareholders
      for approval within twelve (12) months after the Effective
      Date.

            

    

     

    
      	
              2.

            	
              Definitions

            

    

     

    Capitalized
terms not otherwise defined herein shall have the meaning assigned to them in
the Plan. The following additional definitions will apply to grants made
pursuant to this Appendix:

     

    “Affiliate”
means each of the following: (a) any Subsidiary; (b) any Parent; (c) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) that is directly or indirectly controlled 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or
voting interest) by the Company or one of its Subsidiaries or Parents, if any;
and (d) any other entity in which the Company or any of its Affiliates has a
material equity interest and that is designated as an “Affiliate” by resolution
of the Administrator provided, however, that, notwithstanding any other
provisions of the Plan or this Appendix to the contrary, for purposes of
Non-Qualified Stock Options, if an individual who otherwise qualifies as a
Service Provider provides services to such an entity and not to the Company or a
Subsidiary or Parent, such entity may only be designated an Affiliate if the
Company qualifies as a “service recipient,” within the meaning of Code Section
409A, with respect to such individual; provided further that such definition of
“service recipient” shall be determined by (i) applying Code Section 1563(a)(1),
(2) and (3), for purposes of determining a controlled group of corporations
under Code Section 414(b), using the language “at least 50 percent” instead of
“at least 80 percent” each place it appears in Code Section 1563(a)(1), (2) and
(3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of
determining trades or businesses (whether or not incorporated) that are under
common control for purposes of Code Section 414(c), using the language “at least
50 percent” instead of “at least 80 percent” each place it appears in Treasury
Regulations Section 1.414(c)-2, and (ii) where the use of Shares with respect to
the grant of a Non-Qualified Stock Option to such an individual is based upon
legitimate business criteria, by applying Code Section 1563(a)(1), (2) and (3),
for purposes of determining a controlled group of corporations under Code
Section 414(b), using the language “at least 20 percent” instead of “at least 80
percent” at each place it appears in Code Section 1563(a)(1), (2) and (3), and
by applying Treasury Regulations Section 1.414(c)-2, for purposes of determining
trades or businesses (whether or not incorporated) that are under common control
for purposes of Code Section 414(c), using the language “at least 20 percent”
instead of “at least 80 percent” at each place it appears in Treasury
Regulations Section 1.414(c)-2.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Code”
means the Internal Revenue Code of 1986, as amended. Any reference to any
section of the Code shall also be a reference to any successor provision and any
Treasury Regulation promulgated thereunder.

     

    “Disability”
means, with respect to Incentive Stock Options, a “permanent and total
disability” as set forth in Section 22(e)(3) of the Code.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended. Any
references to any section of the Exchange Act shall also be a reference to any
successor provision.

     

    “Fair
Market Value” means, for purposes of this Appendix, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, as of any date and except as provided below, the last sales price
reported for the Share on such date: (a) as reported on the principal national
securities exchange in the United States on which it is the traded or The Nasdaq
Stock Market; or (b) if not traded on any such national securities exchange or
The Nasdaq Stock Market, as quoted on an automated quotation system sponsored by
the National Association of Securities Dealers, Inc. or if the Share shall not
have been reported or quoted on such date, on the first day prior thereto on
which the Share was reported or quoted; provided, that the Administrator may
modify the definition of Fair Market Value to reflect any changes in the trading
practices of any exchange on which the Share is listed or traded. If the Share
is not readily tradable on a national securities exchange, The Nasdaq Stock
Market or any automated quotation system sponsored by the National Association
of Securities Dealers, Inc., its Fair Market Value shall be set in good faith by
the Administrator.

     

    Notwithstanding
any provision herein to the contrary, with respect to Non-Qualified Stock
Options, the “Fair Market Value” of the Shares shall be determined in a manner
that satisfies the applicable requirements of Code Section 409A, and with
respect to Incentive Stock Options, such Fair Market Value shall be determined
in a manner that satisfies the applicable requirements of Code Section 422, and
subject to Code Section 422(c)(7).

     

    “Family
Member” means “family member” as defined in Rule 701 under the Securities
Act or, following the filing of a Form S-8 pursuant to the Securities Act with
respect to the Plan, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the employee’s household
(other than a tenant or employee), a trust in which these persons have more than
50% of the beneficial interest, a foundation in which these persons (or the
employee) control the management of assets, and any other entity in which these
persons (or the employee) own more than 50% of the voting interests or as
otherwise defined in Rule 701 under the Securities Act or in Section A(1)(a)(5)
of the general instructions of Form S-8, as applicable.

     

    “Incentive
Stock Option” means any Option awarded to an eligible Participant under
the Plan and this Appendix intended to be and designated in the Award Agreement
as an “incentive stock option” within the meaning of Section 422 of the
Code.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Non-Qualified
Stock Option” means any Option awarded under this Plan that is not an
Incentive Stock Option.

     

    “Parent”
means any parent corporation of the Company within the meaning of Section
424(e) of the Code.

     

    “Public
Trading Date” means the first date upon which the Shares are listed (or
approved for listing) upon notice of issuance on any U.S. securities exchange or
designated (or approved for designation) upon notice of issuance as a U.S.
national market security on an interdealer quotation system.

     

    “Restricted
Stock” means Shares acquired pursuant to the exercise of an unvested
Option in accordance with Section 3.2 below.

     

    “Section
83(b) Election” means an election by a Participant to include the Fair
Market Value of a Share (less any amount paid for the Share) at the time of
grant as part of the Participant’s income in accordance with Section 83(b) of
the Code. A Section 83(b) Election must be filed in writing with the Internal
Revenue Service within thirty (30) days of the date of the Award, with a copy to
the Company or Affiliate with whom the Participant is employed.

     

    “Securities
Act” means the Securities Act of 1933, as amended, and all rules and
regulations promulgated thereunder. Any reference to any section of the
Securities Act shall also be a reference to any successor
provision.

     

    “Subsidiary”
means any subsidiary corporation of the Company within the meaning of
Section 424(f) of the Code.

     

    “Ten
Percent Shareholder” means a person owning stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, its
Subsidiaries or its Parent.

     

    
      	
              3.

            	
              Grants
      of Options.

            

    

     

    
      	
              3.1

            	
              The
      Administrator shall have full authority to grant Options to Participants
      pursuant to the terms of this Appendix and the Plan. All Options shall be
      granted by, confirmed by, and subject to the terms of, a written agreement
      to be executed by the Company and the Participant. In particular, the
      Administrator shall have the authority to determine whether a Option is an
      Incentive Stock Option or Non-Qualified Stock
  Option.

            

    

     

    
      	
              3.2

            	
              Early
      Exercise. Subject to Section 1.5 of this Appendix, the
      Administrator may provide that a Non-Qualified Stock Option include a
      provision whereby the Participant may elect at any time before the
      termination of a Participant’s employment or engagement as a Service
      Provider to exercise an Option as to any part or all of the Shares subject
      to the Option prior to the full vesting of the Option and such shares
      shall be subject to certain restrictions as determined by the
      Administrator and be treated as Restricted Stock. Any unvested Shares so
      purchased may be subject to a repurchase option in favor of the Company or
      to any other restriction the Administrator determines to be
      appropriate.

            

    

     

    
      	
              3.3

            	
              Termination.

            

    

     

    (a) If a
Participant ceases to be a Service Provider other than by reason of the
Participant’s Disability or death, such Holder may exercise his or her Option
within such period of time as is specified in the Plan or the Award Agreement to
the extent that the Option is vested on the date of termination.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) If a
Participant ceases to be a Service Provider as a result of the Participant’s
Disability, the Participant may exercise his or her Option within such period of
time as is specified in the Plan or the Award Agreement to the extent the Option
is vested on the date of termination.

     

    (c) If a
Participant dies while a Service Provider, the Option may be exercised within
such period of time as is specified in the Plan or the Award
Agreement.

     

    To avoid
doubt, the provisions of Section 9 of the Plan shall remain in full force and
effect and apply to Options granted pursuant to this Appendix.

     

    
      	
              4.

            	
              Shares
      Reserved under Appendix.

            

    

     

    The
aggregate number of Shares with respect to which Options may be granted under
this Appendix shall not exceed 2,273,789 Shares plus any Shares subject to
options that may be canceled under the 2003 Israeli Share Option Plan since the
adoption of the Plan (subject to any increase or decrease approved by the Board
of Directors), which includes all authorized and unissued Share designated for
such purpose. In determining the number of Shares available for Options, if
Shares have been delivered or surrendered by a Participant as full or partial
payment to the Company for payment of the exercise price, or for payment of
withholding taxes, or if the number Shares otherwise deliverable has been
reduced for payment of the exercise price or for payment of withholding taxes,
the number of Shares surrendered as payment in connection with the exercise or
for withholding or reduced shall again be available for purposes of Options
under this Appendix. Notwithstanding the foregoing, the maximum number of Shares
that may be issued pursuant to Incentive Stock Options 1,773,789 Shares, and
such reserve of Shares for grants of Incentive Stock Options shall not be
increased without the approval of the shareholders of the Company as required
pursuant to Section 421 et
seq. of the Code. The numbers of Shares stated in this Section 4 shall be
subject to adjustment as provided in Section 10.1 of the Plan.

     

    
      	
              5.

            	
              Special
      Terms for Incentive Stock Options.

            

    

     

    5.1 Eligibility.
All Service Providers are eligible to be granted Non-Qualified Stock
Options under this Appendix, and all employees of the Company, a Subsidiary or a
Parent are eligible to be granted Incentive Stock Options under this Appendix,
if so employed on the grant date of such Incentive Stock Option, although it is
anticipated that grants hereunder will be granted solely or primarily to U.S.
Taxpayers. Eligibility for the grant of an Option and actual participation in
this Appendix and the Plan shall be determined by the Administrator in its sole
discretion. Notwithstanding anything in this Section 5.1 to the contrary,
Consultants who are not natural persons that provide bona fide services to the
Company, a Subsidiary or a Parent and Consultants who provide services in
connection with the offer or sale of securities in a capital raising transaction
or within the meaning of Rule 701 of the Securities Act shall not be eligible to
be granted Options under this Appendix.

     

    5.2 Disqualification.
To the extent that any Option does not qualify as an Incentive Stock
Option (whether because of its provisions or the time or manner of its exercise
or otherwise), such Option or the portion thereof that does not qualify shall
constitute a separate Non-Qualified Stock Option.

     

    5.3 Exercise
Price. The exercise price per Share subject to an Option shall be
determined by the Administrator at the time of grant of such Option; provided
that the per share exercise price of an Option shall not be less than 100% of
the Fair Market Value of the Share at the time of grant of such Option; and
provided, further, that if an Option is granted to a Ten Percent Shareholder,
the exercise price per Share shall be no less than 110% of the Fair Market Value
of the Share at the time of the grant of such Option.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.4 Option
Term. The term of each Option shall be fixed by the Administrator;
provided, however, that no Option shall be exercisable more than 10 years after
the date such Option is granted; and further provided that the term of an
Incentive Stock Option granted to a Ten Percent Shareholder shall not exceed
five years.

     

    5.5 Incentive
Stock Option Limitations. To the extent that the aggregate Fair Market
Value (determined as of the time of grant) of a Share with respect to which
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year under this Plan and/or any other stock option plan of the
Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be
treated as Non- Qualified Stock Options. In addition, if an employee does not
remain employed by the Company, any Subsidiary or any Parent at all times from
the time an Incentive Stock Option is granted until three months prior to the
date of exercise thereof (or such other period as required by Section 422 of the
Code), such Option shall be treated as a Non- Qualified Stock Option. Should any
provision of this Appendix not be necessary in order for the Options to qualify
as Incentive Stock Options, or should any additional provisions be required, the
Administrator may amend this Appendix accordingly, without the necessity of
obtaining the approval of the shareholders of the Company, unless required by
applicable law.

     

    5.6 Effect
of Termination. Notwithstanding anything to the contrary in the Plan or
this Appendix, and in the absence of a provision specifying otherwise in the
relevant Award Agreement, then with respect to Incentive Stock Options, the
following provisions must be met on order for the Award to qualify as an
Incentive Stock Option under the Code:

     

    (a) in
the event that the Participant ceases to be an employee of the Company or an
Affiliate for any reason other than the Participant's death or Disability, the
vested Options must be exercised within three (3) months from the effective date
of termination of the Participant’s status as a Service Provider;

     

    (b) in
the event that the Participant ceases to be a Service Provider as a result of
the Participant's death or Disability, the Option must be exercised within
twelve (12) months following the Participant's date of termination for death or
Disability.

     

    To avoid
doubt, the provisions of Section 9 of the Plan and Section 3.4 of this Appendix
shall remain in full force and effect and apply to Awards granted as Incentive
Stock Options. The restrictions set forth above represent special additional
limitations that apply to qualify as Incentive Stock Options under the
provisions of the Code. To avoid doubt, a Participant may choose to exercise
Options in accordance with the terms of Section 9 of the Plan or Section 3.4 of
the Appendix and the relevant Award Agreement, and not in compliance with the
provisions of the Code relating to “incentive stock options”. In that case such
Option will not qualify as an Incentive Stock Option and will be treated as a
Non- Qualified Stock Option.

     

    
      	
              6.

            	
              Special
      Terms for Restricted Stock

            

    

     

    In
accordance with the terms of the Code, a Participant shall be responsible for
payment of all taxes incurred in connection with the grant of Restricted Stock.
Accordingly, upon the vesting of Restricted Stock, or upon making a Section
83(b) Election, a Participant shall make provision for the payment of all
required withholding to the Company in accordance with Section 16.1 of the
Plan.

     

    
      	
              7.

            	
              Repurchase
      Provisions

            

    

     

    The
Administrator in its sole discretion may provide that the Company may repurchase
Shares acquired upon exercise of an Option pursuant to the Plan and this
Appendix upon the occurrence of certain specified events, including, without
limitation, a Participant’s termination as a Service Provider, divorce,
bankruptcy or insolvency;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    provided,
however, that any such repurchase right shall be set forth in the
applicable Award Agreement or Restricted Stock purchase agreement or in another
agreement referred to in such agreement.

     

    
      	
              8.

            	
              Amendment
      of Appendix and Individual Awards.

            

    

     

    
      	
              8.1

            	
              This
      Appendix shall terminate ten (10) years following the first date of its
      approval by the Board of Directors. This Appendix may otherwise be amended
      or terminated in accordance with the terms governing the amendment or
      termination of the Plan; provided, however, that without the approval of
      the shareholders of the Company entitled to vote in accordance with
      applicable law, no amendment may be made that would: (i) increase the
      aggregate number of Shares that may be issued under this Appendix; (ii)
      change the classification of individuals eligible to receive Options under
      this Appendix; (iii) decrease the minimum exercise price of any Option
      below the amounts specified herein; (iv) extend the term of the Plan under
      Section 12.1 of the Plan or the maximum Option period under Section 5.4 of
      this Appendix; or (v) require shareholder approval in order for the
      Appendix to continue to comply with Section 422 of the Code to the extent
      applicable to Incentive Stock Options or require shareholder approval
      under the rules of any exchange or system on which the Company’s
      securities are listed or traded at the request of the
    Company.

            

    

     

    
      	
              8.2

            	
              The
      Administrator may, to the extent permitted by the Plan and this Appendix,
      amend the terms of any Option theretofore granted, prospectively or
      retroactively, but, subject to the Plan or as otherwise specifically
      provided herein, no such amendment or other action by the Administrator
      shall materially impair the previously accrued rights of any holder of
      such Option without the holder’s
consent.

            

    

     

    
      	
              8.3

            	
              Notwithstanding
      any other provisions of the Plan or this Appendix to the contrary, (a) the
      Administrator may amend the Plan, this Appendix or any Award without the
      consent of the holder thereof if the Administrator determines that such
      amendment is required or advisable for the Company, the Plan, this
      Appendix or any Award to satisfy, comply with or meet the requirements of
      any law, regulation, rule or accounting standard, and (b) none of the
      Company, the Board or the Administrator shall take any action pursuant to
      Section 8 or Section 9 of this Appendix or Section 10 or Section 12.2 of
      the Plan, or otherwise, that would cause an Award that is otherwise exempt
      under Code Section 409A to become subject to Code Section 409A, or that
      would cause an Award that is subject to Code Section 409A to fail to
      satisfy the requirements of Code Section
409A.

            

    

     

    
      	
              9.

            	
              Transferability
      of Options.

            

    

     

    No Option
shall be transferable by the Participant otherwise than by will or by the laws
of descent and distribution, and all Options shall be exercisable, during the
Participant’s lifetime, only by the Participant. Notwithstanding the foregoing,
the Committee may determine, in its sole discretion, at the time of grant or
thereafter that a Non-Qualified Stock Option that is otherwise not transferable
pursuant to this Section is transferable to a Family Member in whole or in part
and in such circumstances, and under such Conditions, as specified by the
Committee. A Non-Qualified Stock Option that is transferred to a Family Member
pursuant to the preceding sentence (i) may not be subsequently transferred
otherwise than by will or by the laws of descent and distribution and (ii)
remains subject to the terms of the Plan, the Appendix and the applicable Award
agreement. Any shares of Common Stock acquired upon the exercise of a
Non-Qualified Stock Option by a permissible transferee of a Non-Qualified Stock
Option or a permissible transferee pursuant to a transfer after the exercise of
the Non-Qualified Stock Option shall be subject to the terms of the Plan, the
Appendix and the applicable Award Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              10.

            	
              Deferred
      Compensation.

            

    

     

    To the
extent that the Administrator determines that any Award granted under the Plan
and this Appendix is subject to Section 409A of the Code, the Award Agreement
evidencing such Award shall incorporate the terms and conditions required by
Section 409A of the Code. To the extent applicable, the Plan, this Appendix and
the Award Agreements shall be interpreted in accordance with Section 409A of the
Code and Department of Treasury regulations and other interpretive guidance
issued thereunder,including without limitation any such regulations or other
guidance that may be issued after the Effective Date. Notwithstanding any
provision of the Plan or this Appendix to the contrary, in the event that
following the Effective Date the Administrator determines that any Award may be
subject to Section 409A of the Code and related Department of Treasury guidance
(including such Department of Treasury guidance as may be issued after the
Effective Date), the Administrator may adopt such amendments to the Plan or the
Appendix and the applicable Award Agreement or adopt other policies and
procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Administrator determines are
necessary or appropriate to (a) exempt the Award from Section 409A of the Code
and/or preserve the intended tax treatment of the benefits provided with respect
to the Award, or (b) comply with the requirements of Section 409A of the Code
and related Department of Treasury guidance.

     

    The
Administrator may permit deferrals of compensation pursuant to the terms of a
Participant’s Award Agreement, a separate plan, or an Appendix that (in each
case) meets the requirements of Code Section 409A.Unassociated Document

    
       

      DRAWDOWN EQUITY FINANCING
AGREEMENT

       

      THIS AGREEMENT dated as of the
day of March 18, 2010 (the “Agreement”) between
Auctus Private Equity Fund,
LLC a Massachusetts corporation (the “Investor”), and Smart Kids Group, Inc. a
corporation organized and existing under the laws of the Florida (the “Company”).

       

      WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Investor, from time to time as provided herein, and
the Investor shall purchase from the Company up to Ten
Million  Dollars ($10,000,000) of the Company’s common stock, par
value $0.0001 per share (the “Common Stock”);
and

       

      WHEREAS, such investments will
be made in reliance upon the provisions of Regulation D (“Regulation D”) of the
Securities Act of 1933, as amended, and the regulations promulgated thereunder
(the “Securities
Act”), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.

       

      WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto (the "Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act,
and the rules and regulations promulgated thereunder, and applicable state
securities laws.

       

      NOW, THEREFORE, the parties hereto
agree as follows:

       

      ARTICLE
I.

      Certain
Definitions

       

      Section
1.1.       “Advance” shall mean
the portion of the Commitment Amount requested by the Company in the Drawdown
Notice.

       

      Section
1.2.       “Advance Date” shall
mean the first (1st)
Trading Day after expiration of the applicable Pricing Period for each
Advance.

       

      Section
1.3.       “Drawdown Notice”
shall mean a written notice in the form of Exhibit A attached
hereto to the Investor executed by an officer of the Company and setting forth
the Advance amount that the Company requests from the Investor.

       

      Section
1.4.       “Drawdown Notice Date”
shall mean each date the Company delivers (in accordance with Section 2.2(b) of
this Agreement) to the Investor a Drawdown Notice requiring the Investor to
advance funds to the Company, subject to the terms of this
Agreement.  No Drawdown Notice Date shall be less than five (5)
Trading Days after the prior Drawdown Notice Date.

       

      Section
1.5.       “Bid Price” shall
mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of the
Common Stock on the Principal Market or if the Common Stock is not traded on a
Principal Market, the highest reported bid price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc.

       

      Section
1.6.       “Closing” shall mean
one of the closings of a purchase and sale of Common Stock pursuant to Section
2.3.

       

      
        
          
          

        

        
          Page
1

          
            

          

        

        
          
          

        

      

       

      Section
1.7.       “Commitment Amount”
shall mean the aggregate amount of up to Ten Million Dollars ($10,000,000) which
the Investor has agreed to provide to the Company in order to purchase the
Company’s Common Stock pursuant to the terms and conditions of this
Agreement.

       

      Section
1.8.       “Commitment Period”
shall mean the period commencing on the earlier to occur of (i) the Effective
Date, or (ii) such earlier date as the Company and the Investor may mutually
agree in writing, and expiring on the earliest to occur of (x) the date on which
the Investor shall have made payment of Advances pursuant to this Agreement in
the aggregate amount of the Commitment Amount, (y) the date this Agreement is
terminated pursuant to Section 10.2 or (z) the date occurring twenty-four (24)
months after the Effective Date.

       

      Section
1.9.       “Common Stock” shall
mean the Company’s common stock, par value $0.0001 per share.

       

      Section
1.10.     “Condition Satisfaction
Date” shall have the meaning set forth in Section 7.2.

       

      Section
1.11.     “Damages” shall mean
any loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorney’s fees and disbursements and costs and expenses
of expert witnesses and investigation).

       

      Section
1.12.     “Effective Date” shall
mean the date on which the SEC first declares effective a Registration Statement
registering the resale of the Registrable Securities as set forth in Section
7.2(a).

       

      Section
1.13.     “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

       

      Section
1.14.     “Floor” shall mean Seventy-Five (75%) of the
average closing bid price of the stock over the preceding ten (10) trading days
prior to the Drawdown Notice Date “Floor Price”. The “Floor” can be waived at
the discretion of the Company.

       

      (a) The
Company, in its sole and absolute discretion, may waive its right with respect
to the Floor and allow the Investor to sell any shares below the Floor Price. In
the event that the Company does not waive its right with respect to the Floor,
the Investor shall immediately cease selling any shares within the Drawdown
Notice if the price falls below the Floor Price.

       

      Section
1.15.     “Material Adverse
Effect” shall mean any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement or the
Registration Rights Agreement in any material respect.

       

      Section
1.16.     “Market Price” shall
mean the lowest closing Bid Price of the Common Stock during the Pricing
Period.

       

      Section
1.17.     “Maximum Advance
Amount” shall not exceed Two Hundred Fifty Thousand
Dollars ($250,000) or two hundred (200%) percent of the average daily
volume based on the trailing twenty (20) days preceding the Drawdown Notice date
whichever is of a larger value.

       

      Section
1.18.     “NASD” shall mean the
National Association of Securities Dealers, Inc.

       

      Section
1.19.     “Person” shall mean an
individual, a corporation, a partnership, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.

       

      
        
          
          

        

        
          Page
2

          
            

          

        

        
          
          

        

      

       

      Section
1.20.     “Pricing Period” shall
mean the five (5) consecutive Trading Days after the Drawdown Notice
Date.

       

      Section
1.21.    “Principal Market”
shall mean the Nasdaq National Market, the Nasdaq Capital Market, the American
Stock Exchange, the OTC Bulletin Board, OTC Pink Sheets or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

       

      Section
1.22.     “Purchase Price” shall
be set at Ninety-Five percent (95%) of the lowest closing bid price of the
common stock during the Pricing Period.

       

      Section
1.23.     “Registrable
Securities” shall mean the shares of Common Stock to be issued
hereunder (i) in
respect of which the Registration Statement has not been declared effective by
the SEC, (ii) which have not been sold under circumstances meeting all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act (“Rule 144”) or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

       

      Section
1.24.     “Registration Rights
Agreement” shall mean the Registration Rights Agreement dated the date
hereof, regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the
Investor.

       

      Section
1.25.     “Registration
Statement” shall mean a registration statement on Form S-1  (if
use of such form is then available to the Company pursuant to the rules of the
SEC and, if not, on such other form promulgated by the SEC for which the Company
then qualifies and which counsel for the Company shall deem appropriate, and
which form shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement and
the Registration Rights Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.

       

      Section
1.26.     “Regulation D” shall
have the meaning set forth in the recitals of this Agreement.

       

      Section
1.27.     “SEC” shall mean the
United States Securities and Exchange Commission.

       

      Section
1.28.     “Securities Act” shall
have the meaning set forth in the recitals of this Agreement.

       

      Section
1.29.     “SEC Documents” shall
mean Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and Proxy Statements of the Company as supplemented to the
date hereof, filed by the Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may be,
until such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.

       

      Section
1.30.     “Trading Day” shall
mean any day during which the New York Stock Exchange shall be open for
business.

       

      
        
          
          

        

        
          Page
3

          
            

          

        

        
          
          

        

      

       

      ARTICLE
II.

      Advances

       

      Section
2.1.       Advances.

       

      (a)       Subject
to the terms and conditions of this Agreement (including, without limitation,
the provisions of Article VII hereof), the Company, at its sole and exclusive
option, may issue and sell to the Investor, and, except for conditions outside
of the Investor’s control, the Investor shall be obligated to purchase from the
Company, shares of the Company’s Common Stock by the delivery, in the Company’s
sole discretion, of Drawdown Notices.  The number of shares of Common
Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase
Price.  No fractional shares shall be issued. Fractional shares shall
be rounded to the next higher whole number of shares.  The aggregate
maximum amount of all Advances that the Investor shall be obligated to make
under this Agreement shall not exceed the Commitment Amount.

       

      (b)      The
Investor shall immediately cease selling any shares within the Drawdown Notice
if the price falls below the Floor Price. The Company, in its sole and absolute
discretion, may waive its right with respect to the Floor and allow the Investor
to sell any shares below the Floor Price.  Only when the closing bid
price of the stock is above the Floor Price (the price at the time when the
Investor must immediately cease selling shares) may the Investor reinitiate
selling of any shares without such waiver from the Company required under this
subsection.

       

      Section
2.2.       Mechanics.

       

      (a)       Drawdown
Notice.  At any time during the Commitment Period, the Company
may request the Investor to purchase shares of Common Stock by delivering a
Drawdown Notice to the Investor, subject to the conditions set forth in
Section 7.2; provided, however, the amount for each Advance as designated
by the Company in the applicable Drawdown Notice shall not be more than the
Maximum Advance Amount and the aggregate amount of the Advances pursuant to this
Agreement shall not exceed the Commitment Amount.  The Company
acknowledges that the Investor may sell shares of the Company’s Common Stock
corresponding with a particular Drawdown Notice after the Drawdown Notice is
received by the Investor.  There shall be a minimum of five (5)
Trading Days between each Drawdown Notice Date.

       

      (b)      Date of Delivery of Drawdown
Notice.  A Drawdown Notice shall be deemed delivered on: (i)
the Trading Day it is received by email to louposner@auctusfund.com and
als@auctusfund.com if such notice is received prior to 5:00 pm Eastern Time; or
(ii) the immediately succeeding Trading Day if Drawdown Notice is received by
facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day.  No Drawdown Notice may be
deemed delivered on a day that is not a Trading Day or if positive receipt is
not acknowledged by Auctus.

       

      Section
2.3.       Closings.  On
each Advance Date (i) the Company shall deliver to the Investor such number of
shares of the Common Stock registered in the name of the Investor as shall equal
(x) the amount of the Advance specified in such Drawdown Notice pursuant to
Section 2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt of
such shares, the Investor shall deliver to the Company the amount of the Advance
specified in the Drawdown Notice by wire transfer of immediately available
funds.  In addition, on or prior to the Advance Date, each of the
Company and the Investor shall deliver to the other all documents, instruments
and writings required to be delivered by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated
herein.  To the extent the Company has not paid the fees, expenses,
and disbursements of the Investor in accordance with Section 12.4, the amount of
such fees, expenses, and disbursements may be deducted by the Investor (and
shall be paid to the relevant party) directly out of the proceeds of the Advance
with no reduction in the amount of shares of the Company’s Common Stock to be
delivered on such Advance Date.

       

      
        
          
          

        

        
          Page
4

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (a)

              	
                Company’s Obligations
      Upon Closing.

              

      

       

      (i)          The
Company shall use all reasonable efforts to become DTC eligible within a
reasonable time of the date of this Agreement.  Upon approval of DTC
eligibility, the Company shall deliver to the Investor, through the use of a
Deposit/Withdrawal at Custodian from a Deposit Trust Company method or commonly
referred to as “DWAC/DTC” of the Investor’s choosing, the shares of Common Stock
applicable to the Advance in accordance with Section 2.3.  The
certificates evidencing such shares shall be free of restrictive
legends.  Upon receipt, Investor will perform a wire transfer on the
same business day provided that the shares have been received in sufficient time
to perform such transfer.  In the event that the Investor is no longer
able, due to time constraints beyond his control, to perform a wire on the day
of receipt, the wire will be promptly executed the following business
day.

       

      (ii)         the
Company’s Registration Statement with respect to the resale of the shares of
Common Stock delivered in connection with the Advance shall have been declared
effective by the SEC;

       

      (iii)        the
Company shall have obtained all material permits and qualifications required by
any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom.  The sale and
issuance of the Registrable Securities shall be legally permitted by all laws
and regulations to which the Company is subject;

       

      (iv)        the
Company shall file with the SEC in a timely manner all reports, notices and
other documents required of a “reporting company” under the Exchange Act and
applicable Commission regulations;

       

      (v)         the
fees as set forth in Section 12.4 below shall have been paid or can be withheld
as provided in Section 2.3; and

       

      (vi)        The
Company’s transfer agent shall be DWAC eligible.

       

      (b)      
      Investor’s Obligations Upon
Closing.     Upon receipt of the shares
referenced in Section 2.3(a)(i) above and provided the Company is in compliance
with its obligations in Section 2.3, the Investor shall deliver to the Company
the amount of the Advance specified in the Drawdown Notice by wire transfer of
immediately available funds.

       

      Section
2.4.       Hardship.  In
the event the Investor sells shares of the Company’s Common Stock after receipt
of an Drawdown Notice and the Company fails to perform its obligations as
mandated in Section 2.3, and specifically the Company fails to deliver to the
Investor on the Advance Date the shares of Common Stock corresponding to the
applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges that
the Investor shall suffer financial hardship and therefore shall be liable for
any and all losses, commissions, fees, interest, legal fees or any other
financial hardship caused to the Investor.

       

      The
Company understands that a delay in the delivery of the securities in the form
required pursuant to this registration statement beyond the Closing could result
in economic loss to the Investor.  After the Effective Date, as
compensation to the Investor for late issuance of such shares (delivery of
securities after the applicable closing), the Company agrees to make payments to
the Investor in accordance with the schedule below where the number of days
overdue is defined as the number of business days beyond the close with amount
due being cumulative.

       

      
        
          
          

        

        
          Page
5

          
            

          

        

        
          
          

        

      

       

      The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.  Nothing herein shall limit the right of
the Investor to pursue damages for the Company’s failure to comply with the
issuance and delivery of securities to the Investor.

       

      
        
          
            
              
                
                  	
                          Payments
      for Each Number of Days Overdue

                        	 	
                          For
      each $10,000 Worth of Common Stock

                        
	 
      	 	 
      
	
                          1

                        	 	
                          $100

                        
	
                          2

                        	 	
                          $200

                        
	
                          3

                        	 	
                          $300

                        
	
                          4

                        	 	
                          $400

                        
	
                          5

                        	 	
                          $500

                        
	
                          6

                        	 	
                          $600

                        
	
                          7

                        	 	
                          $700

                        
	
                          8

                        	 	
                          $800

                        
	
                          9

                        	 	
                          $900

                        
	
                          10

                        	 	
                          $1000

                        
	
                          Over
      10

                        	 	
                          $1000
      + $200 for each Business Day beyond the tenth
  day

                        

                

              

            

          

        

      

       

      ARTICLE
III.

      Representations
and Warranties of Investor

       

      Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:

       

      Section
3.1.       Organization and
Authorization.  The Investor is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization
and has all requisite power and authority to purchase and hold the securities
issuable hereunder.  The decision to invest and the execution and
delivery of this Agreement by such Investor, the performance by such Investor of
its obligations hereunder and the consummation by such Investor of the
transactions contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investor.  The undersigned has the
right, power and authority to execute and deliver this Agreement and all other
instruments (including, without limitations, the Registration Rights Agreement),
on behalf of the Investor.  This Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

       

      Section
3.1.1.    Evaluation of
Risks.  The Investor has such knowledge and experience in
financial, tax and business matters as to be capable of evaluating the merits
and risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this
transaction.  It recognizes that its investment in the Company
involves a high degree of risk.

       

      Section
3.2.       No Legal Advice From the
Company.  The Investor acknowledges that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax
advisors.  The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.

       

      
        
          
          

        

        
          Page
6

          
            

          

        

        
          
          

        

      

       

      Section
3.3.       Investment Purpose.
The securities are being purchased by the Investor for its own account, and for
investment purposes.  The Investor agrees not to assign or in any way
transfer the Investor’s rights to the securities or any interest therein and
acknowledges that the Company will not recognize any purported assignment or
transfer except in accordance with applicable Federal and state securities
laws.  No other person has or will have a direct or indirect
beneficial interest in the securities.  The Investor agrees not to
sell, hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.

       

      Section
3.4.       Accredited
Investor.  The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities
Act.

       

      Section
3.5.       Information.  The
Investor and its advisors (and its counsel), if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and information it deemed material to making an informed investment
decision.  The Investor and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its
management.  Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor’s right to rely on
the Company’s representations and warranties contained in this
Agreement.  The Investor understands that its investment involves a
high degree of risk.  The Investor is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Investor to obtain information from
the Company in order to evaluate the merits and risks of this
investment.  The Investor has sought such accounting, legal and tax
advice, as it has considered necessary to make an informed investment decision
with respect to this transaction.

       

      Section
3.6.       Receipt of Documents.
The Investor and its counsel have received and read in their
entirety:  (i) this Agreement and the Exhibits annexed hereto; (ii)
all due diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; and (iii)
answers to all questions the Investor submitted to the Company regarding an
investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.

       

      Section
3.7.       Registration Rights
Agreement.  The parties have entered into the Registration
Rights Agreement dated the date hereof.

       

      Section
3.8.       No General
Solicitation.  Neither the Company, nor any of its affiliates,
nor 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 Securities Act) in connection with the offer or sale of the shares of Common
Stock offered hereby.

       

      Section
3.9.       Not an
Affiliate.  The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with the Company or any “Affiliate” of the
Company (as that term is defined in Rule 405 of the Securities
Act).

       

      
        
          
          

        

        
          Page
7

          
            

          

        

        
          
          

        

      

       

      Section
3.10.     Trading
Activities.  The Investor’s
trading activities with respect to the Company’s Common Stock shall be in
compliance with all applicable federal and state securities laws, rules and
regulations and the rules and regulations of the Principal Market on which the
Company’s Common Stock is listed or traded and Investor will comply with any
requests that the SEC makes in connection with the Filing of the Registration
Agreement to ensure such compliance. Neither the Investor nor its
affiliates has an open short position in the Common Stock of the Company, the
Investor agrees that it shall not, and that it will cause its affiliates not to,
engage in any short sales of or hedging transactions with respect to the Common
Stock, provided that the Company acknowledges and agrees that upon receipt of an
Drawdown Notice the Investor has the right to sell the shares to be issued to
the Investor pursuant to the Drawdown Notice
during the applicable Pricing Period.

       

      Section
3.11      No Registration as a
Dealer. The Investor is not and will not be
required to be registered as a "dealer" under the 1934 Act, either as a result
of its execution and performance of its obligations under this Agreement or
otherwise.

       

      Section
3.12      Good Standing. The
Investor is a limited liability company, duly organized, validly existing and in
good standing under the laws of its state of formation and any jurisdiction in
which it is conducting business.

       

      ARTICLE
IV.

      Representations
and Warranties of the Company

       

      Except as
stated below, on the disclosure schedules attached hereto or in the SEC
Documents (as defined herein), the Company hereby represents and warrants to,
and covenants with, the Investor that the following are true and correct as of
the date hereof:

       

      Section
4.1.       Organization and
Qualification.  The Company is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization
and has all requisite corporate power to own its properties and to carry on its
business as now being conducted.  Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect on the Company and its subsidiaries taken as a
whole.

       

      Section
4.2.      Authorization, Enforcement,
Compliance with Other Instruments.  (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Placement Agent Agreement and
any related agreements, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Registration Rights Agreement,
the Placement Agent Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by the Company’s Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement, the Registration Rights Agreement, the
Placement Agent Agreement and any related agreements have been duly executed and
delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement, the Placement Agent Agreement and assuming the execution and delivery
thereof and acceptance by the Investor and any related agreements constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.

       

      
        
          
          

        

        
          Page
8

          
            

          

        

        
          
          

        

      

       

      Section
4.2.1.    Capitalization.  The
authorized capital stock of the Company consists of 400,000,000 shares of Common
Stock, $0.0001 par value; 129.087,000 ans 122,748,500 shares issued and
outstanding, respectively. All of such outstanding shares have been validly
issued and are fully paid and nonassessable.  Except as disclosed in
the SEC Documents, no shares of Common Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company.  Except as disclosed in the SEC Documents, as of the date
hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities (iii) there are no
outstanding registration statements other than on Form S-1and (iv) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except pursuant to the Registration Rights Agreement).  There are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the consummation
of the transactions described herein or therein.  This section shall
not prevent the Company, after the date hereof, from obtaining other funding or
other means of financing.

       

      The
Company has furnished to the Investor true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date
hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.

       

      Section
4.3.       No
Conflict.  The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws 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 to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which would cause a
Material Adverse Effect.  Except as disclosed in the SEC Documents,
neither the Company nor its subsidiaries is in violation of any term of or in
default under its Articles of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries.  The
business of the Company and its subsidiaries is not being conducted in violation
of any material law, ordinance, regulation of any governmental
entity.  Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws, the
Company 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 or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof.  All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.  The Company and its subsidiaries are
unaware of any fact or circumstance which might give rise to any of the
foregoing.

       

      
        
          
          

        

        
          Page
9

          
            

          

        

        
          
          

        

      

       

      Section
4.4.       SEC Documents; Financial
Statements.   As of the date hereof, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act.    As of their
respective dates, to the Company’s knowledge, the financial statements of the
Company disclosed in the SEC Documents (the “Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and, fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

       

      Section
4.5.       No
Default.  Except as disclosed in Exhibit 4.7, the Company is
not in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust or other material instrument or agreement to which it is a party or by
which it is or its property is bound and neither the execution, nor the delivery
by the Company, nor the performance by the Company of its obligations under this
Agreement or any of the exhibits or attachments hereto will conflict with or
result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under its Certificate of
Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other
material agreement applicable to the Company or instrument to which the Company
is a party or by which it is bound, or any statute, or any decree, judgment,
order, rules or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties, in each case which default,
lien or charge is likely to cause a Material Adverse Effect on the Company’s
business or financial condition.

       

      Section
4.6.       Absence of Events of
Default.  Except for matters described in Exhibit 4.8 and/or
this Agreement, no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a Material Adverse Effect on
the Company’s business, properties, prospects, financial condition or results of
operations.

       

      Section
4.7.       Intellectual Property
Rights.  The Company and its subsidiaries own or possess
adequate rights or licenses to use all material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted.   The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

       

      
        
          
          

        

        
          Page
10

          
            

          

        

        
          
          

        

      

       

      Section
4.8.       Employee
Relations.  Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened.  None of the Company’s
or its subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are
good.

       

      Section
4.9.       Environmental
Laws.  The Company and its subsidiaries are (i) in compliance
with any and all applicable material foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval.

       

      Section
4.10.     Title.  Except
as set forth in Exhibit 4.10, the Company has good and marketable title to its
properties and material assets owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Company.  Any real property
and facilities held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries.

       

      Section
4.11.     Insurance. Except as
set forth in Exhibit 4.11, the Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged.  Neither the Company nor any such subsidiary has been refused
any insurance coverage sought or applied for and neither the Company nor any
such subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.

       

      Section
4.12.     Regulatory
Permits.  The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

       

      Section
4.13.     Internal Accounting
Controls.  The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Representation by the company relating
to internal controls will be made at such time the registration filing has been
approved.

       

      
        
          
          

        

        
          Page
11

          
            

          

        

        
          
          

        

      

       

      Section
4.14.     No Material Adverse
Breaches, etc.  Except as set forth in Exhibit 4.16, neither
the Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries.  Except as set forth in the SEC Documents, neither the
Company nor any of its subsidiaries is in breach of any contract or agreement
which breach, in the judgment of the Company’s officers, has or is expected to
have a Material Adverse Effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries.

       

      Section
4.15.     Absence of
Litigation.  Except as set forth in Exhibit 4.17, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have
a Material Adverse Effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.

       

      Section
4.16.     Subsidiaries.  Except
as disclosed in Exhibit 4.18, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
association or other business entity.

       

      Section
4.17.     Tax
Status.  Except as disclosed in Exhibit 4.19, the Company and
each of its subsidiaries has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject and (unless and only to the extent that the Company and each
of its subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

       

      Section
4.18.     Certain
Transactions.  Except as set forth in Exhibit 4.20 none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

       

      Section
4.19.     Fees and Rights of First
Refusal.  The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties.

       

      
        
          
          

        

        
          Page
12

          
            

          

        

        
          
          

        

      

       

      Section
4.20.     Use of
Proceeds.  The Company shall use the net proceeds from this
offering for general corporate purposes, including, without limitation, the
payment of loans incurred by the Company.  However, in no event shall
the Company use the net proceeds from this offering for the payment (or loan to
any such person for the payment) of any judgment, or other liability, incurred
by any executive officer, officer, director or employee of the Company, except
for any liability owed to such person for services rendered, or if any judgment
or other liability is incurred by such person originating from services rendered
to the Company, or the Company has indemnified such person from
liability.

       

      Section
4.21.     Further Representation and
Warranties of the Company.  For so long as any securities
issuable hereunder held by the Investor remain outstanding, the Company
acknowledges, represents, warrants and agrees that it will maintain the listing
of its Common Stock on the Principal Market.

       

      Section
4.22.     Opinion of
Counsel.  Investor shall receive an opinion letter from counsel
to the Company on the date hereof.

       

      Section
4.23.     Opinion of
Counsel.  The Company will obtain for the Investor, at the
Company’s expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without
restriction.

       

      Section
4.24.     Dilution.  The
Company is aware and acknowledges that issuance of shares of the Company’s
Common Stock could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common
Stock.

       

      ARTICLE
V.

      Indemnification

       

      The
Investor and the Company represent to the other the following with respect to
itself:

       

      Section
5.1.       Indemnification.

       

      (a)       In
consideration of the Investor’s execution and delivery of this Agreement, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, and all
of its officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Investor Indemnitee not arising out of any action or inaction of an
Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

       

      
        
          
          

        

        
          Page
13

          
            

          

        

        
          
          

        

      

       

      (b)       In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Investor’s other obligations under this Agreement, the
Investor shall defend, protect, indemnify and hold harmless the Company and all
of its officers, directors, shareholders, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Company Indemnitees”)
from and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement, the Registration Rights Agreement, or any instrument
or document contemplated hereby or thereby executed by the Investor, (b) any
breach of any covenant, agreement or obligation of the Investor(s) contained in
this Agreement,  the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Investor, or (c) any cause of action, suit or claim brought or made against
such Company Indemnitee based on  misrepresentations or due to
a  breach by the Investor and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the Company
Indemnitees.  To the extent that the foregoing undertaking by the
Investor may be unenforceable for any reason, the Investor shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

       

      (c)       The obligations of the parties to indemnify or make
contribution under this Section 5.1 shall survive
termination.

       

      ARTICLE
VI.

      Covenants
of the Company

       

      Section
6.1.       Registration
Rights.  The Company shall cause the Registration Rights
Agreement to remain in full force and effect and the Company shall comply in all
material respects with the terms thereof.

       

      Section
6.2.       Listing of Common
Stock.  The Company shall maintain the Common Stock’s
authorization for quotation on the Principal Market.

       

      Section
6.3.       Exchange Act
Registration.  The Company will cause its Common Stock to
continue to be registered under Section 12(g) of the Exchange Act, will file in
a timely manner all reports and other documents required of it as a reporting
company under the Exchange Act and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Exchange Act.

       

      Section
6.4.       Transfer Agent
Instructions.  Upon effectiveness of the Registration Statement
the Company shall deliver instructions to its transfer agent to issue shares of
Common Stock to the Investor free of restrictive legends on or before each
Advance Date.

       

      Section
6.5.       Corporate
Existence.  The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.

       

      
        
          
          

        

        
          Page
14

          
            

          

        

        
          
          

        

      

       

      Section
6.6.       Notice of Certain Events
Affecting Registration; Suspension of Right to Make an
Advance.  The Company will immediately notify the Investor upon
its becoming aware of the occurrence of any of the following events in respect
of a registration statement or related prospectus relating to an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other Federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other Federal or state governmental authority of  any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus.  The Company shall not deliver to the Investor
any Drawdown Notice during the continuation of any of the foregoing
events.

       

      Section
6.7.       Restriction on Sale of
Capital Stock.  During the Commitment Period, the Company shall
not, without 10 days written notice to the Investor, (i) issue or sell any
Common Stock or Preferred Stock without consideration or for a consideration per
share less than the Bid Price of the Common Stock determined immediately prior
to its issuance, (ii) issue or sell any Preferred Stock warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for a
consideration per share less than the Bid Price of the Common Stock determined
immediately prior to its issuance, or (iii) file any registration statement on
Form S-8.

       

      Section
6.8.       Consolidation;
Merger.  The Company shall not, at any time after the date
hereof, effect any merger or consolidation of the Company with or into, or a
transfer of all or substantially all the assets of the Company to another entity
(a “Consolidation
Event”) unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement.

       

      Section
6.9.       Issuance of the Company’s
Common Stock.  The sale of the shares of Common Stock shall be
made in accordance with the provisions and requirements of Regulation D and
any applicable state securities law.

       

      Section
6.10.     Review of Public
Disclosures.  All SEC filings (including, without limitation,
all filings required under the Exchange Act, which include Forms 10-Q and
10-QSB, 10-K and 10K-SB, 8-K, etc) and other public disclosures made by the
Company, including, without limitation, all press releases, investor relations
materials, and scripts of analysts meetings and calls, shall be reviewed and
approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public
accountants.

       

      Section
6.11.     Market
Activities.  The Company will not, directly or indirectly, (i)
take any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Common Stock or (ii) sell, bid for or purchase the Common Stock, or pay anyone
any compensation for soliciting purchases of the Common Stock.

       

      
        
          
          

        

        
          Page
15

          
            

          

        

        
          
          

        

      

       

      ARTICLE
VII.

      Conditions
for Advance and Conditions to Closing

       

      Section
7.1.       Conditions Precedent to the
Obligations of the Company.  The obligation hereunder of the
Company to issue and sell the shares of Common Stock to the Investor incident to
each Closing is subject to the satisfaction, or waiver by the Company, at or
before each such Closing, of each of the conditions set forth
below.

       

      (a)       Accuracy of the Investor’s
Representations and Warranties.  The representations and
warranties of the Investor shall be true and correct in all material
respects.

       

      (b)       Performance by the
Investor.  The Investor shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement and the Registration Rights Agreement to be performed,
satisfied or complied with by the Investor at or prior to such
Closing.

       

      Section
7.2.       Conditions Precedent to the
Right of the Company to Deliver an Drawdown Notice.  The right
of the Company to deliver an Drawdown Notice is subject to the fulfillment by
the Company, on such Drawdown Notice (a “Condition Satisfaction
Date”), of each of the following conditions:

       

      (a)       Registration of the Common
Stock with the SEC.  The Company shall have filed with the SEC
a Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the Registration Rights
Agreement.  As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so, and (ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist.  The
Registration Statement must have been declared effective by the SEC prior to the
first Drawdown Notice Date.

       

      (b)      Authority.  The
Company shall have obtained all permits and qualifications required by any
applicable state in accordance with the Registration Rights Agreement for the
offer and sale of the shares of Common Stock, or shall have the availability of
exemptions therefrom.  The sale and issuance of the shares of Common
Stock shall be legally permitted by all laws and regulations to which the
Company is subject.

       

      (c)       Fundamental Changes.
There shall not exist any fundamental changes to the information set forth in
the Registration Statement, which would require the Company to file a
post-effective amendment to the Registration Statement.

       

      (d)       Performance by the
Company.  The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.

       

      (e)       No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.

       

      
        
          
          

        

        
          Page
16

          
            

          

        

        
          
          

        

      

    

    

      (f)           No Suspension of Trading in
or Delisting of Common Stock.  The trading of the Common Stock
is not suspended by the SEC or the Principal Market (if the Common Stock is
traded on a Principal Market).  The issuance of shares of Common Stock
with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market (if the Common Stock
is traded on a Principal Market).  The Company shall not have received
any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal
Market).

       

      (g)          Maximum Advance
Amount.  The amount of an Advance requested by the Company
shall not exceed the Maximum Advance Amount.  In addition, in no event
shall the number of shares issuable to the Investor pursuant to an Advance cause
the aggregate number of shares of Common Stock beneficially owned by the
Investor and its affiliates to exceed four and 99/100 percent (4.99%) of the
then outstanding Common Stock of the Company.  For the purposes of
this section beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act.

       

      (h)          No
Knowledge.  The Company has no knowledge of any event which
would be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.

       

      (i)           Executed Drawdown
Notice.  The Investor shall have received the Drawdown Notice
executed by an officer of the Company and the representations contained in such
Drawdown Notice shall be true and correct as of each Condition Satisfaction
Date.

       

      ARTICLE
VIII.

      Due
Diligence Review; Non-Disclosure of Non-Public Information

      

      Section
8.1.         Non-Disclosure of Non-Public
Information.

       

      (a)          The
Company covenants and agrees that it shall refrain from disclosing, and shall
cause its officers, directors, employees and agents to refrain from disclosing,
any material non-public information to the Investor without also disseminating
such information to the public, unless prior to disclosure of such information
the Company identifies such information as being material non-public information
and provides the Investor with the opportunity to accept or refuse to accept
such material non-public information for review.

       

      (b)          Nothing
herein shall require the Company to disclose non-public information to the
Investor or its advisors or representatives, and the Company represents that it
does not disseminate non-public information to any investors who purchase stock
in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not
misleading.  Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information) may not
obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.

      

        
          
             

          

          
            Page
17

            
              

            

          

          
             

          

        

      

      
      

       

      ARTICLE
IX.

      Choice
of Law/Jurisdiction

       

      Section
9.1.        Governing
Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without regard to
the principles of conflict of laws.  The parties further agree that
any action between them shall be heard in Boston, MA. for the adjudication of
any civil action asserted pursuant to this paragraph.

       

      ARTICLE
X.

      Assignment;
Termination

       

      Section
10.1.       Assignment.  Neither
this Agreement nor any rights of the Company hereunder may be assigned to any
other Person.

       

      Section
10.2.       Termination.

       

      (a)          The
obligations of the Investor to make Advances under Article II hereof shall
terminate twenty-four (24) months after the Effective Date.

       

      (b)          The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance Date
that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of fifty (50) Trading Days, other than due to the acts of the
Investor, during the Commitment Period, or (ii) the Company shall at any time
fail materially to comply with the requirements of Article VI and such failure
is not cured within thirty (30) days after receipt of written notice from the
Investor, provided, however, that this
termination provision shall not apply to any period commencing upon the filing
of a post-effective amendment to such Registration Statement and ending upon the
date on which such post effective amendment is declared effective by the
SEC.

       

      ARTICLE
XI.

      Notices

       

      a.           Section
11.0.0.1.       Notices.  Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S. certified
mail, return receipt requested; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses and
facsimile numbers for such communications shall be:

      
        
           

        

        
          Page
18

          
            

          

        

        
           

        

      

       

      
        
          	
                  If
      to the Company, to:

                	
                  Smart
      Kids Group, Inc.

                  515
      Old Santa Fe Trail PMB 435

                
	 
      	
                  Santa
      Fe, NM 87505

                
	 
      	
                  Attention:
      Paul Andrew Ruppanner, CEO

                
	 
      	
                  Telephone:
      505-577-7918

                
	 
      	
                  Facsimile:  702-974-1340

                
	 
      	 
      
	
                  If
      to the Investor, to:

                	
                  Auctus
      Private Equity Fund, LLC

                  One
      Beacon St. 34th
      Floor

                  Boston,
      MA 02108

                  ATTN:
      Lou Posner, Director

                  Telephone:
      617-532-6408

                  Facsimile:
      617-532-6402

                
	 
      	 
      
	
                  With
      a copy to:

                	 
      

        

      

       

      Each
party shall provide five (5) days’ prior written notice to the other party of
any change in address or facsimile number.

       

      ARTICLE
XII.

      Miscellaneous

       

      Section
12.1.      Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof, though
failure to deliver such copies shall not affect the validity of this
Agreement.

       

      Section
12.2.      Entire Agreement;
Amendments.  This Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters.  No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

       

      Section
12.3.      Reporting Entity for the
Common Stock.  The reporting entity relied upon for the
determination of the trading price or trading volume of the Common Stock on any
given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or
any successor thereto.  The written mutual consent of the Investor and
the Company shall be required to employ any other reporting
entity.

      
        
           

        

        
          Page
19

          
            

          

        

        
           

        

      

      Section
12.4.       Fees and
Expenses.  The Company hereby agrees to pay the following
fees:

       

      (a)         Fees.  Each
of the parties shall pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such party) in
connection with this Agreement and the transactions contemplated
hereby.

       

      (b)         Origination Fee. The
Company has agreed to pay the Investor Fifteen Thousand Dollars ($15,000) in
cash as a non-refundable origination fee.

       

      Section
12.5.      Confidentiality.  If
for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any information
obtained from any other party (except information publicly available or in such
party’s domain prior to the date hereof, and except as required by court order)
and shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining copies
thereof, previously furnished by it as a result of this Agreement or in
connection herein.

       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      
        
           

        

        
          Page
20

          
            

          

        

        
           

        

      

       

      IN WITNESS WHEREOF, the
parties hereto have caused this Drawdown Equity Financing Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.

       

      
        
          
            
              	
                      COMPANY:

                    
	
                      Smart
      Kids Group, Inc.

                    
	 
      	 
      
	
                      By:

                    	/s/ Andrew Ruppanner
	
                      Name:
      Paul Andrew Ruppanner

                    
	
                      Title:
      CEO

                    
	 
      	 
      
	
                      INVESTOR:

                    
	
                      Auctus
      Private Equity Fund, LLC

                    
	 
      
	
                      By:  

                    	/s/
      Lou Posner
	
                      Name:  Lou
      Posner

                    
	
                      Title:
      Director

                    

            

          

        

      

      
        
           

        

        
          Page
21

          
            

          

        

        
           

        

      

      EXHIBIT
A

       

      DRAWDOWN
NOTICE

       

      Smart
Kids Group, Inc.

       

      The
undersigned, _______________________ hereby certifies, with respect to the sale
of shares of Common Stock of Smart Kids Group, Inc. (the “Company”) issuable in
connection with this Drawdown Notice, delivered pursuant to the Drawdown Equity
Financing Agreement (the “Agreement”), as
follows:

       

      1.           The
undersigned is the duly elected ______________ of the Company.

       

      2.           There
are no fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post effective amendment to
the Registration Statement.

       

      3.           The
Company has performed in all material respects all covenants and agreements to
be performed by the Company and has complied in all material respects with all
obligations and conditions contained in the Agreement on or prior to the
Drawdown Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date.  All conditions to the delivery of this Drawdown Notice
are satisfied as of the date hereof.

       

      4.           The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC
Filings”) required to be made by it pursuant to applicable securities
laws (including, without limitation, all filings required under the Securities
Exchange Act of 1934, which include Forms 10-Q or 10-QSB, 10-K or 10-KSB, 8-K,
etc.).  All SEC Filings and other public disclosures made by the
Company, including, without limitation, all press releases, analysts meetings
and calls, etc. (collectively, the “Public Disclosures”),
have been reviewed and approved for release by the Company’s attorneys and, if
containing financial information, the Company’s independent certified public
accountants.  None of the Company’s Public Disclosures contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

       

      5.           The
Advance requested is _____________________.

       

      The
undersigned has executed this Certificate this ____ day of
_________________.

       

      
        
          	
                  Smart
      Kids Group, Inc.

                
	 
      
	
                  By:  

                	 
      
	
                  Name:
      Paul Andrew Ruppanner

                
	
                  Title:
      CEO

                

        

      

      
        
           

        

        
          Page
22

          
            

          

        

        
           

        

      

      Exhibit
4.7

       

      None

      
        
           

        

        
          Page
23

          
            

          

        

        
           

        

      

      Exhibit
4.8

      
        
           

        

        
          Page
24

          
            

          

        

        
           

        

      

      Exhibit
4.10

       

      None

      
        
           

        

        
          Page
25

          
            

          

        

        
           

        

      

      Exhibit
4.11

      
        
           

        

        
          Page
26

          
            

          

        

        
           

        

      

      Exhibit
4.16

       

      None

      
        
           

        

        
          Page
27

          
            

          

        

        
           

        

      

      Exhibit
4.17

       

      Litigation

       

      None

      
        
           

        

        
          Page
28

          
            

          

        

        
           

        

      

      Exhibit
4.18

       

      Subsidiaries

      
        
           

        

        
          Page
29

          
            

          

        

        
           

        

      

      Exhibit
4.19

      
        
           

        

        
          Page
30

          
            

          

        

        
           

        

      

      Exhibit
4.20

      
        
           

        

        
          Page
31

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]