Document:

Fromex
        Equity Corp.

      Notes
        To Financial Statements

    

    Exhibit
      10.05

    

    Assignment
      and Bill of Sale

    

    This
      Assignment and Bill of Sale is made as of the close of business on the
      30th
      day of
      April 2007 between Horizon Asset Management, Inc. (herein “Horizon” or “Seller”)
      and Fromex Equity Corp., a Delaware corporation (herein “Fromex” or
“Purchaser”).

     

    WITNESSETH

    WHEREAS:

    

    
      	 	
              A.

            	
              Horizon
                has a 45% general partner interest in the Protostar Fund, LP, a hedge
                fund
                with a domestic portion (a Delaware limited partnership) and an offshore
                portion (an exempted company incorporated pursuant to the Companies
                Law of
                the Caymen Islands), and Horizon is the investment manager for the
                fund.

            

    

    

    
      	 	
              B.

            	
              Horizon
                is herewith assigning to Fromex a one-third (33.33%) share of the
                amounts
                (herein “Cash Revenues”) Horizon will hereafter receive in cash by reason
                of its general partner and investment manager interests in Protostar
                Fund.

            

    

     

    
      	
            	C.	
              The
                Purchase Price is $72,000 payable as set forth
                below.

            

    

     

    NOW
      THEREFORE,
      in
      consideration of the premises and the payment to Horizon of $72,000 on or before
      May 31, 2007 the Seller
      does hereby sell, assign and transfer to the Purchaser, its successors and
      assigns One
      Third
      (33.33%) of said Cash Revenues and it is hereby agreed between the parties
      as
      follows:

    

    1. Term.
      Fromex’s shares of the Cash Revenues shall be in effect on the date hereof and
      continue in effect in perpetuity so long as Horizon, or its successors and
      assigns, receive revenues, in cash, from the Protostar Fund.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      Fromex
        Equity Corp.

      Notes
        To Financial Statements

    2. Payment.
      Horizon
      shall pay to Fromex in perpetuity one-third (33 1/3%) percent of the Cash
      Revenues that Horizon, or its successors and assigns, receives from Protostar
      Fund so long as such Cash Revenues are paid to Horizon. Said one-third share
      shall be based only on the cash actually received by Horizon from Protostar
      in
      each three (3) month period beginning May 1, 2007. The payment of such share
      shall be made at the close of the month following the end of each three month
      period (the first period is four months) ending on the last days of February,
      May, August and November of each year, less any advances, which Horizon shall
      have made to Fromex on account thereof.

    

    3.  Arbitration
      and Choice of Laws.
      The
      laws of the State of New York shall govern this Agreement, without regard to
      the
      conflict of laws principles thereof. The parties irrevocably agree that all
      disagreements or controversies in any way, manner or respect, arising out of
      or
      related to this Agreement shall be resolved by binding arbitration in New York
      City in accordance with the Rules of the American Arbitration Association.
      Each
      party hereby consents and submits to the jurisdiction of the American
      Arbitration Association and hereby waives any rights the party may have to
      transfer or change the venue of any such dispute. The prevailing party in any
      arbitration in connection with this Agreement shall be entitled to recover
      from
      the other party all costs and expenses, including without limitation reasonable
      fees of attorneys and paralegals, incurred by such party in connection with
      any
      such arbitration or court proceeding to enforce the award made in the
      arbitration proceeding. Each party consents to the jurisdiction of the Supreme
      Court of the State of New York, County of New York to enforce any such
      arbitration result. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      Fromex
        Equity Corp.

      Notes
        To Financial Statements

    4.  Further
      Assurances.
      The
      parties shall execute and deliver such further instruments and do such further
      acts and things as may be required in good faith to carry out the intent and
      purpose of this Agreement.

    

    5.
       Binding
      on Successors.
      This
      Agreement shall be binding on, and inure to the benefit of, the parties hereto,
      their successors and assigns.

    

    6. Severability.
      If any
      provision of this Agreement or its application to any circumstance shall be
      finally determined by any court of competent jurisdiction to be invalid or
      unenforceable then the same is hereby declared to be severable and the remainder
      of this Agreement and the application of such provisions or circumstances other
      than so determined to be invalid or unenforceable shall not be affected
      hereby.

    

    7. Effect
      of Waiver or Consent.
      A
      waiver or consent, express or implied, to or of any breach or default by any
      party in the performance by that party of its obligations hereunder is not
      a
      consent or waiver to or of any other breach or default in the performance by
      that party of the same or any other obligations of that party. Failure on the
      part of a party to complain of any act or omission or to declare any party
      in
      default hereunder, irrespective of how long that failure continues, does not
      constitute a waiver by that party of its rights with respect to that
      default.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      Fromex
        Equity Corp.

      Notes
        To Financial Statements

    8. Supersedes
      Prior Agreement.
      This
      Agreement shall supersede any prior agreement or understanding made by the
      parties prior to the date hereof and constitutes the entire agreement between
      the parties with respect to the subject matter. This Agreement is not intended
      to confer upon any person other than the parties hereto any rights or remedies
      hereunder.

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Assignment and Agreement to be executed as
      of
      the date first above written.

     

    
      	 	 	 
	 	
              HORIZON
                ASSET MANAGEMENT

            
	 
 	 
 	 
 
	
            	By  	/s/
              Murray Stahl . 
	 	
              
Murray
              Stahl, CEO

      	 	 	 
	 	
              FROMEX
                EQUITY CORP.

            
	 
 	 
 	 
 
	
            	By 
              	/s/
              Steven Bregman .
	 	
              
Steven
              Bregman,
              PresidentSUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of May ___, 2007, by and among Aprecia,
      Inc., a Delaware corporation
      (the
“Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

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

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase for $170,000 (the
“Purchase
      Price”)
      $187,000 (the "Principal
      Amount")
      of
      principal amount of secured promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A;
      and
      share purchase warrants (the “Warrants”),
      in
      the form annexed hereto as Exhibit
      B,
      to
      purchase shares of the Company’s $.0001 par value common stock (“Common
      Stock”)
      (the
“Warrant
      Shares”).
      The
      Notes, the Warrants and the Warrant Shares are collectively referred to herein
      as the "Securities";
      and

     

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

     

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

     

    1. Closing
      Date.
      The
“Closing
      Date”
shall
      be the date that the Purchase Price is transmitted by wire transfer or otherwise
      credited to or for the benefit of the Company. The consummation of the
      transactions contemplated herein shall take place at the offices of Grushko
      & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
      upon the satisfaction or waiver of all conditions to closing set forth in this
      Agreement. Subject to the satisfaction or waiver of the terms and conditions
      of
      this Agreement, on the Closing Date, each Subscriber shall purchase and the
      Company shall sell to each Subscriber a Note in the Principal Amount designated
      on the signature page hereto for the Purchase Price indicated thereon, and
      Warrants as described in Section 2 of this Agreement. 

     

    2. Warrants.
      On the
      Closing Date, the Company will issue and deliver, in the aggregate, 500,000
      Class A Warrants to the Subscribers. Two hundred and fifty thousand Class A
      Warrant will be issued for each $85,000 of Purchase Price. The exercise price
      to
      acquire a Warrant Share upon exercise of a Class A Warrant shall be $0.18,
      subject to reduction as described in the Class A Warrant. The Class A Warrants
      shall be exercisable until five years after the issue date of the
      Warrants.

     

    3. Security
      Interest.
      On
      or
      about March 10, 2006, holder of promissory notes issued by the Company on that
      date (“Prior
      Subscribers”)
      were
      granted a security interest in assets of the Company. The security interest
      was
      memorialized in a Security Agreement dated March 10, 2006. The
      Prior
      Subscribers appointed a Collateral Agent to represent them collectively in
      connection with the security interest. The appointment was pursuant to a
      Collateral Agent Agreement. The Security Agreement is annexed hereto as
Exhibit
      D.
      The
      Collateral Agent Agreement is annexed hereto as Exhibit
      E.
      The
      Notes and all sums due under the Notes and the Transaction Documents (as defined
      in Section 5(c) below) are included in the term “Obligations”
as
      defined in the Security Agreement and are secured by the Collateral (as defined
      in the Security Agreement) in the same manner and having the same priority
      as
      granted to the Prior Subscribers pursuant to the Security Agreements. The
      Subscribers and the Prior Subscribers by their signatures on a “Consent
      Agreement”
agree
      that their interests in all Obligations are pari passu in proportion to their
      relative Obligation amounts and of equal priority with each other. The
      Subscribers and Prior Subscribers further agree that the Subscribers as of
      the
      Closing Date are parties to the Security Agreement and Collateral Agent
      Agreement. The Subscribers and Prior Subscribers agree to execute such documents
      and agreements as reasonably requested by the Company, Subscribers and Prior
      Subscribers to memorialize the foregoing agreements, and hereby appoint the
      Collateral Agent pursuant to the Collateral Agent. The Subscribers, Company
      and
      Prior Subscribers agree that the Collateral Agent Agreement dated as of March
      10, 2006 is the Collateral Agent Agreement which shall govern the rights and
      obligations of the Subscribers and Prior Subscribers in connection with the
      Obligations and shall remain in full force and effect except as modified in
      this
      Agreement. The Company will execute all such documents reasonably necessary
      in
      the opinion of Subscribers to memorialize and further protect the security
      interest described herein.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

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

    

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

    

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

     

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

    

    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form SB-2 filed on November 13, 2006, as amended
      thereafter and the financial statements included therein for the year ended
      June
      30, 2006, together with all subsequent filings made with the Commission
      available at the EDGAR website (hereinafter referred to collectively as the
      "Reports").
      In
      addition, the Subscriber has received in writing from the Company such other
      information concerning its operations, financial condition and other matters
      as
      the Subscriber has requested in writing identified thereon as OTHER WRITTEN
      INFORMATION (such other information is collectively, the "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the exercise of the Warrants, an
      "accredited
      investor",
      as
      such term is defined in Regulation D promulgated by the Commission under the
      1933 Act, is experienced in investments and business matters, has made
      investments of a speculative nature and has purchased securities of United
      States publicly-owned companies in private placements in the past and, with
      its
      representatives, has such knowledge and experience in financial, tax and other
      business matters as to enable the Subscriber to utilize the information made
      available by the Company to evaluate the merits and risks of and to make an
      informed investment decision with respect to the proposed purchase, which
      represents a speculative investment. The Subscriber has the authority and is
      duly and legally qualified to purchase and own the Securities. The Subscriber
      is
      able to bear the risk of such investment for an indefinite period and to afford
      a complete loss thereof. The information set forth on the signature page hereto
      regarding the Subscriber is accurate.

     

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

     

    (g) Compliance
      with Securities Act.
       The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration.
In
      any
      event, and subject to compliance with applicable securities laws, the Subscriber
      may enter into lawful hedging transactions in the course of hedging the position
      they assume and the Subscriber may also enter into lawful short positions or
      other derivative transactions relating to the Securities, or interests in the
      Securities, and deliver the Securities, or interests in the Securities, to
      close
      out their short or other positions or otherwise settle other transactions,
      or
      loan or pledge the Securities, or interests in the Securities, to third parties
      that in turn may dispose of these Securities.

     

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

     

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

     

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

     

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

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

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

     

    "THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
      THIS
      NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
      OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO APRECIA, INC. THAT SUCH
      REGISTRATION IS NOT REQUIRED."

     

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

     

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (p) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date for
      a
      period of three years.

     

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

     

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

     

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

     

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

     

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

     

    (e) Consents.
      No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, the OTC Bulletin Board (the “Bulletin
      Board”)
      nor
      the Company's shareholders is required for the execution by the Company of
      the
      Transaction Documents and compliance and performance by the Company of its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities. The Transaction Documents and the Company’s
      performance of its obligations thereunder has been approved unanimously by
      the
      Company’s directors.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

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

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default) under (A) the articles or certificate of
      incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
      any decree, judgment, order, law, treaty, rule, regulation or determination
      applicable to the Company of any court, governmental agency or body, or
      arbitrator having jurisdiction over the Company or over the properties or assets
      of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
      note or any other evidence of indebtedness, or any agreement, stock option
      or
      other similar plan, indenture, lease, mortgage, deed of trust or other
      instrument to which the Company or any of its Affiliates is a party, by which
      the Company or any of its Affiliates is bound, or to which any of the properties
      of the Company or any of its Affiliates is subject, or (D) the terms of any
      "lock-up" or similar provision of any underwriting or similar agreement to
      which
      the Company, or any of its Affiliates is a party except the violation, conflict,
      breach, or default of which would not have a Material Adverse Effect;
      or

     

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

     

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

     

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

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

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

    

    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Warrant Shares upon exercise of the Warrants will be duly and validly issued,
      fully paid and non-assessable and if registered pursuant to the 1933 Act and
      resold pursuant to an effective registration statement will be free trading
      and
      unrestricted;

     

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

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders; and

     

    (v) assuming
      the representations warranties of the Subscribers as set forth in Section 4
      hereof are true and correct, will not result in a violation of Section 5 under
      the 1933 Act.

     

    (h) Litigation.
      There
      is no pending or, to the best knowledge of the Company, threatened action,
      suit,
      proceeding or investigation before any court, governmental agency or body,
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates that
      would affect the execution by the Company or the performance by the Company
      of
      its obligations under the Transaction Documents. There is no pending or, to
      the
      best knowledge of the Company, basis for or threatened action, suit, proceeding
      or investigation before any court, governmental agency or body, or arbitrator
      having jurisdiction over the Company, or any of its Affiliates which litigation
      if adversely determined would have a Material Adverse Effect.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (i) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold.

     

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

     

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

     

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

     

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

     

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

     

    (o) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company
      businesses since June 30, 2006 and which, individually or in the aggregate,
      would reasonably be expected to have a Material Adverse Effect,
      except
      as disclosed on Schedule
      5(o).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (p) No
      Undisclosed Events or Circumstances.
      Since
      June 30, 2006, no event or circumstance has occurred or exists with respect
      to
      the Company or its businesses, properties, operations or financial condition,
      that, under applicable law, rule or regulation, requires public disclosure
      or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the Reports.

     

    (q) Capitalization.
      The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries. All of the outstanding shares of Common Stock of the Company
      have
      been duly and validly authorized and issued and are fully paid and
      non-assessable.

     

    (r) Dilution.
      The
      Company's executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Warrant
      Shares upon exercise of the Warrants, is binding upon the Company and
      enforceable regardless of the dilution such issuance may have on the ownership
      interests of other shareholders of the Company or parties entitled to receive
      equity of the Company.

     

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

    

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

     

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

    

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

    

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

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

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

    

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

     

    (z) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date for
      a
      period of three years.

     

    6. Regulation
      D Offering.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company's legal counsel opining
      on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. A form of the legal opinion is annexed hereto as
      Exhibit
      F.
      The
      Company will provide, at the Company's expense, such other legal opinions in
      the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon exercise of the Warrants pursuant to an effective
      registration statement, Rule 144 under the 1933 Act or an exemption from
      registration.

    7. Broker’s
      Fee.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby or in connection with any investment in the Company at
      any
      time, whether or not such investment was consummated and arising out of such
      party’s actions. The Company represents that there are no other parties entitled
      to receive fees, commissions, or similar payments in connection with the
      Offering except Palladium Capital Advisors, LLC (“Broker”)
      as
      more fully described on Schedule
      7.
      The
      Broker is a non-exclusive broker in connection with the Offering.

     

    8. Subscriber’s
      Legal Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $20,000
      (“Subscriber’s
      Legal Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes and Warrants (the “Offering”).
      The
      Subscriber’s Legal Fees will be payable out of funds held pursuant to the Escrow
      Agreement. Grushko & Mittman, P.C. will be reimbursed at Closing for all UCC
      searches, filing fees, and estimated printing and shipping costs for the closing
      statements to be delivered to Subscribers.

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b) Listing/Quotation.
      The
      Company shall promptly secure the quotation or listing of the Warrant Shares
      upon each national securities exchange, or automated quotation system upon
      which
      they are or become eligible for quotation or listing (subject to official notice
      of issuance) and shall maintain same so long as any Warrants are outstanding.
      The Company will maintain the quotation or listing of its Common Stock on the
      American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
      Global Select Market, Bulletin Board, or New York Stock Exchange (whichever
      of
      the foregoing is at the time the principal trading exchange or market for the
      Common Stock (the “Principal
      Market”)),
      and
      will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement and the Closing
      Date, the Bulletin Board is and will be the Principal Market.

     

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

     

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

     

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

     

    (f) Reservation.
      Prior
      to the Closing, the Company undertakes to reserve, pro rata,
      on
      behalf of each holder of a Warrant, from its authorized but unissued common
      stock, the
      amount of Warrant Shares issuable upon exercise of the Warrants. Failure to
      have
      sufficient shares reserved pursuant to this Section 9(f) at any time shall
      be a
      material default of the Company’s obligations under this Agreement and an Event
      of Default under the Note.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the End Date, the Company shall maintain
      in
      full force and effect its corporate existence, rights and franchises and all
      licenses and other rights to use intellectual property owned or possessed by
      it
      and reasonably deemed to be necessary to the conduct of its business, unless
      it
      is sold for value.

     

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

     

    (m) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the End Date, the Company agrees that except
      in
      connection with a Form 8-K, it will not disclose publicly or privately the
      identity of the Subscribers unless expressly agreed to in writing by a
      Subscriber or only to the extent required by law and then only upon five days
      prior notice to Subscriber. In any event and subject to the foregoing, the
      Company undertakes to file a Form 8-K or make a public announcement describing
      the Offering not later than the first business day after the Closing Date.
      In
      the Form 8-K or public announcement, the Company will specifically disclose
      the
      amount of common stock outstanding immediately after the Closing.

     

    (n) Non-Public
      Information.
      The
      Company covenants and agrees that except for the Reports, Other Written
      Information and schedules and exhibits to this Agreement, which information
      thereon will be publicly disclosed not later than the Actual Effective date,
      neither it nor any other person acting on its behalf will at any time provide
      any Subscriber or its agents or counsel with any information that the Company
      believes constitutes material non-public information, unless prior thereto
      such
      Subscriber shall have agreed in writing to receive such information. The Company
      understands and confirms that each Subscriber shall be relying on the foregoing
      representations in effecting transactions in securities of the
      Company.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (o) Negative
      Covenants.
      So long
      as a Note is outstanding, without the consent of the Subscriber, the Company
      will not and will not permit any of its Subsidiaries to directly or
      indirectly:

    

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

     

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

    

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

     

    (iv) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $25,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company, (iii) as
      set
      forth in the Use of Proceeds Schedule
      9(e)
      attached
      hereto and (iv) for other employee benefits, including stock option agreements
      under any stock option plan of the Company; or

     

    (v) prepay
      or
      redeem any financing related debt or past due obligations outstanding as of
      the
      Closing Date.

     

    (p) Offering
      Restrictions.
      For so
      long as the Notes are outstanding, except for the Excepted Issuances, the
      Company will not enter into any equity line of credit or similar agreement,
      nor
      issue nor agree to issue any floating or variable priced equity linked
      instruments nor any of the foregoing or equity with price reset rights.
The
      only
      officer, director, employee and consultant stock option or stock incentive
      plan
      currently in effect or contemplated by the Company is described on Schedule
      5(d).
      No
      other plan will be adopted nor may any options or equity not included in such
      plan be issued for so long as any sum is outstanding under the
      Notes.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (q) Limited
      Standstill.
      The
      Company will deliver to the Subscribers on or before the Closing Date and
      enforce the provisions of an irrevocable lockup agreement (“Lockup
      Agreement”)
      in the
      form annexed hereto as Exhibit
      G,
      with
      the Chief Executive Officer of the Company.

     

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

     

    (s) DTC
      Program.
      At all
      times that Warrants are outstanding, the Company will employ as the transfer
      agent for the Common Stock and Warrant Shares a participant in the Depository
      Trust Company Automated Securities Transfer Program.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

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

     

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

     

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

     

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

     

    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities. If the Company at any time proposes to register any of its
      securities under the 1933 Act for sale to the public, whether for its own
      account or for the account of other security holders or both, except with
      respect to registration statements on Forms S-4, S-8 or another form not
      available for registering the Warrant Shares and the other shares of Common
      Stock held by or purchaseable by Subscriber as set forth on Schedule
      11.1
      (“Registrable
      Securities”)
      for
      sale to the public, provided the Registrable Securities are not otherwise
      registered for resale by the Subscribers or Holder pursuant to an effective
      registration statement, each such time it will give at least fifteen (15) days'
      prior written notice to the record holder of the Registrable Securities of
      its
      intention so to do. Upon the written request of the holder, received by the
      Company within ten (10) days after the giving of any such notice by the Company,
      to register any of the Registrable Securities not previously registered, the
      Company will cause such Registrable Securities as to which registration shall
      have been so requested to be included with the securities to be covered by
      the
      registration statement proposed to be filed by the Company, all to the extent
      required to permit the sale or other disposition of the Registrable Securities
      so registered by the holder of such Registrable Securities (the “Seller”
or
      “Sellers”).
      Unless instructed in writing to the contrary, the Subscribers hereby
      automatically exercise the registration rights granted in this Section 11.1.
      The
      Seller is hereby given the same rights and benefits as any other party
      identified in such registration. In the event that any registration pursuant
      to
      this Section 11.1 shall be, in whole or in part, an underwritten public offering
      of common stock of the Company, the number of shares of Registrable Securities
      to be included in such an underwriting may be reduced by the managing
      underwriter if and to the extent that the Company and the underwriter shall
      reasonably be of the opinion that such inclusion would adversely affect the
      marketing of the securities to be sold by the Company therein; provided,
      however, that the Company shall notify the Seller in writing of any such
      reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof,
      the
      Company may withdraw or delay or suffer a delay of any registration statement
      referred to in this Section 11.1 without thereby incurring any liability to
      the
      Seller due to such withdrawal or delay.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1 to effect
      the
      registration of any Registrable Securities under the 1933 Act, the Company
      will,
      as expeditiously as possible: 

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Company does not comply with its obligations set forth in Section
      11.1.

     

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

     

    11.6. Indemnification
      and Contribution.

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

     

    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel reasonably
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      which are different from or additional to those available to the indemnifying
      party or if the interests of the indemnified party reasonably may be deemed
      to
      conflict with the interests of the indemnifying party, the indemnified parties,
      as a group, shall have the right to select one separate counsel and to assume
      such legal defenses and otherwise to participate in the defense of such action,
      with the reasonable expenses and fees of such separate counsel and other
      expenses related to such participation to be reimbursed by the indemnifying
      party as incurred.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

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

     

    11.7. Delivery
      of Unlegended Shares.

     

    (a) Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Warrant
      Shares have been sold pursuant to a registration statement or Rule 144 under
      the
      1933 Act, (ii) a representation that the prospectus delivery requirements,
      or
      the requirements of Rule 144, as applicable and if required, have been
      satisfied, and (iii) the original share certificates representing the shares
      of
      Common Stock that have been sold, and (iv) in the case of sales under Rule
      144,
      customary representation letters of the Subscriber and/or Subscriber’s broker
      regarding compliance with the requirements of Rule 144, the Company at its
      expense, (y) shall deliver, and shall cause legal counsel selected by the
      Company to deliver to its transfer agent (with copies to Subscriber) an
      appropriate instruction and opinion of such counsel, directing the delivery
      of
      shares of Common Stock without any legends including the legend set forth in
      Section 4 above, reissuable pursuant to any effective and current Registration
      Statement described in Section 11 of this Agreement or pursuant to Rule 144
      under the 1933 Act (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Warrant Shares certificate, if any, to the Subscriber at the address
      specified in the notice of sale, via express courier, by electronic transfer
      or
      otherwise on or before the Unlegended Shares Delivery Date. 

     

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

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
      result in economic loss to Subscriber. As compensation to Subscriber for such
      loss, the Company agrees to pay late payment fees (as liquidated damages and
      not
      as a penalty) to the Subscriber for late delivery of Unlegended Shares in the
      amount of $100 per business day after the Delivery Date for each $10,000 of
      Purchase Price (as defined in the Warrants) of the Unlegended Shares subject
      to
      the delivery default. If during any 360 day period, the Company fails to deliver
      Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
      (30) days, then each Subscriber or assignee holding Securities subject to such
      default may, at its option, require the Company to redeem all or any portion
      of
      the Warrant Shares subject to such default at a price per share equal to 120%
      of
      the Purchase Price of such Warrant Shares (“Unlegended
      Redemption Amount”).

    

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

    

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

    

    12. (a) Right
      of First Refusal.
      Subject
      to rights of holders of Debentures issued by the Company on March 10, 2006,
      for
      so long as Notes or Warrants are outstanding, the Subscribers shall be given
      not
      less than ten business days prior written notice of any proposed sale by the
      Company of its debt, Common Stock or other securities or equity linked debt
      obligations, except in connection with (i) full or partial consideration in
      connection with a strategic merger, acquisition, consolidation or purchase
      of
      substantially all of the securities
      or assets of corporation or other entity which holders of such securities or
      debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which holders of such securities or debt are
      not
      at any time granted registration rights, (iii) the Company’s issuance of Common
      Stock or the issuances or grants of options to purchase Common Stock pursuant
      to
      stock option plans and employee stock purchase plans described on Schedule
      5(d)
      hereto at prices equal to or higher than the closing price of the Common Stock
      on the issue date of any of the foregoing, and (iv) as a result of the exercise
      of Warrants or conversion of Notes which are granted or issued pursuant to
      this
      Agreement (collectively the foregoing are “Excepted
      Issuances”).
      The
      Subscribers who exercise their rights pursuant to this
      Section
      12(a) shall have the right during the ten business days following receipt of
      the
      notice to purchase in the aggregate up to all of such offered Common Stock,
      debt
      or other securities in accordance with the terms and conditions set forth in
      the
      notice of sale in the same proportion to each other as their purchase of Notes
      in the Offering. Payment in connection with the Subscriber’s exercise of its
      rights hereunder may be made by surrender or forgiveness of a corresponding
      amount owed to such exercising Subscriber under the Note or any other
      Transaction Document. In the event such terms and conditions are modified during
      the notice period, the Subscribers shall be given prompt notice of such
      modification and shall have the right during the ten business days following
      the
      notice of modification to exercise such right.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

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

     

    (c) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Sections 12(a) or 12(b)
would
      or
      could result in the issuance of an amount of common stock of the Company that
      would exceed the maximum amount that may be issued to a Subscriber calculated
      in
      the manner described in Section 10 of the Warrant, then the issuance of such
      additional shares of common stock of the Company to such Subscriber will be
      deferred in whole or in part until such time as such Subscriber is able to
      beneficially own such common stock without exceeding the applicable maximum
      amount set forth calculated in the manner described in Section 10 of the
      Warrant. The determination of when such Common Stock may be issued shall be
      made
      by each Subscriber as to only such Subscriber.

     

    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: Aprecia,
      Inc., 1177 High Ridge Road, Stamford, CT 06905, Attn: Isidore Sobkowski,
      President and CEO, telecopier: (203) 968-9033, with a copy by telecopier only
      to: Hilary B. Miller, Esq., 112 Parsonage Road, Greenwich, CT 06830-3942,
      telecopier: (914) 206-3727, (ii) if to the Subscriber, to: the one or more
      addresses and telecopier numbers indicated on the signature pages hereto, with
      an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
      Avenue, Suite 1601, New York, New York 10176, telecopier: (212) 697-3575, and
      (iii) if to the Broker, to: Palladium Capital Advisors LLC, 62 West
      45th
      Street,
      New York, NY 10036, Attn: Michael Hartstein, telecopier: (646)
      390-6328.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

     

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

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Agreement hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      parties executing this Agreement and other agreements referred to herein or
      delivered in connection herewith on behalf of the Company agree to submit to
      the
      in personam jurisdiction of such courts and hereby irrevocably waive trial
      by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

    (e) Specific
      Enforcement, Service of Process.
      The
      Company and Subscriber acknowledge and agree that irreparable damage would
      occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek an injunction
      or
      injunctions to prevent or cure breaches of the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof, this being in addition
      to any other remedy to which any of them may be entitled by law or equity.
      Service of Process may be made upon the Company and signators hereto on behalf
      of the Company in the same manner as notices may be given. Nothing in this
      Section shall affect or limit any right to serve process in any manner permitted
      by law.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

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

     

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

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 80% of the outstanding Note principal owned
      by Subscribers on the date consent is requested.

     

    (i) Equal
      Treatment.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered and paid to all the Subscribers and their
      permitted successors and assigns.

     

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (k) Calendar
      Days.
      All
      references to “days” in the Transaction Documents shall mean calendar days
      unless otherwise stated. The terms “business days” and “trading days” shall mean
      days that the New York Stock Exchange is open for trading for three or more
      hours. Time periods shall be determined as if the relevant action, calculation
      or time period were occurring in New York City.

     

    

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    

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

    

    
      	 	APRECIA,
              INC.
              a
                Delaware corporation

              

              

              By:_________________________________

              Name:
                Idisodre Sobkowski

              Title:
                President and CEO

              

              Dated:
                May ___, 2007

            

    

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                

              PRICE

            	
              AND
                NOTE 

              PRINCIPAL

            	
              CLASS
                A 

              WARRANTS

            
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

              ___________________________________________

              (Signature)

              By:
                

               

            	
              $85,000.00

            	
              $93,500.00

            	
              250,000

            

    

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    

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

    

    
      	 	 APRECIA,
              INC.
              a
                Delaware corporation

              

              

              By:_________________________________

              Name:
                Idisodre Sobkowski

              Title:
                President and CEO

              

              Dated:
                May ___, 2007

            

    

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                

              PRICE

            	
              AND
                NOTE 

              PRINCIPAL

            	
              CLASS
                A 

              WARRANTS

            
	
              HARBORVIEW
                MASTER FUND L.P.

              2nd
                Floor, Harbor House

              Waterfront
                Drive, Road Town

              Tortola,
                British Virgin Islands

              Fax:
                (284) 494-4771

               

               

               

               

              ___________________________________________

              (Signature)

              By:
                

               

            	
              $85,000.00

            	
              $93,500.00

            	
              250,000

            

    

    

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    LIST
      OF EXHIBITS AND SCHEDULES

     

    

      
        	 	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	
                Exhibit
                  B

              	
                Form
                  of Class A Warrant

              
	 	
                Exhibit
                  C

              	
                Escrow
                  Agreement

              
	 	
                Exhibit
                  D

              	
                Security
                  Agreement Dated March 10, 2006

              
	 	
                Exhibit
                  E

              	
                Collateral
                  Agent Agreement Dated March 10, 2006

              
	 	
                Exhibit
                  F

              	
                Form
                  of Legal Opinion

              
	 	
                Exhibit
                  G

              	
                Form
                  of Lockup Agreement

              
	 	
                Schedule
                  5(d)

              	
                Additional
                  Issuances / Capitalization

              
	 	
                Schedule
                  5(o)

              	
                Undisclosed
                  Liabilities

              
	 	
                Schedule
                  5(y)

              	
                Transfer
                  Agent

              
	 	
                Schedule
                  7

              	
                Broker
                  Compensation

              
	 	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	
                Schedule
                  9(o)

              	
                Additional
                  Permitted Lien

              
	 	
                Schedule
                  11.1

              	
                Other
                  Registrable Securities

              

      

    

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      G

    LOCKUP
      AGREEMENT

    

    This
      AGREEMENT (the "Agreement") is made as of the ____ day of May, 2007, by Isidore
      Sobkowski ("Holder"), in connection with his ownership of shares of Aprecia,
      Inc., a Delaware corporation (the "Company").

    

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

    

    1. Background.

    

    a.
       Holder
      is
      the beneficial owner of the amount of shares of the Common Stock, $.0001 par
      value, of the Company (“Common Stock”) designated on the signature page
      hereto.

    

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

    

    2. Share
      Restriction. 

    

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

    

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

    

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

    

    3. Miscellaneous.

    

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

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    b. This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Agreement hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      parties executing this Agreement and other agreements referred to herein or
      delivered in connection herewith agree to submit to the in personam jurisdiction
      of such courts and hereby irrevocably waive trial by jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

    

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

    

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

    

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

    

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

    

    g. Notices
      and service of process in connection herewith may be made and given to the
      Company and Holder in the same manner as set forth in the Subscription
      Agreement.

    

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

    
 

    
      	 	 HOLDER:
              ________________________________

              (Signature
                of Holder) 

              

              ________________________________

              (Print
                Name of Holder)            

              ________________________________

              Number
                of Shares of Common Stock

              Beneficially
                Owned

              

              COMPANY:

              

              APRECIA,
                INC.

              

              By:______________________________

            

    

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    SCHEDULE
      7

    
      
        
          	
                  BROKER:

                	
                  PALLADIUM
                    CAPITAL ADVISORS LLC

                
	 	
                  62
                    West 45th
                    Street

                  New
                    York, NY 10036

                  Attn:
                    Michael Hartstein

                  Fax:
                    (646) 390-6328

                

        

      

    

     

    Cash
      Fee.
      The
      Company agrees that it will pay the Broker, on the Closing Date a fee of eight
      percent (8%) of the Principal Amount (“Broker’s Cash Fee”). The Company
      represents that there are no other parties entitled to receive fees,
      commissions, or similar payments in connection with the Offering except the
      Broker. The Broker’s Cash Fee will be paid by delivery of a Note in the
      principal amount of the Broker’s Cash Fee (“Broker’s Note”).

    

    Broker’s
      Warrants.
      On the
      Closing Date, the Company will issue to the Broker, 83,111 Class A Warrants
      to
      the Broker (“Broker’s Warrants”). The Broker’s Warrants will be similar to and
      carrying the same rights as the Class A Warrants issuable to the
      Subscribers.

    

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

    

     

    
      
        
        

      

      
        28

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]