Document:

Unassociated Document

     

    EXHIBIT
10.1

    

    PLACEMENT
AGENCY AGREEMENT

    

    July 12,
2010

    

    Emerson
Equity LLC

    155 Bovet
Road, Suite 725

    San
Mateo, CA 94402

    

    Re:           SPO
Medical Inc.

    

    Ladies
and Gentlemen:

    

    This
Placement Agency Agreement (this “Agreement”) sets forth terms upon which
Emerson Equity LLC, a registered broker-dealer and a member of the Financial
Industry Regulatory Authority (“FINRA”) (together with its selected dealers, the
“Placement Agent”), shall be engaged by SPO Medical Inc. (the “Company”) to act
as lead placement agent in connection with the private placement (the
“Offering”) on a “reasonable efforts basis” of up to seventeen (17) units
($510,000) (“Units”) (the “Maximum Offering”), each Unit consisting of (i)
200,000 shares of common stock, par value $0.01 per share (“Common Stock” or the
“Shares”) and (ii) three-year Common Stock Purchase Warrants (“Investor
Warrants”) to purchase 100,000 shares of Common Stock (the “Warrant Shares”) at
an exercise price of $0.25 per share.  The Company and the Placement
Agent (by mutual agreement) reserve the right to increase the Maximum Offering
by an additional seventeen (17) Units ($510,000) (“Overallotment”).

     

    Subscriptions
for the Units will be accepted by the Company at a price of $30,000 per Unit
(the “Offering Price”), with a minimum investment of one Unit; provided,
however, that subscriptions in lesser amounts may be accepted in the Company’s
and Placement Agent’s discretion.  The Placement Agent shall not
tender to the Company subscriptions for any persons or entities who do not
qualify as “accredited investors,” as such term is defined in Rule 501 of
Regulation D as promulgated under Section 4(2) (“Regulation D”) of the
Securities Act of 1933, as amended (the “Act”).  The Units will be
offered commencing on the issue date of the Memorandum (as defined below) until
September 7, 2010 (the “Initial Offering Period”), which period may be extended
by the Company and the Placement Agent until up to November 9, 2010 (this
additional period and the Initial Offering Period shall be referred to as the
“Offering Period”).  The date on which the Offering shall terminate
shall be referred to as the “Termination Date.”

     

    With
respect to the Offering, the Company shall provide the Placement Agent, on the
terms set forth herein, the exclusive right to offer and sell all of the Units
being offered.  Each of the Placement Agent and the Company may, in
its sole reasonable discretion, accept or reject in whole or in part any
prospective investment in the Units or allot to any prospective subscriber less
than the number of Units that such subscriber desires to purchase.

     

    The
Offering will be made by the Company solely pursuant to the Memorandum (as
hereinafter defined), which at all times will be in form and substance
reasonably acceptable to the Placement Agent, the Company and their respective
counsel and contain such legends and other information as such parties and their
respective counsel may, from time to time, deem necessary and desirable to be
set forth therein.  “Memorandum” as used in this Agreement means the
Company’s Confidential Private Placement Memorandum dated July 9, 2010,
inclusive of all annexes, and all amendments, supplements and appendices thereto
and all documents incorporated therein by reference.

     

    
      
         

      

      
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    1.    
        Appointment of Placement
Agent.

    

    (a)           On
the basis of the representations and warranties provided herein, and subject to
the terms and conditions set forth herein, the Placement Agent is appointed as
exclusive Placement Agent of the Company during the Offering Period to assist
the Company in finding qualified subscribers for the Offering.  On the
basis of such representations and warranties and subject to such terms and
conditions, the Placement Agent hereby accepts such appointment and agrees to
perform its services hereunder in a professional and businesslike manner and to
use its commercially reasonable efforts to assist the Company in finding
subscribers of Units who qualify as “accredited investors,” as such term is
defined in Rule 501 of Regulation D and to complete the Offering.  The
Placement Agent has no obligation to purchase any of the
Units.  Unless sooner terminated in accordance with this Agreement,
the engagement of the Placement Agent hereunder shall continue until the later
of the Termination Date or the last Closing (as defined below).  Prior
to the Termination Date, the Company shall not engage any other party to act as
placement agent of any type of security (either debt or
equity).  Notwithstanding anything contained herein, in the event
that closings for in
excess of $250,000 are not consummated on or before August 20, 2010, the
engagement of the Placement Agent will, at the Company’s option upon written
notice to the Placement Agent, become a non-exclusive engagement and, in such
event the Company will revise the Memorandum (provided such revised Memorandum
is provided to the Placement Agent so that it has an opportunity to comment on
such revisions) to reflect the non-exclusivity of Emerson as placement
agent.

    

    (b)           The
Placement Agent shall not contact any potential investors regarding the offering
of the Units unless the following procedures are complied with. The Placement
Agent has furnished the Company with a list of potential investors, as may be
supplemented from time to time (hereinafter the "Potential Investor List") that
it may solicit with respect to the Offering.  The Potential Investor
List is annexed hereto as Exhibit A and has been approved by the
Company.  To the extent the Placement Agent desires to add names to
the list, it will provide notice via email to the Company.  The
Company shall have two business days from such e-mail delivery to object to any
person or entity on the Potential Investor List, citing the reason for such
objection. The failure of the Company to timely object shall be deemed to
represent its consent to the approach of such person.

    

    2.      
     Representations and
Warranties.

    

    Except as
otherwise disclosed in the SEC Documents (as defined below) or in the
Memorandum, the following representations and warranties of the Company are true
and correct as of the date of this Agreement:

     

    
      
         

      

      
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    (a)           The
Company and each subsidiary of which the Company owns, directly or indirectly, a
controlling interest (a “Subsidiary”) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as
and where now owned, leased, used, operated and conducted.  The
Company has no Subsidiaries, other than SPO Medical Equipment Ltd., a company
incorporated under the laws of the State of Israel and SPO Ltd., a company
incorporated under the laws of the State of Israel.  Except as
disclosed in the SEC Documents, the Company owns, directly or indirectly, all of
the capital stock or comparable equity interests of each Subsidiary free and
clear of any and all liens, security interests, charges, pledges or similar
encumbrances (“Liens”) and all of the issued and outstanding shares of capital
stock or comparable equity interest of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive rights of first refusal
and other similar rights.  The Company has the unrestricted right to
vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital stock or other equity securities of
its Subsidiaries that are owned by the Company. As used herein, “SEC Documents”
means all of the Company’s reports, schedules, financial statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) including, without limitation, the Company Annual Report on Form 10-K for
the year ended December 31, 2009, filed with the SEC on March 29, 2010, the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010,
filed with SEC on May 14, 2010 and the Company's Current Report on Form 8-K
filed on July 2, 2010 and as amended and filed with the SEC on July __,
2010.  The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership or
use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. For purposes of this
Agreement “Material Adverse Effect” shall mean a material adverse effect on (1)
the assets, liabilities, results of operations, condition (financial or
otherwise), business, or prospects of the Company and each Subsidiary taken as a
whole; or (2) the ability of the Company to perform its obligations under the
Transaction Documents (as defined herein).

     

    (b)           The
Company and each Subsidiary has all requisite power and authority to conduct its
business as presently conducted and as proposed to be conducted, with respect to
the Company only, to enter into and perform its obligations under this
Agreement, the Subscription Agreement annexed to the Memorandum (the
“Subscription Agreement”), the Investor Warrants and the warrants to be issued
to the Placement Agent at each closing of the Offering (“Placement Agent
Warrants” and collectively with the aforementioned agreements and instruments,
the “Transaction Documents”).  The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by the
Company’s Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders, is required.  At
the time of the initial Closing and each subsequent closing the Company will
have all requisite power and authority to issue, sell and deliver the securities
comprising the Units and the Placement Agent Warrants and the securities
underlying such Units and Placement Agent Warrants.  Upon due
execution and delivery, the Transaction Documents will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally, securities
laws applicable to indemnification and contribution obligations of the kind set
forth herein and to general equitable principles and the availability of
specific performance.

     

    (c)           None
of the execution and delivery of, or performance by the Company under the
Transaction Documents, will conflict with or violate, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company or any of its Subsidiaries under any agreement or other
instrument to which the Company or any of its Subsidiaries is a party or by
which either the Company or any of its Subsidiaries or their respective assets
may be bound, or any term of the charter or by-laws of the Company, or any
license, permit, judgment, decree, order, statute, rule or regulation applicable
to the Company or its Subsidiaries or any of their respective
assets.

     

    (d)           None
of the Units, the Investor Warrants, the Placement Agent Warrants and the shares
of Common Stock issuable upon exercise of the Investor Warrants or the Placement
Agent Warrants are subject to preemptive or similar rights of any stockholder or
security holder of the Company or an adjustment under the anti-dilution or
exercise rights of any holders of any outstanding shares of capital stock,
options, warrants or other rights to acquire any securities of the
Company.

     

    
      
         

      

      
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    (e)           As
of the date of the initial Closing, the Common Stock and Common stock underlying
the Investor Warrants and Placement Agent Warrants have been duly authorized
and, when issued and delivered against payment therefore as provided in the
Transaction Documents, will be validly issued, fully paid and nonassessable and
shall be free and clear of all liens, charges restrictions, claims and
encumbrances imposed by or through the Company other than as provided in the
Transaction Documents.

     

    (f)           No
consent, authorization or filing of or with any United States court or
government authority is required in connection with the consummation of the
transactions contemplated herein, except for required filings with the United
States Securities and Exchange Commission (the “SEC”) and applicable “Blue Sky”
or state securities commissions relating specifically to the
Offering.

     

    (g)        
The Memorandum does not, and will not, include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.  None of the statements,
documents, certificates or other items prepared or supplied by the Company with
respect to the transactions contemplated hereby contains an untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.  There is no fact which the Company has not
disclosed to the Placement Agent and its counsel in writing and of which the
Company is aware which materially adversely affects or could materially
adversely affect the business prospects, financial condition, operations,
property or affairs of the Company or any of its Subsidiaries.

     

    (h)           The
Memorandum has been diligently prepared by the Company, and, to the Company’s
knowledge, is in compliance with Regulation D, the Act and the requirements of
all other rules and regulations (the “Regulations”) of the Securities and
Exchange Commission (the “SEC”) relating to offerings of the type contemplated
by the Offering, and the applicable securities laws and the rules and
regulations of those jurisdictions wherein the Units are to be offered and
sold.  With respect to actions taken by the Company, the Units will be
offered and sold pursuant to the registration exemption provided by Regulation D
and Section 4(2) and/or Section 4(6) of the Act as a transaction not involving a
public offering and the requirements of any other applicable state securities
laws and the respective rules and regulations thereunder in those jurisdictions
in which the Placement Agent notifies the Company that the Units are being
offered for sale.  The Memorandum describes all material aspects,
including attendant risks, of an investment in the Company.  The
Company has not taken nor will it take any action which conflicts with the
conditions and requirements of, or which would make unavailable with respect to
the Offering, the exemption(s) from registration available pursuant to
Regulation D or Section 4(2) and/or Section 4(6) of the Act, and knows of no
reason why any such exemption would be otherwise unavailable to it. Neither the
Company, nor, to the Company’s 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) in connection with the offer or sale of the
Units.  The Company has not been subject to any order, judgment or
decree of any court of competent jurisdiction temporarily, preliminarily or
permanently enjoining it for failing to comply with Section 503 of Regulation
D.

     

    (i)           The
Company owns its property and assets free and clear of all mortgages, liens,
loans, pledges, security interests, claims, equitable interests, charges, and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company’s or its
subsidiaries, as the case may be, ownership or use of such property or
assets.  With respect to the property and assets it leases, if any,
each of the Company is in compliance in all material respects with such leases
and, to its knowledge, holds a valid leasehold interest free of any liens,
claims, or encumbrances.

     

    
      
         

      

      
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    (j)           The
Company has authorized and outstanding the capital stock as set forth in the
Memorandum as of the date set forth therein.  All outstanding shares
of capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable.  Except
for  warrants and options referred to in the Memorandum: (i) there are
no outstanding options, warrants or other rights permitting or requiring the
Company or others to purchase or acquire any shares of capital stock or other
equity securities of the Company or to pay any dividend or make any other
distribution in respect thereof; (ii) there are no securities issued or
outstanding which are convertible into or exchangeable for shares of capital
stock or other equity securities of the Company and there are no contracts,
commitments or understandings to which the Company is a party, whether or not in
writing, to issue or grant any such option, warrant, right or convertible or
exchangeable security; (iii) no shares of stock or other securities of the
Company are reserved for issuance for any purpose; and (iv) there are no voting
trusts or other contracts, commitments, understandings, arrangements or
restrictions of any kind to which the Company is a party with respect to the
ownership, voting or transfer of Units of stock or other securities of the
Company, including without limitation, any preemptive rights, rights of first
refusal, proxies or similar rights.  The issued and outstanding shares
of capital stock of the Company conform to all statements in relation thereto
contained in the Memorandum and the Memorandum describes all material terms and
conditions thereof.  All issuances by the Company of its securities
have been registered or were exempt from registration under the Act and any
applicable state securities laws.

     

    (k)           The
financial statements, together with the related notes, of the Company included
in the Company’s SEC filings and the Memorandum present fairly in all material
respects the financial position of the Company as of the respective dates
specified and the results of its operations and cash flow for the respective
periods covered thereby.  Except as set forth in such financial
statements and incurred in the ordinary course of business, the Company has not
incurred any material liabilities of any kind, whether accrued, absolute,
contingent or otherwise or entered into any material transactions subsequent to
December 31, 2009.

     

    (l)           The
conduct of business by the Company as presently and proposed to be conducted is
not subject to continuing oversight, supervision, regulation or examination by
any governmental official or body of the United States or any other jurisdiction
wherein the Company conducts or proposes to conduct such business, except as is
described in the Memorandum or where such regulation is otherwise applicable to
commercial enterprises generally.  The Company has obtained all
requisite licenses, permits and other governmental authorizations to conduct its
business as presently conducted, except to the extent the failure to so obtain
would not reasonably be expected to have a Material Adverse
Effect.  The Company has not received any notice of any violation of,
or noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations and orders (including, without limitation, those relating to
environmental protection, occupational safety and health, federal securities
laws, equal employment opportunity, consumer protection, credit reporting,
“truth-in-lending”, and warranties and trade practices) applicable to its
business, the violation of, or noncompliance with, which would reasonably be
expected to have a Material Adverse Effect, and the Company knows of no facts or
set of circumstances which would give rise to such a notice.

     

    (m)           No
default by the Company or, to the knowledge of the Company, any other party
exists in the due performance under any material agreements to which the Company
is a party or to which any of its assets are subject, other than defaults that
would not reasonably be expected to have a Material Adverse
Effect.  No default by the Company or, to the knowledge of the
Company, any other party exists in the due performance under any material
agreements to which the Company is a party or to which any of its assets are
subject, other than defaults that would not reasonably be expected to have a
Material Adverse Effect.

     

    
      
         

      

      
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    (n)           There
are no actions, suits, claims, hearings or proceedings pending before any court
or governmental authority or, to the knowledge of the Company, threatened,
against the Company, or involving its assets or any of its officers or directors
(in their capacity as such) which, if determined adversely to the Company or
such officer or director, would reasonably be expected to have a Material
Adverse Effect or adversely affect the transactions contemplated by this
Agreement or the enforceability thereof.

     

    (o)           The
Company is not in violation of its Certificate of Incorporation, By-laws or
other organizational documents. The Company is not in default (and no event has
occurred which with notice or lapse of time or both could put the Company in
default), under, and the Company has not taken any action or failed to take any
action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party or by which any property or assets of the Company is
bound or affected, except for possible defaults, terminations, amendments,
accelerations or cancellations which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The
businesses of the Company are not being conducted in violation of any law, rule
ordinance or regulation of any governmental entity, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect.

     

    (p)           Except
as set forth in the Memorandum, since December 31, 2009, there has been
no:  (i) material adverse change in the financial condition,
operations or business of the Company from that shown on the Company Financial
Statements (as defined below), or any material transaction or commitment
effected or entered into by the Company outside of the ordinary course of
business or (ii) damage, loss or destruction, whether or not covered by
insurance, with respect to any material asset or property of the
Company.

     

    (q)           Except
as set forth in the Memorandum, there are no loans, leases, royalty agreements
or other transactions between (i) the Company or any of its customers or
suppliers; and (ii) any officer, employee, consultant or director of the Company
or any person owning five (5%) percent or more of the capital stock of the
Company or five (5%) percent or more of the ownership interests of the Company
or any member of the immediate family of such officer, employee, consultant,
director, stockholder or owner or any corporation or other entity controlled by
such officer, employee, consultant, director, stockholder or owner, or a member
of the immediate family of such officer, employee, consultant, director,
stockholder or owner.

     

    (r)           Each
of the Company and its Subsidiaries is insured by recognized, financially sound
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are prudent and customary in the business
in which it is engaged, including directors and officers liability. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able:
(i) to renew its existing insurance coverage as and when such policies
expire; or (ii) to obtain comparable coverage from similar institutions as
may be necessary or appropriate to conduct its business as now
conducted.

     

    (s)           The
Company or its Subsidiaries owns valid title, free and clear of any Liens, or
possesses the requisite valid and current licenses or rights, free and clear of
any Liens, to use all intellectual property in connection with the conduct its
business as now operated.  There is no pending claim or action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any intellectual property necessary to enable it to conduct its
business as now operated.  To the Company’s knowledge, the Company’s
current and proposed products, services and processes do not infringe on any
intellectual property or other rights held by any person, and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.  The Company has not received any written notice of
infringement of, or conflict with, the asserted rights of others with respect to
its intellectual property. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of its intellectual
property.

     

    
      
         

      

      
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    (t)           Except
as set forth in the Memorandum, there is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, or its businesses,
properties or assets or their officers or directors in their capacity as such,
that would
reasonably be expected to have a Material Adverse Effect.

     

    (u)           Each
of the Company and its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject and which are due (unless and only to
the extent that it has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes or has obtained an extension of
the deadline for such filing) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  To the Company’s knowledge,
there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, statue or local tax.  To the Company’s
knowledge, none of the Company’s or any Subsidiary’s tax returns is presently
being audited by any taxing authority.  To the Company’s knowledge,
there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, statue or local tax.

     

    (v)           Except
as set forth in the SEC Documents, since January 1, 2009, the Company has timely
filed (subject to 12b-25 filings with respect to certain periodic filings) all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange
Act.  The SEC Documents have been made available to the Investor via
the SEC’s EDGAR system.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party have been filed as exhibits to the SEC Filings.  As of their
respective dates, the financial statements of the Company included in the SEC
Documents (“Company Financial Statements”) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect at the time of the
filing.  The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”),
consistently applied, during the periods involved except: (1) as may be
otherwise indicated in such financial statements or the notes thereto; or (2) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries, if any, as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments).  Except as expressly set forth in the Company Financial
Statements or in the SEC Documents, the Company has no liabilities, contingent
or otherwise, other than: (1) liabilities incurred in the ordinary course of
business subsequent to December 31, 2009; and (2) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under GAAP to be reflected in such financial statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company.  All information relating to or concerning the
Company and its officers, directors, employees, customers or clients (including,
without limitation, all information regarding the Company’s internal financial
accounting controls and procedures) set forth in the Transaction Documents and
the SEC Documents, when taken together as a whole, does not contain an untrue
statement of material fact or omit to state any material fact necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.

    
      
         

      

      
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    (w)           The
shares of Common Stock are quoted on the OTCBB under the symbol
“SPOM.”  The Company has not received notice (written or oral) from
the OTCBB to the effect that the Company is not in compliance with the
continuing requirements of the OTCBB.  The Company is, and it has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such maintenance requirements.

    

    (x)           The
Company has complied in all material respects with the laws, rules and
regulation under the Sarbanes-Oxley Act of 2002 to the extent applicable to the
Company.

     

    (y)           Neither
the Company, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company has, in the course of
its actions for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

     

    (z)           To
the knowledge of the Company, neither the sale of the Units by the Company nor
its use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.  Without limiting the
foregoing, the Company is not (a) a person whose property or interests in
property are blocked pursuant to Section 1 of Executive Order 13224 of September
23, 2001 Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a
person who engages in any dealings or transactions, or be otherwise associated,
with any such person.  To the knowledge of the Company, the Company is
in compliance, in all material respects, with the USA Patriot Act of 2001
(signed into law October 26, 2001).

     

    (aa)        
Except for the compensation set forth in this Agreement or the Memorandum, the
Company is not obligated to pay, and has not obligated the Placement Agent to
pay, a finder’s or origination fee in connection with the Offering, and hereby
agrees to indemnify the Placement Agent from any such claim made by any other
person as more fully set forth in Section 9 hereof.  The Company has
not offered for sale or solicited offers to purchase the Units except for
negotiations with the Placement Agent.  Except as set forth in the
Memorandum, no other person has any right to participate in any offer, sale or
distribution of the Company’s securities to which the Placement Agent’s rights,
described herein, shall apply.

     

    
      
         

      

      
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    (bb)           Neither
the Company, its affiliates, nor any person acting on its or their behalf has
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
Units  pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the Act, or any applicable stockholder
approval provisions, which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder. Nor will the Company or its affiliates take any action or steps that
would knowingly cause the offer or issuance of the Units 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 Units, which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.

     

    3.           Certain Obligations of the
Company and Placement Agent Compensation.

     

    (a)           The
Company shall cause to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws and in
accordance with the terms and conditions of this Agreement, and hereby
authorizes the Placement Agent and its agents, employees, to use the Memorandum
in connection with the sale of the Units until the Termination Date, and no
person or entity is or will be authorized to give any information or make any
representations other than those contained in the Memorandum or to use any
offering materials other than those contained in the Memorandum in connection
with the sale of the Units.

     

    (b)           The
Company shall make available to the Placement Agent and its representatives such
information as may be reasonably requested in making a reasonable investigation
of the Company and its affairs and shall provide access to such employees during
normal business hours as shall be reasonably requested by the Placement
Agent.

     

    (c)           As
compensation for its services under this Agreement, at each Closing, the
Placement Agent will receive (i) a cash fee (the “Placement Agent Fee”) equal to
10% of the aggregate gross cash proceeds that the Company receives from the sale
of Units at such closing and (ii) a non-accountable expense allowance (the
“Expense Allowance”) equal to 2% of the aggregate gross proceeds that the
Company receives from the sale of Units at such closing and a legal expense
reimbursement not to exceed $15,000, $5,000 of which has previously been paid,
with the balance to be paid upon the initial Closing.

     

    (d)           In
addition to the Placement Agent Fee and Expense Allowance and reimbursement set
forth in clause (c) above, the Company shall at each Closing issue to Placement
Agent, or its designee(s), a warrant to purchase 12% of the number of shares of
Common Stock (i) included in the Units at an exercise price of $0.15 per share
and (ii) issuable upon exercise of the Investor Warrants at an exercise price of
$0.25 (the “Placement Agent Warrants”).  The Placement Agent Warrants
shall be substantially identical to the Investor Warrants.

     

    
      
         

      

      
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    (e)           The
Company shall also pay to the Placement Agent the Placement Agent Fee and issue
to the Placement Agent or its designees the Placement Agent Warrants, calculated
according to the percentages set forth in Sections 3(c) and (d) of this
Agreement, if any party on the Potential Investor List makes a private
investment in the Company at any time prior to the date that is twelve (12)
months after the later to occur of the Termination Date and the Final Closing
(the “Post-Closing Investors”).  In that regard, the Placement Agent
shall update the Potential Investor List within 5 business days following the
later to occur of the Termination Date and the Final Closing which shall
represent a comprehensive list of Post Closing Investors for purposes of the
“tail” provisions of this section.  The Company acknowledges and
agrees that the Potential Investor List is proprietary to the Placement Agent
and shall be maintained in strict confidence by the Company.  As used
herein, the term “Post Closing Investors” includes any party that is an
affiliate or a referral of the specific party named in the Potential Investor
List.

    

    4.            Subscription and Closing
Procedures.

     

    (a)           The
Units sold in the Offering will be sold pursuant to Subscription Agreements
between the Company and the investors in the Offering in the form annexed to the
Memorandum.

     

    (b)         
All funds for subscriptions received from the Offering will be promptly
forwarded by the Placement Agent or the Company, if received by it, to, and
deposited into, a non-interest bearing escrow account (the “Escrow Account”)
established for such purpose with Signature Bank (the “Escrow
Agent”).  All such funds for subscriptions will be held in the Escrow
Account pursuant to the terms of an escrow agreement among the Company, the
Placement Agent and the Escrow Agent.  The Company will pay all fees
related to the establishment and maintenance of the Escrow
Account.  The Company will either accept or reject, for any or no
reason, the Subscription Agreements in a timely fashion and at each Closing will
countersign the Subscription Agreements and provide duplicate copies of such
documents to the Placement Agent for distribution to the
subscribers.  The Company will give notice to the Placement Agent of
its acceptance of each subscription.  The Company, or the Placement
Agent on the Company’s behalf, will promptly return to subscribers incomplete,
improperly completed, improperly executed and rejected subscriptions and give
written notice thereof to the Placement Agent upon such return.

     

    (c)           If
all of the conditions set forth elsewhere in this Agreement are fulfilled, the
initial Closing shall be held in accordance with the terms of the Memorandum
with respect to the Units sold.  Thereafter, additional closings may
be held until either (i) all of the Units are sold or (ii) the Termination Date,
with the final closing (the “Final Closing” and each closing of the purchase and
sale of Units is referred to in this Agreement as a “Closing”) to occur within
10 days from the earlier of the Termination Date or the sale of all Units
offered.  Delivery of payment for the accepted subscriptions for Units
from the funds held in the Escrow Account will be made at each Closing at the
Placement Agent’s offices against delivery of the securities comprising the
Units by the Company at the address set forth in Section 14 hereof (or at
such other place as may be mutually agreed upon between the Company and the
Placement Agent), net of amounts due to the Placement Agent and its counsel as
of such Closing.  Executed instruments/certificates for the Units and
the Agent’s Warrants will be in such authorized denominations and registered in
such names as the Placement Agent may request on or before the date of each
Closing (“Closing Date”), and will be made available to the Placement Agent for
checking and packaging at the Placement Agent’s office at each
Closing.

     

    (d)           If
subscriptions for Units have not been received and accepted by the Company on or
before the expiration of the Offering Period for any reason, the Offering will
be terminated, no Units will be sold, and the Escrow Agent will, at the request
of the Placement Agent, cause all monies received from subscribers for the Units
to be promptly returned to such subscribers without interest, penalty, expense
or deduction.

     

    
      
         

      

      
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    5.           Further
Covenants.  The Company hereby covenants and agrees
that:

     

    (a)           Except
upon prior written notice to the Placement Agent, the Company shall not, at any
time prior to the Closing, knowingly take any action which would reasonably be
expected to cause any of the representations and warranties made by it in this
Agreement not to be complete and correct in all material respects on and as of
the Closing date with the same force and effect as if such representations and
warranties had been made on and as of each such date.

     

    (b)           
If, at any time prior to the Final Closing (i) any event shall occur which does
or may materially affect the Company or as a result of which it might become
necessary to amend or supplement the Memorandum so that the representations,
warranties and covenants herein remain true, or (ii) in case it shall, in the
opinion of counsel to the Placement Agent and the Company, be necessary to amend
or supplement the Memorandum to comply with Regulation D or any other applicable
securities laws or regulations, the Company shall, in the case of (i) above,
promptly notify the Placement Agent and, in the event of either (i) or (ii)
above shall, at its sole cost, prepare and furnish to the Placement Agent copies
of appropriate amendments and/or supplements to the Memorandum in such
quantities as the Placement Agent may request.  The Company shall not
at any time, whether before or after the Final Closing, prepare or use any
amendment or supplement to the Memorandum of which the Placement Agent shall not
previously have been advised and furnished with a copy, or to which the
Placement Agent or its counsel will have reasonably objected in writing or
orally (confirmed in writing within 24 hours), or which is not in compliance
with the Act, the regulations thereunder and other applicable securities laws.
As soon as the Company is advised thereof, the Company shall advise the
Placement Agent and its counsel, and confirm the advice in writing, of any order
preventing or suspending the use of the Memorandum, or the suspension of the
qualification or registration of the Units or the Securities for offering or the
suspension of any exemption for such qualification or registration of the Units
or the Securities for offering in any jurisdiction, or of the institution or
threatened institution of any proceedings for any of such purposes, and the
Company shall use its best efforts to prevent the issuance of any such order
and, if issued, to obtain as soon as reasonably possible the lifting
thereof.

     

    (c)          
 The Company will use its commercially reasonable efforts to assist counsel
to the Placement Agent in qualifying the Units for sale under the securities
laws of such U.S. jurisdictions as may be mutually agreed to by the Company and
the Placement Agent; provided, that the
Company will not be required or obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Units.  Furthermore, the Company shall file a
copy of a Notice of Sale on Form D with the SEC within the prescribed time
period and shall file all amendments with the SEC as may be
required.  Copies of the Form D and all amendments thereto shall be
provided to the Placement Agent.  The Company or its counsel will
provide counsel for the Placement Agent with copies of all correspondence or
other documentation filed with or received from any jurisdiction where the Units
are to be registered or qualified or offered.  The Company will
promptly provide to the Placement Agent for delivery to all offerees and
investors and their representatives any additional information, documents and
instruments which the Placement Agent or the Company reasonably deem necessary
to comply with the rules, regulations and judicial and administrative
interpretations respecting compliance with such exemptions or qualifications and
registrations in those states where the Units are to be offered or
sold.

     

     (d)           The
Company shall place a legend on the certificates representing the securities
comprising the Units and the Placement Agent Warrants that the securities
evidenced thereby have not been registered under the Act or applicable state
securities laws, setting forth or referring to the applicable restrictions on
transferability and sale of such securities under the Act and applicable state
laws.

     

    
      
         

      

      
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    (e)           The
Company shall apply the net proceeds from the sale of the Units to fund its
working capital requirements and for such other purposes as substantially
described under the “Use of Proceeds” section of the Memorandum.

     

    (f)           During
the Offering Period, the Company shall afford each prospective purchaser of
Units the opportunity to ask questions of and receive answers from an officer of
the Company concerning the terms and conditions of the Offering and the
opportunity to obtain such other additional information necessary to verify the
accuracy of the Memorandum to the extent it possesses such information or can
acquire it without unreasonable expense or violation of any confidentiality
agreements.

     

    (g)        
Except to the extent set forth in Section 1(a) hereto, until the earlier of (i)
completion of the Offering, and (ii) the Termination Date, neither the Company
nor any person or entity acting on its behalf shall negotiate with any other
placement agent or underwriter with respect to a private or public offering of
the Company’s debt or equity securities. Notwithstanding the foregoing, the
Company shall have the ability during the Term, to negotiate and conclude terms
with respect to establishing an equity credit line with a third party provider;
provided the following terms are adhered to: (a) the Placement Agent shall be
provided with periodic updates with respect to such activities during the Term,
(b) no equity line shall be established that contemplate share issuances are
below the per share offering price of the Shares or which contain terms that are
more favorable than the terms of the Offering, (c) no actions shall be taken
with respect to the establishment of the credit line which would jeopardize the
exempt nature of the Offering under federal or state securities laws, including
without limitation, the filing during the Offering Period of a registration
statement with the SEC with respect to such credit line.   In
addition, except as contemplated in Section 1(a) or in the Memorandum, neither
the Company nor anyone acting on its behalf shall, until the Termination Date,
offer for sale to, or solicit offers to subscribe for Units or other securities
of the Company from, or otherwise approach or negotiate in respect thereof with,
any other person.

     

    (h)     Until
the earlier of (i) the Termination Date and (ii) the Final Closing, the Company
will not issue any press release, grant any media interview (including without
limitation, internet media outlets), or otherwise communicate with the media in
any manner whatsoever except to the extent it first provides the Placement Agent
prior written notice of the proposed press release or other communication which
it desires to make and provides the Placement Agent with a reasonable
opportunity to comment on such press release or other
communication.   In no event shall the Company issue any press
release or otherwise communicate with the media in a fashion that could
jeopardize the exempt nature of the Offering.

     

    (i)       The
Company shall pay all expenses incurred in connection with the preparation and
printing of all necessary offering documents, amendments, and instruments
related to the Offering and the issuance of the Units, the Common Stock,
Investor Warrants and the Placement Agent Warrants, and shall also pay its own
expenses for accounting fees, legal fees, bound volumes of closing documents,
and other costs involved with the Offering. The Company shall provide at its own
expense such quantities of the Memorandum and other documents and instruments
relating to the Offering as the Placement Agent may reasonably request. The Blue
Sky filings shall be prepared by the Placement Agent’s counsel for the Company’s
account, with copies to Company’s counsel concurrently (or as soon as sent or
received as reasonable possible) of the filings, correspondence, orders,
findings and all related matters.  In addition, the Company shall pay
all filing fees and reasonable legal fees and expenses for Blue Sky services and
related filings and out-of-pocket expenses of the Placement Agent’s counsel with
respect to Blue Sky exemptions that are sought with respect to the Offering (the
“Blue Sky Expenses”), $4,000 of which shall be paid to the Placement Agent’s
counsel upon the First Closing, and additional reasonable amounts, if any, of
which shall be paid at any subsequent Closing, as applicable.  The
Blue Sky filings shall be prepared by the Placement Agent’s counsel for the
Company’s account and Placement Agent’s counsel shall communicate with the
Company’s counsel with respect to such filings.

     

    
      
         

      

      
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    6.           Conditions of Placement
Agent’s Obligations.  The obligations of the Placement Agent
hereunder to affect each Closing are subject to the fulfillment, at or before
each Closing, of the following additional conditions:

     

    (a)           Each
of the representations and warranties of the Company qualified as to materiality
shall be true and correct at all times prior to and on each Closing Date, except
to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and
correct as of such earlier date, and the representations and warranties of the
Company not qualified as to materiality shall be true and correct in all
material respects at all times prior to and on each Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects as of such earlier date.

     

    (b)           The
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions required to be performed by and complied
with it under the Transaction Documents at or before each Closing.

     

    (c)           
No order suspending the use of the Memorandum or enjoining the offering or sale
of the Units shall have been issued, and no proceedings for that purpose or a
similar purpose shall have been initiated or pending, or, to the Company’s
knowledge, are contemplated or threatened.

    

    (d)           No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

    

    (e)           The
Placement Agent shall have received certificates of the Chief Executive Officer
and Chief Financial Officer of the Company, dated as of each Closing Date,
certifying, in such detail as Placement Agent may reasonably request, as to the
fulfillment of the conditions set forth in paragraphs (a), (b), (c) and (d)
above.

     

    (f)           The
Company shall have delivered to the Placement Agent: (i) at each Closing a
currently dated good standing certificate from the secretary of state of its
jurisdiction of incorporation and each jurisdiction in which the Company and
each Subsidiary is qualified to do business as a foreign corporation, and (ii)
at the First Closing, certified resolutions of the Company’s Board of Directors
approving this Agreement and the other Transaction Documents, and the
transactions and agreements contemplated by this Agreement and the other
Transaction Documents.

     

    (g)           On
or prior to the date hereof and at each Closing, either the Chief Executive
Officer or the Chief Financial Officer of the Company shall have provided a
certificate to the Placement Agent confirming that, to the best of their
knowledge, there have been no material adverse changes in the condition
(financial or otherwise) or prospects of the Company from the date of the
financial statements included in the Memorandum, the absence of undisclosed
liabilities and such other matters relating to the financial condition and
prospects of the Company that the Placement Agent may reasonably
request.

     

    
      
         

      

      
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    (h)           At
each Closing, the Company shall pay and deliver to the Placement Agent the
Placement Agent Fee, calculated in accordance with Sections 3(c), the Expense
Allowance, calculated in accordance with Sections 3(c) and the Blue Sky Expenses
in accordance with Section 5(i) hereof.

     

    (i)           At
each Closing the Company shall have delivered to the Placement Agent and/or its
designees, the appropriate number of Placement Agent Warrants, calculated in
accordance with Section 3(d) hereof.

     

    (j)           There
shall have been delivered to the Placement Agent a signed opinion of Aboudi
& Brounstein Law Offices,  counsel to the Company, dated as of
each Closing Date, containing substantially the opinions set forth as Exhibit B
hereto.

    

    (k)           All
proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent’s Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as it may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.

     

    7.            Representation and
Warranties of the Placement Agent; Covenants of the Placement
Agent.

     

    (a)           The
Placement Agent hereby represents and warrants to the Company that it is a
registered broker-dealer pursuant to the Exchange Act and a member in good
standing of the Financial Industry Regulatory Authority

     

    (b)           The
Placement Agent shall not engage in any form of general solicitation or general
advertising that is prohibited by Regulation D in connection with the
Offering, or take any action that might reasonably be expected to jeopardize the
availability for the Offering of the exemption from registration provided by
Rule 506 under Regulation D.

     

    8.            Indemnification.

     

    (a)           The
Company shall: (i) indemnify and hold harmless the Placement Agent, its selected
dealers, agents and their respective officers, directors, employees and each
person, if any, who controls the Placement Agent within the meaning of the Act
and such agents (each an “Indemnitee”) against, and pay or reimburse each
Indemnitee for, any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which will, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys’ fees, including appeals), to which any Indemnitee may
become subject, under the Act or otherwise, in connection with the offer and
sale of the Units, and (ii) reimburse each Indemnitee for any legal or other
expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, action, proceeding or investigation; provided,
however, that the Company will not be liable in any such case to the extent that
any such claim, damage or liability is found in a final judgment, or judgment
not appealed within the prescribed appeal time period, in both cases by a court
of competent jurisdiction to have resulted from (A) an untrue statement or
alleged untrue statement of a material fact made in the Memorandum, or an
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
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons specifically for
use in the Memorandum, (B) any violations by the Placement Agent or such
controlling persons of the Act or state securities laws which does not result
from a violation thereof by the Company or any of its affiliates, or (C) the
gross negligence, willful misconduct, or bad faith of the Placement Agent or the
party claiming a right to indemnification.  In addition to the
foregoing agreement to indemnify and reimburse the Indemnitees, the Company will
indemnify and hold harmless each Indemnitee against any and all losses, claims,
damages, liabilities or expenses whatsoever (or actions or proceedings or
investigations in respect thereof), joint or several (which shall for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals) to which any Indemnitee may become subject insofar as such costs,
expenses, losses, claims, damages or liabilities arise out of or are based upon
the claim of any person or entity that he or it is entitled to broker’s or
finder’s fees from any Indemnitee in connection with the Offering and provided
that such claim did not arise out of actions taken by the Placement
Agent.

    
      
         

      

      
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    (b)
   The Placement Agent will indemnify and hold harmless the Company,
its officers, directors, employees and each person, if any, who controls the
Company within the meaning of the Act against, and pay or reimburse any such
person for, any and all losses, claims, damages or liabilities or expenses
whatsoever (or actions, proceedings or investigations in respect thereof), joint
or several, to which the Company or any such person may become subject under the
Act or otherwise, in connection with the offer and sale of the Units, insofar
whether such losses, claims, damages, liabilities or expenses (or actions,
proceedings or investigations in respect thereof) shall result from any claim of
the Company, any of its officers, directors, employees, agents, any person who
controls the Company and such persons within the meaning of the Act or any third
party, but only insofar as such losses, claims, damages or liabilities are based
upon (A) any untrue statement or alleged untrue statement of any material fact
contained in the Memorandum, but only with reference to information contained in
the Memorandum relating to the Placement Agent, or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if made or omitted in
reliance upon and in conformity with information furnished to the Company by the
Placement Agent or any such controlling persons, specifically for use in the
preparation thereof, or (B) fraud, willful misconduct or gross negligence of the
Placement Agent.  The Placement Agent will reimburse the Company or
any such person for any legal or other expenses reasonably incurred in
connection with investigating or defending against any such loss, claim, damage,
liability or action, proceeding or investigation to which such indemnity
obligation applies, including appeals. Notwithstanding the foregoing, (i) in no
case shall the Placement Agent have any liability to any person under this
Section 8(b) for the gross negligence, fraud or willful misconduct of the
Company or any person entitled to indemnification hereunder and (ii) in no event
shall the Placement Agent’s indemnification obligation hereunder exceed the fees
payable to it hereunder, except in cases of the Placement Agent’s gross
negligence, fraud or willful misconduct as determined in a final judgment, or
judgment not appealed within the prescribed appeal time period, in both cases by
a court of competent jurisdiction.

    
      
         

      

      
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    (c)     Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, claim, proceeding or investigation (the “Action”),
such indemnified party, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, will notify the indemnifying party of
the commencement thereof, but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party under this Section 8 unless the indemnifying party has been substantially
prejudiced by such omission. The indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party, to assume the defense thereof subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party.
The indemnified party will have the right to employ separate counsel in any such
Action and to participate in the defense thereof, but the fees and expenses of
such counsel will not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the Action with counsel reasonably
satisfactory to the indemnified party, provided, however, that if the
indemnified party shall be requested by the indemnifying party to participate in
the defense thereof or shall have concluded in good faith and specifically
notified the indemnifying party either that there may be specific defenses
available to it which are different from or additional to those available to the
indemnifying party or that such Action involves or could have a material adverse
effect upon it with respect to matters beyond the scope of the indemnity
agreements contained in this Agreement, then the counsel representing it, to the
extent made necessary by such defenses, shall have the right to direct such
defenses of such Action on its behalf and in such case the reasonable fees and
expenses of such counsel in connection with any such participation or defenses
shall be paid by the indemnifying party. No settlement of any Action against an
indemnified party will be made without the consent of the indemnifying party and
the indemnified party, which consent shall not be unreasonably withheld or
delayed in light of all factors of importance to such party and no indemnifying
party shall be liable to indemnify any person for any settlement of any such
claim effected without such indemnifying party’s consent.

     

    9.           Contribution.  To
provide for just and equitable contribution, if (i) an indemnified party makes a
claim for indemnification pursuant to Section 8 hereof and it is finally
determined, by a judgment, order or decree not subject to further appeal that
such claims for indemnification may not be enforced, even though this Agreement
expressly provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the 1934 Act, or otherwise,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Placement Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total commissions and fees
actually received by the Placement Agent.  The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Placement Agent, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 9. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 9. Anything in this Section 10 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 9 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    10.         Termination.

     

    (a) The Offering may be terminated by
the Placement Agent at any time prior to the expiration of the Offering Period
in the event that: (i) any of the representations, warranties or covenants of
the Company contained herein, in the Memorandum or in any other Transaction
Document shall prove to have been false or misleading in any material respect
when actually made, (ii) the Company shall have failed to perform any of its
material obligations hereunder or under any other Transaction Document; or (iii)
there shall occur any event, within the control of the Company, which could
materially adversely affect the transactions contemplated hereby or the other
Transaction Documents or the ability of the Company to perform
thereunder.  In such event, the Placement Agent shall be entitled to
receive from the Company, within ten (10) business days of the Termination Date,
in addition to other rights and remedies it may have hereunder, at law or
otherwise, an amount equal to the sum of: (A) any and all Placement Agent Fee
which would have been earned through the Termination Date based on amounts in
the Escrow Account that, but for the termination would have been available in
normal course for release to the Company at a Closing and shall retain any
Placement Agent Fee for any closings previously consummated; (B) the Expense
Allowance based on amounts in the Escrow Account that, but for the termination
would have been available in normal course to be paid to the Placement Agent at
a Closing and shall retain any Expense Allowance for any closings previously
consummated [(A) and (B) collectively, the “Termination Amount”] and (C) all
amounts which may become payable in respect of Post-Closing Investors pursuant
to Section 3(e) hereof.  In addition, in the event such termination
occurs prior to the time that a Closing has been consummated and there are no
funds in the Escrow Account, the Placement Agent will be entitled, upon
presentation of a written accounting therefor in reasonable detail (but without
the need to include the underlying statements or evidence of payment), to prompt
reimbursement of its actual, out-of-pocket expenses related to the Offering in
an amount not to exceed $15,000  (of which $5,000 has previously been
paid) including but not limited to fees and expenses of legal counsel, travel
expenses and the fees and expenses of outside experts, if any, retained to
assist the Placement Agent with due diligence (the foregoing hereinafter
referred to as the “Expense Reimbursement”).

    

    (b)  This
Offering may be terminated by the Company at any time prior to the expiration of
the Offering Period in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder (excluding failing to raise
the Minimum Amount hereunder). In the event of any such termination by the
Company, the Placement Agent shall not be entitled to any amounts whatsoever
except for the Expense Reimbursement.

    

    (c)  This Offering may also
be terminated by the Company at any time prior to the expiration of the Offering
Period for any reason not covered in Section 10(b) above (the “Company 10(c)
Termination”).  In such event, the Placement Agent shall be entitled
to receive from the Company (i) the Termination Amount (or if at the time of
such termination, there are no funds in the Escrow Account that have or are to
be released to Company, the Expense Reimbursement) and (ii) all amounts which
may become payable in respect of Post-Closing Investors pursuant to Section 3(e)
hereof.  In addition, if within twelve (12) months after the Company
10(c) Termination, the Company conducts a public or private offering of its
securities or enters into a letter of intent with respect to the foregoing, then
upon the closing of any such transaction, the Placement Agent shall be entitled
to receive from the Company an amount equal to five (5%) of the gross proceeds
raised in such transaction (the “Company 10 (c) Termination
Amount”).

    

    (d)  Upon any such
termination, the Placement Agent and the Company will cause, via written
instructions to the Escrow Agent, all monies received with respect to the
subscriptions for Units not accepted by the Company to be promptly returned to
such subscribers without interest, penalty, expense or deduction.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (e)  Before any termination
by the Placement Agent under Section 10(a) or by the Company under Section 10(b)
or Section 10(c) shall become effective, the terminating party shall give
written notice to the other party of its intention to terminate the Offering
(the “Termination Notice”).  The Termination Notice shall specify the
grounds for the proposed termination. If the specified grounds for termination,
or their resulting adverse effect on the Transactions, are curable, then the
other party shall have ten (10) days from the Termination Notice within which to
remove such grounds or to eliminate all of their material adverse effects on the
Transactions contemplated hereby; otherwise, the Offering shall
terminate.

     

    11.           Survival.  The
obligations of the parties to pay any costs and expenses hereunder and to
provide indemnification pursuant to Section 8 and contribution pursuant to
Section 9 shall survive any termination or completion of the
Offering.  The respective indemnities, agreements, representations,
warranties and other statements of the Company or the Placement Agent set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of, and regardless of any
access to information by, the Company or the Placement Agent, or any of their
officers or directors or any controlling person thereof, and will survive the
sale of the Units.  In addition, the provisions of Sections 3(e),
5(e), and 10 through 18 hereof shall also survive the termination or expiration
of this Offering.

     

    12.            Notices.  All
communications hereunder will be in writing and, except as otherwise expressly
provided herein or after notice by one party to the other of a change of
address, if sent to the Placement Agent, will be mailed, delivered or telefaxed
and confirmed to the Placement Agent at 155 Bovet Road, Suite 725, San Mateo, CA
94402, with a copy to Littman Krooks LLP, 655 Third Avenue, 20th Floor,
New York, New York 10017, Attention: Steven D. Uslaner, Esq., telefax number
(212) 490-2990 and if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to SPO Medical Inc., 3 Gavish Street, POB 2454, Kfar
Saba Israel, Attention: Michael Braunold, telefax number (972) 9-764-3571 with a
copy to Aboudi & Brounstein Law Offices, 3 Gavish Street, POB 2432, Kfar
Saba Ind. Zone 44641 Israel, Attention: David Aboudi, telefax number
972-9-764-4834.

    

    13.           Governing Law, Jurisdiction,
Costs.   This Agreement shall be deemed to have been made
and delivered in New York, New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York without regard to principles of conflicts of law
thereof.   The parties hereto irrevocably submit to the exclusive
jurisdiction of the New York State or United States Federal courts located in
the Borough of Manhattan, New York over any action or proceeding arising out of
or in any manner relating to this Agreement or any agreement contemplated
hereby, and the parties irrevocably agree that all claims in respect of any such
action or proceeding shall be heard in such New York State or Federal court. The
parties hereto further irrevocably waive any objection to venue in such state
and any objection to an action or proceeding in such state on the basis of an
inconvenient forum. Service of process may be made upon either party by mailing
a copy thereof to it, by certified or registered mail, at its address to be used
for the giving of notices under this Agreement. The prevailing party in any
action or proceeding brought arising out of or relating to this Agreement shall
be entitled to receive from the other party all costs, fees and expenses,
including without limitation, the fees and expenses of legal counsel, incurred
in connection with such action or proceeding.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    14.           Limitation of Engagement to
the Company. The Company acknowledges that the Placement Agent has been
retained only by the Company, that the Placement Agent is providing services
hereunder as an independent contractor (and not in any fiduciary or agency
capacity) and that the Company’s engagement of the Placement Agent is not deemed
to be on behalf of, and is not intended to confer rights upon, any shareholder,
owner or partner of the Company or any other person not a party hereto as
against the Placement Agent or any of its affiliates, or any of its or their
officers, directors, controlling persons (within the meaning of Section 15 of
the Act or Section 20 of the 1934 Act), employees or agents, other than the
indemnification and contribution provisions set forth in Sections 8 and 9
hereof. Unless otherwise expressly agreed in writing by the Placement Agent, no
one other than the Company is authorized to rely upon this Agreement or any
other statements or conduct of the Placement Agent, and no one other than the
Company is intended to be a beneficiary of this Agreement.

    

    15.           Limitation of Liability to
the Company. Except as provided in Section 8 (Indemnification) and
Section 9 (Contribution), neither the Placement Agent nor any of its affiliates
or any of its or their officers, directors, controlling persons (within the
meaning of Section 15 of the Act or Section 20 of the 1934 Act ), employees or
agents shall have any liability to the Company, its security holders or
creditors, or any person asserting claims on behalf of or in the right of the
Company (whether direct or indirect, in contract, tort, for an act of negligence
or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
equitable relief arising out of or relating to this Agreement or the services
rendered hereunder, except for losses, fees, damages, liabilities, costs or
expenses that arise out of or are based on any action of or failure to act by
the Placement Agent and that are determined in a final judgment, or
judgment not appealed within the prescribed appeal time period, in both cases by
a court of competent jurisdiction to have resulted from the fraud, gross
negligence, or willful misconduct of the Placement Agent.

    

    16.           Miscellaneous.  No
provision of this Agreement may be changed or terminated except by a writing
signed by the party or parties to be charged therewith.  Unless
expressly so provided, no party to this Agreement will be liable for the
performance of any other party’s obligations hereunder.  Either party
hereto may waive compliance by the other with any of the terms, provisions and
conditions set forth herein; provided, however, that any such waiver shall be in
writing specifically setting forth those provisions waived
thereby.  No such waiver shall be deemed to constitute or imply waiver
of any other term, provision or condition of this Agreement.

    

    17.           Entire
Agreement.  This Agreement supersedes all prior agreements
(including, without limitation, that certain letter agreement  between
the Company and the Placement Agent dated June 14, 2010) between the parties
with respect to the Offering and the subject matter hereof.

     

    18.           Counterparts.  This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the same
instrument.  In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.  This
Agreement shall become effective when one or more counterparts has been signed
and delivered by each of the parties hereto.

     

    * * * *
*

     

    
      
        
           

        

        
          19

          
            

          

        

        
           

        

      

    

    

    If the
foregoing is in accordance with your understanding of the agreement, kindly sign
and return this Agreement, whereupon it will become a binding agreement between
the Company and the Placement Agent in accordance with its terms.

    

    
      
        
          
            	 
      	
                    SPO
      MEDICAL INC.

                  
	 
      	 
      	 
      
	 
      	
                    By: 

                  	
                    /s/
      Michael Braunold

                  
	 
      	 
      	 
      
	 
      	 
      	
                    Michael
      Braunold

                  
	 
      	 
      	
                    Chief
      Executive Officer

                  
	 	 	 
	 	[ 	 

          

        

      

    

     

    
      	
              Accepted
      and agreed to this

            	 
      
	
              12th  day
      of July, 2010

            	 
      
	 
      	 
      
	
              EMERSON
      EQUITY LLC

            	 
      
	 
      	 
      	 
      
	
              By: 

            	
              /s/
      Domenic Baldini

            	 
      
	 
      	 
      	 
      
	 
      	
              Domenic
      Baldini

            	 
      
	 
      	
              President

            	 
      

    

    
      
         

      

      
        20Unassociated Document

     

    EXHIBIT 10.2

    FORM OF
SUBSCRIPTION AGREEMENT

    

    SPO
Medical Inc.

    3 Gavish
Street

    POB
2454

    Kfar Saba
Israel

    Attn:
Michael Braunold, Chief Executive Officer

    

    Ladies
and Gentlemen:

    

    1.           Subscription.  The
undersigned (the “Purchaser”), intending to be legally bound, hereby irrevocably
agrees to purchase from SPO Medical Inc., a Delaware corporation (the
“Company”), the number of Units (as defined below) of the Company set forth on
the signature page hereof at a purchase price of $30,000 per
Unit.  This subscription is submitted to you in accordance with and
subject to the terms and conditions described in this Subscription Agreement and
the Confidential Offering Memorandum, dated July 12, 2010, as may amended or
supplemented from time to time, including all attachments, schedules and
exhibits thereto (the “Memorandum,” and, together with this Subscription
Agreement, the “Offering Documents”) and relating to the offering (the
“Offering”) by the Company of up to 17 Units ($510,000) of the Company's
securities with the right at the sole discretion of the Company and the
Placement Agent to increase the maximum by an additional 17 Units
($510,000).  Each Unit (individually a "Unit" and collectively the
"Units") is being offered at a price of $30,000 per Unit and consists of (i)
200,000 shares of common stock, par value $0.01 per share (“Common Stock” or the
“Shares”) and (ii) three-year Common Stock Purchase Warrants (“Investor
Warrants”) to purchase up to 100,000 shares of Common Stock (the “Warrant
Shares”) at an exercise price of $0.25 per share.  We sometimes refer
to the Units, Shares, Warrant Shares and Investor Warrants collectively as the
“Securities.”  The Units are being offered on an exclusive basis
through Emerson Equity LLC (the “Placement Agent”) and its selected dealers, if
any, on a “reasonable efforts, no minimum” basis.  The minimum
subscription for a Purchaser in the Offering is one Unit ($30,000); provided, however, that Placement Agent
and the Company, in their sole discretion, may waive such minimum subscription
requirement from time to time.

     

    2.           Payment.  The
Purchaser encloses herewith a check payable to, or will immediately make a wire
transfer payment to “Signature Bank, Escrow Agent for SPO Medical
Inc.” in the full amount of the purchase price of the Units being subscribed
for.  Such funds will be held for the Purchaser's benefit, and will be
returned promptly, without interest or offset if this Subscription Agreement is
not accepted by the Company or the Offering is terminated pursuant to its terms
or by the Company or the Placement Agent.  Together with a check for,
or wire transfer of, the full purchase price, the Purchaser is delivering (i) a
completed and executed Signature Page to this Subscription Agreement and (ii) an
Accredited Investor Certification and Investor Profile, which is annexed
hereto.

    

    3.           Deposit of
Funds.  All payments made as provided in Section 2 hereof shall
be deposited by the Company or the Placement Agent as soon as practicable with
the Escrow Agent, in a non-interest-bearing escrow account (the “Escrow
Account”) until the earliest to occur of (a) the occurrence of a Closing (as
defined below), (b) the rejection of such subscription, or (c) the termination
of the Offering.  The Company and the Placement Agent may offer and
sell the Units and conduct closings (each, a “Closing”) during an offering
period commencing on the date of the Memorandum and continuing until September
7, 2010 (the “Initial Offering Period”), which period may be extended by the
Company and the Placement Agent, in their mutual discretion to a date no later
than November 9, 2010, unless terminated prior to such dates (the “Offering
Period”).

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    4.           Acceptance of
Subscription.  The Purchaser understands and agrees that the
Company and/or the Placement Agent, each in their sole discretion, reserve the
right to accept or reject this or any other subscription for Units, in whole or
in part, notwithstanding prior receipt by the Purchaser of notice of acceptance
of this or any other subscription.  The Company shall have no
obligation hereunder until the Company shall execute and deliver to the
Placement Agent (on behalf of the Purchaser) an executed copy of this
Subscription Agreement.  If this subscription is rejected in whole, or
the Offering is terminated, all funds received from the Purchaser will be
returned without interest, penalty, expense or deduction, and this Subscription
Agreement shall thereafter be of no further force or effect.  If this
subscription is rejected in part, the funds for the rejected portion of this
subscription will be returned without interest, penalty, expense or deduction,
and this Subscription Agreement will continue in full force and effect to the
extent this subscription was accepted.

    

    5.           Representations and Warranties of the
Purchaser.  The Purchaser hereby acknowledges, represents,
warrants, and agrees as follows:

    

    (a)           None
of the Units or the Securities offered pursuant to the Offering Documents are
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or any state securities laws.  The Purchaser understands that the
offering and sale of the Units contemplated hereby is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) thereof and the
provisions of Regulation D promulgated thereunder, based, in part, upon the
truth and accuracy of, and compliance with, representations, warranties and
agreements of the Purchaser contained in this Subscription
Agreement;

    

    (b)           The
Purchaser acknowledges that it and its attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, the “Advisors”), have
received the Offering Documents, either in hard copy or electronically, and all
other documents requested by the Purchaser and/or its Advisors, have carefully
reviewed them and understands the information contained therein, and the
Purchaser and the Advisors, if any, prior to the execution of this Subscription
Agreement, have had access to the same kind of information as would be available
in a registration statement filed by the Company under the Securities
Act.  Purchaser’s decision to enter into this Subscription Agreement
and the other Transaction Documents (as defined herein) has been made based
solely on the independent evaluation of the Purchaser and its Advisors, if
any;

    

    (c)           Neither
the Securities and Exchange Commission (the “SEC”) nor any state securities
commission or other regulatory body has approved the Securities or passed upon
or endorsed the merits of the Offering or confirmed the accuracy or determined
the adequacy of the Offering Documents.  Any representation to the
contrary is a criminal offense.  The Offering Documents have not been
reviewed by any federal, state or other regulatory authority.  The
Securities are subject to restrictions on transferability and resale and may not
be transferred or resold except as permitted under the Securities Act, and the
applicable state securities laws, pursuant to registration or exemption
therefrom;

    

    (d)           All
documents, records, and books pertaining to the investment in the Securities
(including, without limitation, the Offering Documents) have been made
available, subject to certain confidentiality restrictions, for inspection by
the Purchaser and its Advisors, if any;

    
      
         

      

      
        A-2

        
          

        

      

      
         

      

    

    

    (e)           The
Purchaser and its Advisors, if any, have had a reasonable opportunity to ask
questions of and receive answers from a person or persons acting on behalf of
the Company concerning the offering of the Units and the business, financial
condition, and results of operations of the Company, and all such questions have
been answered by representatives of the Company to the full satisfaction of the
Purchaser and its Advisors, if any, and the Purchaser and its Advisors have had
access, through the Memorandum and/or the EDGAR system, to true and complete
copies of the Company’s most recent Annual Report on Form 10-K for the 2009 year
(the “10-K”) and all other reports filed by the Company pursuant to the
Securities Exchange Act of 1934, as amended, since the filing of the 10-K and
prior to the date hereof and have reviewed such filings;

    

    (f)     
      In evaluating the suitability of an
investment in the Company, the Purchaser has not relied upon any representation
or other information (oral or written) other than as stated in the Offering
Documents or as contained in documents so furnished to the Purchaser or its
Advisors, if any, by the Company or the Placement Agent;

    

    (g)           The
Purchaser is unaware of, is in no way relying on, and did not become aware of
the offering of the Units directly or indirectly through or as a result of, any
form of general solicitation or general advertising including, without
limitation, any press release, filing with the SEC, article, notice,
advertisement or other communication published in any newspaper, magazine or
similar media or broadcast over television, radio or the internet (including
without limitation, internet “blogs,” bulletin boards, discussion groups or
social networking sites), in connection with the offering and sale of the Units
and is not subscribing for Units and did not become aware of the offering of the
Units through or as a result of any seminar or meeting to which the Purchaser
was invited by, or any solicitation of a subscription by, a person not
previously known to the Purchaser in connection with investments in securities
generally;

    

    (h)           The
Purchaser has taken no action which would give rise to any claim by any person
for brokerage commissions, finder’ fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby (other than
commissions and other compensation to be paid by the Company to the Placement
Agent or as otherwise described in the Offering Documents);

    

    (i)    
       The Purchaser's decision to enter into
this Subscription Agreement has been made based solely on the independent
evaluation of the Purchaser and its own Advisors, if any, and the Purchaser,
either alone or together with its Advisors, if any, has such knowledge and
experience in financial, tax, and business matters, and, in particular,
investments in securities, so as to enable it to utilize the information made
available to it in connection with the Offering to evaluate the merits and risks
of an investment in the Units and the Company and to make an informed investment
decision with respect thereto;

    

    (j)       
    The Purchaser is not relying on the Company, the
Placement Agent or any of their respective employees or agents with respect to
the legal, tax, economic and related considerations of an investment in the
Units, and the Purchaser has relied on the advice of, or has consulted with,
only its own Advisors, if any;

    

    (k)           The Purchaser is neither a registered
representative under the Financial Industry Regulatory Authority (“FINRA”), a
member of FINRA or associated or affiliated with any member of FINRA, nor a
broker-dealer registered with the SEC under the Exchange Act or engaged in a
business that would require it to be so registered, nor is it an affiliate of a
such a broker-dealer or any person engaged in a business that would require it
to be registered as a broker-dealer. In the event such Purchaser is a member of
FINRA, or associated or affiliated with a member of FINRA, such Purchaser
agrees, if requested by FINRA, to sign a lock-up, the form of which shall be
satisfactory to FINRA with respect to the Securities.  Furthermore,
the Purchaser is not an underwriter of the Securities, nor is it an affiliate of
an underwriter of the Securities.

    
      
         

      

      
        A-3

        
          

        

      

      
         

      

    

    

    (l)  
         The Purchaser is acquiring
the Units solely for such Purchaser's own account for investment purposes only
and not with a view to or intent of resale or distribution thereof, in whole or
in part.  The Purchaser has no agreement or arrangement, formal or
informal, with any person to sell or transfer all or any part of the Securities,
and the Purchaser has no plans to enter into any such agreement or
arrangement;

    

    (m)          The
purchase of the Units represents a high risk capital investment and the
Purchaser is able to afford an investment in a speculative venture having the
risks and objectives of the Company.  The Purchaser must bear the
substantial economic risks of the investment in the Units indefinitely because
none of the Units or the Securities may be sold, hypothecated or otherwise
disposed of unless subsequently registered under the Securities Act and
applicable state securities laws or an exemption from such registration is
available.  Legends shall be placed on the Units and the Securities to
the effect that they have not been registered under the Securities Act or
applicable state securities laws and appropriate notations thereof will be made
in the Company's books.  Stop transfer instructions will be placed
with the transfer agent of the Securities, if any, or with the
Company.  There can be no assurance that there will be any market for
resale of the Units or the Securities.  The Company has agreed that
purchasers of the Units will have, with respect to the Shares and the Warrant
Shares, the registration rights described herein;

    

    (n)           The
Purchaser has adequate means of providing for such Purchaser's current financial
needs and foreseeable contingencies and has no need for liquidity of its
investment in the Securities for an indefinite period of time;

    

    (o)           The
Purchaser is aware that an investment in the Units involves a number of very
significant risks and has carefully read and considered the matters set forth
under the caption “Risk Factors” in the Offering Documents, and, in particular,
acknowledges that the Company's independent registered public accounting firm
has included an explanatory paragraph in its opinion on the Company’s financial
statements for the fiscal years ended December 31, 2009, expressing doubt as to
the Company's ability to continue as a going concern;

    

    (p)           The
Purchaser meets the requirements of at least one of the suitability standards
for an “accredited investor” as that term is defined in Regulation D under the
Securities Act, and has truthfully and accurately completed the Accredited
Investor Certification and Investor Profile attached hereto;

    

    (q)           The
Purchaser: (i) if a natural person, represents that the Purchaser has reached
the age of 21 and has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
or limited liability company or partnership, or association, joint stock
company, trust, unincorporated organization or other entity, represents that
such entity was not formed for the specific purpose of acquiring the Units, such
entity is duly organized, validly existing and in good standing under the laws
of the state of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of any
law applicable to it or its charter or other organizational documents, such
entity has full power and authority to execute and deliver this Subscription
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Units and the
Securities, the execution and delivery of this Subscription Agreement has been
duly authorized by all necessary action, this Subscription Agreement has been
duly executed and delivered on behalf of such entity and is a legal, valid and
binding obligation of such entity; or (iii) if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that it has full
power and authority to execute and deliver this Subscription Agreement in such
capacity and on behalf of the subscribing individual, ward, partnership, trust,
estate, corporation, or limited liability company or partnership, or other
entity for whom the Purchaser is executing this Subscription Agreement, and such
individual, partnership, ward, trust, estate, corporation, or limited liability
company or partnership, or other entity has full right and power to perform
pursuant to this Subscription Agreement and make an investment in the Company,
and represents that this Subscription Agreement constitutes a legal, valid and
binding obligation of such entity.  The execution and delivery of this
Subscription Agreement will not violate or be in conflict with any order,
judgment, injunction, agreement or controlling document to which the Purchaser
is a party or by which it is bound;

    
      
         

      

      
        A-4

        
          

        

      

      
         

      

    

    

    (r)           The
Purchaser and the Advisors, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such information in its
possession or could acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Offering Documents
and all documents received or reviewed in connection with the purchase of the
Units and have had the opportunity to have representatives of the Company
provide them with such additional information regarding the terms and conditions
of this particular investment and the financial condition, results of
operations, business and prospects of the Company deemed relevant by the
Purchaser or the Advisors, if any, and all such requested information, to the
extent the Company had such information in its possession or could acquire it
without unreasonable effort or expense, has been provided by the Company to the
full satisfaction of the Purchaser and the Advisors, if any;

    

    (s)           Any
information which the Purchaser has heretofore furnished or is furnishing
herewith to the Company or the Placement Agent is complete and accurate and may
be relied upon by the Company and the Placement Agent in determining the
availability of an exemption from registration under Federal and state
securities laws in connection with the Offering.  The Purchaser
further represents and warrants that it will notify and supply corrective
information to the Company and the Placement Agent immediately upon the
occurrence of any change therein occurring prior to the Company's issuance of
the securities underlying the Units;

    

    (t)           The
Purchaser has significant prior investment experience, including investments in
high risk securities.  The Purchaser is knowledgeable about
investments in small and thinly capitalized, companies.  The Purchaser
has a sufficient net worth to sustain a loss of its entire investment in the
Company in the event such a loss should occur.  The Purchaser's
overall commitment to investments which are not readily marketable is not
excessive in view of the Purchaser’s net worth and financial circumstances and
the purchase of the Units will not cause such commitment to become
excessive.  The investment is a suitable one for the
Purchaser;

    

    (u)           The
Purchaser is satisfied that it has received adequate information with respect to
all matters which it or the Advisors, if any, consider material to its decision
to make this investment;

    

    (v)           The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Offering Documents were prepared by the Company in
good faith but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed and will not be updated by the
Company and should not be relied upon;

    

    (w)          No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or its Advisors, if any, in connection with the
Offering which are in any way inconsistent with the information contained in the
Offering Documents;

    

    (x)           Within
five (5) business days after receipt of a request from the Company or the
Placement Agent, the Purchaser will provide such information and deliver such
documents as may reasonably be necessary to comply with any and all laws and
ordinances to which the Company or the Placement Agent is
subject;

    
      
         

      

      
        A-5

        
          

        

      

      
         

      

    

    

    (y)           The
Purchaser’s substantive relationship with the Company, the Placement Agent or
subagent through which the Purchaser is subscribing for Units predates the
Company’s, Placement Agent’s or such subagent's contact with the Purchaser
regarding an investment in the Units;

    

    (z)           THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT
AND SUCH LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
OFFERING DOCUMENTS.  ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL;

    

    (aa)         The
Purchaser understands that affiliates and/or employees of the Placement Agent
(i) will receive the compensation set forth elsewhere in the Offering Documents
in connection with the Offering and (ii) may, but are not obligated to, purchase
Units in the Offering and all such Units purchased shall be counted toward the
aggregate amount of the Offering.

    

    (bb)         (For ERISA plans
only)    The fiduciary of the ERISA plan represents
that such fiduciary has been informed of and understands the Company’s
investment objectives, policies and strategies, and that the decision to invest
“plan assets” (as such term is defined in ERISA) in the Company is consistent
with the provisions of ERISA that require diversification of plan assets and
impose other fiduciary responsibilities.  The Purchaser fiduciary or
Plan (a) is responsible for the decision to invest in the Company; (b) is
independent of the Company or any of its affiliates; (c) is qualified to make
such investment decision; and (d) in making such decision, the Purchaser
fiduciary or Plan has not relied primarily on any advice or recommendation of
the Company or any of its affiliates;

    

    (cc)         The Purchaser should check the Office
of Foreign Assets Control (“OFAC”) website at <http://www.treas.gov/ofac>
before making the following representations. The Purchaser represents
that the amounts invested by it in the Company in the Offering were not and are
not directly or indirectly derived from activities that contravene federal,
state or international laws and regulations, including anti-money laundering
laws and regulations. Federal regulations and Executive Orders administered by
OFAC prohibit, among other things, the engagement in transactions with, and the
provision of services to, certain foreign countries, territories, entities and
individuals.  The lists of OFAC prohibited countries, territories,
persons and entities can be found on the OFAC website at
<http://www.treas.gov/ofac>.  In addition, the programs
administered by OFAC (the “OFAC Programs”) prohibit dealing with
individuals1 or
entities in certain countries regardless of whether such individuals or entities
appear on the OFAC lists;

     

    
      
        
1 These
individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs.

    

    
      
         

      

      
        A-6

        
          

        

      

      
         

      

    

    

    (dd) To the best of the Purchaser’s
knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled
by the Purchaser; (3) if the Purchaser is a privately-held entity, any person
having a beneficial interest in the Purchaser; or (4) any person for whom the
Purchaser is acting as agent or nominee in connection with this investment is a
country, territory, individual or entity named on an OFAC list, or a person or
entity prohibited under the OFAC Programs.  Please be advised that the
Company may not accept any amounts from a prospective investor if such
prospective investor cannot make the representation set forth in the preceding
paragraph.  The Purchaser agrees to promptly notify the Company and
the Placement Agent should the Purchaser become aware of any change in the
information set forth in these representations.  The Purchaser
understands and acknowledges that, by law, the Company may be obligated to
“freeze the account” of the Purchaser, either by prohibiting additional
subscriptions from the Purchaser, declining any redemption requests and/or
segregating the assets in the account in compliance with governmental
regulations, and the Placement Agent may also be required to report such action
and to disclose the Purchaser’s identity to OFAC.  The Purchaser
further acknowledges that the Company may, by written notice to the Purchaser,
suspend the redemption rights, if any, of the Purchaser if the Company
reasonably deems it necessary to do so to comply with anti-money laundering
regulations applicable to the Company and the Placement Agent or any of the
Company’s other service providers.  These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs;

    

    (ee) To the best of the Purchaser’s
knowledge, none of: (1) the Purchaser; (2) any person controlling or controlled
by the Purchaser; (3) if the Purchaser is a privately-held entity, any person
having a beneficial interest in the Purchaser; or (4) any person for whom the
Purchaser is acting as agent or nominee in connection with this investment is a
senior foreign political figure2, or
any immediate family3
member or
close associate4 of a
senior foreign political figure, as such terms are defined in the footnotes
below; and

    

    (ff)           If
the Purchaser is affiliated with a non-U.S. banking institution (a “Foreign
Bank”), or if the Purchaser receives deposits from, makes payments on behalf of,
or handles other financial transactions related to a Foreign Bank, the Purchaser
represents and warrants to the Company that: (1) the Foreign Bank has a fixed
address, other than solely an electronic address, in a country in which the
Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank
maintains operating records related to its banking activities; (3) the Foreign
Bank is subject to inspection by the banking authority that licensed the Foreign
Bank to conduct banking activities; and (4) the Foreign Bank does not provide
banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.

    

    6.           Representations, Warranties and
Covenants of the Company.  The Company hereby represents,
warrants, acknowledges and agrees as follows:

    

    (a)         Organization, Good Standing
and Qualification.  (a)  The Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority to own,
lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted.  The Company has no
subsidiaries, other than SPO Medical Equipment Ltd., a company incorporated
under the laws of the State of Israel.  The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its  ownership or use of property or the nature
of the business conducted by it makes such qualification necessary except where
the failure to be so qualified or in good standing would not have a material
adverse effect on (i) the assets, liabilities, results of operations, financial
condition or business, or prospects of the Company or (ii) the ability of the
Company to perform its obligations under the Transaction Documents (as defined
below) (a “Material Adverse Effect”).

     

    
      
        

      

    

    2 A
“senior foreign political figure” is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a “senior foreign political figure” includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.

    

    3
“Immediate family” of a senior foreign political figure typically includes the
figure’s parents, siblings, spouse, children and in-laws.

    

    4 A “close associate” of a senior foreign
political figure is a person who is widely and publicly known to maintain an
unusually close relationship with the senior foreign political figure, and
includes a person who is in a position to conduct substantial domestic and
international financial transactions on behalf of the senior foreign political
figure.

    
      
         

      

      
        A-7

        
          

        

      

      
         

      

    

    

    (b)         Authorization;
Enforceability. The Company has all corporate power and authority to (i)
conduct its business as presently conducted and as proposed to be conducted (as
described in the Memorandum) (ii) enter into and perform its obligations under
this Subscription Agreement (the “Subscription Agreement”), the Investor
Warrants substantially in the form of Annex B to the Memorandum, and the other
agreements contemplated hereby (this Subscription Agreement, the Warrants, and
the other agreements contemplated hereby, are collectively referred to herein as
the “Transaction Documents”), (iii) issue, sell and deliver the Shares and
Investor Warrants and (iv) issue, sell and deliver the Warrant
Shares.  The execution and delivery of this Agreement and the other
Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby, have been duly
authorized by the Company's Board of Directors.  This Agreement has
been duly authorized, executed and delivered and constitutes, and each of the
other Transaction Documents, upon due execution and delivery, will constitute,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms (i) except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect related to laws affecting
creditors’ rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers, and except that no
representation is made herein regarding the enforceability of the Company’s
obligations to provide indemnification and contribution remedies under the
securities laws and (ii) subject to the limitations imposed by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity).

    

    7.           Registration
Rights.  Purchaser shall have the registration rights described
below.

    

    (a)        
Definitions.  As
used in the Subscription Agreement, the following terms shall have the following
meanings.

    

    (1)           The
term “Holder” shall mean any holder of Registrable Securities.

    

    (2)           The
terms “register”, “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or order of
effectiveness of such registration statement or document.

    

    (3)           The
term “Registrable Securities” shall mean (i) the Shares, (ii) the Warrant
Shares  and (iii) any shares of Common Stock issuable (or issuable
upon the conversion or exercise of any warrant, right or other security that is
issued) pursuant to a dividend or other distribution with respect to or in
replacement of any such Securities; provided, however, that securities shall
only be treated as Registrable Securities if and only for so long as they (A)
have not been disposed of pursuant to a registration statement declared
effective by the SEC; (B) have not been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale; (C) are held by a Holder or a
permitted transferee of a Holder pursuant to Section 7(j) and (D) may not be
disposed of under Rule 144 under the Securities Act without
restriction.

    
      
         

      

      
        A-8

        
          

        

      

      
         

      

    

    

    (4)           The
term “Trading Event” means the first date on which the Company’s common stock
trades on a national securities exchange or the Over the Counter Bulletin
Board.

    

    (b)         Piggyback
Registration.

    

    (1)           The
Company agrees that if, at any time, and from time to time, after the date
hereof  the Board of Directors of the Company (the “Board”) shall
authorize the filing of a registration statement under the Securities Act (other
than a registration statement on Form S-8, Form S-4 or any other form that does
not include substantially the same information as would be required in a form
for the general registration of securities) in connection with the proposed
offer of any of its securities by it or any of its stockholders, the Company
shall: (A) promptly notify each Holder that such registration statement will be
filed and that the Registrable Securities then held by such Holder will be
included in such registration statement at such Holder’s request; (B) cause such
registration statement to cover all of such Registrable Securities issued to
such Holder for which such Holder requests inclusion; (C) use reasonable best
efforts to cause such registration statement to become effective as soon as
practicable; and (D) take all other reasonable action necessary under any
Federal law or regulation of any governmental authority to permit all such
Registrable Securities that have been issued to such Holder to be sold or
otherwise disposed of, and maintain such compliance with each such Federal and
regulation of any governmental authority for the period necessary for such
Holder to promptly effect the proposed sale or other disposition.

    

    (2)           Notwithstanding
any other provision of this Section 7(b), the Company may at any time, abandon
or delay any registration commenced by the Company.  In the event of
such an abandonment by the Company, the Company shall not be required to
continue registration of shares requested by the Holder for inclusion, the
Holder shall retain the right to request inclusion of shares as set forth above
and the withdrawn registration shall not be deemed to be a registration request
for the purposes of Section 7(b)(3) below.

    

    (3)           Each
Holder shall have the right to request inclusion of any of its Registrable
Securities in a registration statement as described in this Section 7(b) up to
two times.

    

    (4)           Notwithstanding the registration
obligations set forth in this Section 7, if at any time the SEC takes the
position that the offering of some or all of the Registrable Securities in a
Registration Statement is not eligible to be made on a delayed or continuous
basis under the provisions of Rule 415 under the Securities Act, the Company
shall use its commercially reasonable efforts (which shall include assistance
from Placement Agent’s counsel) to advocate with the SEC that the offering
contemplated by the Registration Statement is a valid secondary offering and not
an offering “by or on behalf of the issuer” as defined in Rule
415.  In the event that, despite the Company’s commercially reasonable
efforts and compliance with the terms of this Section 7(b), the SEC refuses
to alter its position, the Company shall (i) remove from the Registration
Statement such portion of the Registrable Securities and other securities
(“Other
Registrable Securities”)
that were included in the initial Registration Statement
filing  (“Cut-back
Shares”) and/or
(ii) agree to such restrictions and limitations on the registration and
resale of the Registrable Securities as the SEC may require to assure the
Company’s compliance with the requirements of Rule 415 (collectively, the “SEC
Restrictions”).  Any cut-back imposed on
the Holders pursuant to this Section 7(b)(4) shall be allocated among the
Holders and the holders of Other Registrable Securities on a pro rata
basis.  Any exclusion of Registrable Securities shall be made pro rata
among the Holders in proportion to the number of Registrable Securities held by
the Holders, with the Warrant Shares excluded first.  From and after
the date the Company is able to effect the registration of such Cut-back Shares
in accordance with any SEC Restrictions, all of the provisions of this
Section 7 shall again be applicable to such Cut Back
Shares.

    
      
         

      

      
        A-9

        
          

        

      

      
         

      

    

    

    (c)         Registration
Procedures. Whenever required under this Section 7 to include Registrable
Securities in a Company registration statement, the Company shall, as
expeditiously as reasonably possible:

    

    (1)           Use
reasonable efforts to (i) cause such registration statement to become effective,
and (ii) cause such registration statement to remain effective until the
earliest to occur of (A) such date as the Holders selling Registrable Securities
have completed the distribution described in the registration statement and (B)
such time that all of such Registrable Securities are no longer, by reason of
Rule 144 under the Act, required to be registered for the sale thereof by such
Holders.  The Company will also use its reasonable efforts to, during
the period that such registration statement is required to be maintained
hereunder, file such post-effective amendments and supplements thereto as may be
required by the Securities Act and the rules and regulations thereunder or
otherwise to ensure that the registration statement does not contain any untrue
statement of material fact or omit to state a fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
if applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permits, in lieu of filing a post-effective amendment
that (i) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (ii) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the Company
may incorporate by reference information required to be included in (i) and (ii)
above to the extent such information is contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement. In the event that the Company becomes qualified for the use of Form
S-3 or any successor form at a time when any registration statement on any other
Form which includes Registrable Securities is required to be maintained
hereunder, the Company shall, upon the request of any selling Holder, subject to
Section 7(d), (i) as expeditiously as reasonably possible, use reasonable
efforts to cause a Short-Form Registration covering such Registrable Securities
to become effective and (ii) comply with each of the other requirements of this
Section 7(c) which may applicable thereto. Upon the effectiveness of such
Short-Form Registration, the Company shall be relieved of its obligations
hereunder to keep in effect the registration statement which initially covered
the Registrable Securities included in such Short-Form
Registration.

    

    (2)          Prepare
and file with the SEC such amendments and supplements to such registration
statement, and the prospectus used in connection with such registration
statement, as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement.

    

    (3)           Make
available for inspection upon reasonable notice during the Company’s regular
business hours by each selling Holder, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such selling Holder or underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company’s officers, directors and employees to supply all
information reasonably requested by any such selling Holder, underwriter,
attorney, accountant or agent in connection with such registration statement,
subject to the execution of appropriate confidentiality agreements.

    

    (4)           Furnish
to the selling Holders such numbers of copies of a prospectus, including a
preliminary prospectus as amended or supplemented from time to time, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.

    
      
         

      

      
        A-10

        
          

        

      

      
         

      

    

    

    (5)           Use
reasonable efforts to register and qualify the securities covered by such
registration statement under such other federal or state securities laws of such
jurisdictions as shall be reasonably requested by the selling Holders; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.

    

    (6)           In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering.  Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.

    

    (7)           Notify
each Holder of Registrable Securities covered by such registration statement, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, (i) when the registration statement or any post-effective
amendment and supplement thereto has become effective; (ii) of the issuance by
the SEC of any stop order or the initiation of proceedings for that purpose (in
which event the Company shall make every effort to obtain the withdrawal of any
order suspending effectiveness of the registration statement at the earliest
possible time or prevent the entry thereof); (iii) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iv) of the happening of any event as a result
of which the prospectus included 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 the light of the circumstances then existing (and each
Holder agrees to suspend any trading under the Registration Statement until such
condition is abated).

    

    (8)           Cause
all such Registrable Securities registered hereunder to be listed on each
securities exchange or quotation service on which similar securities issued by
the Company are then listed or quoted or, if no such similar securities are
listed or quoted on a securities exchange or quotation service, apply for
qualification and use best efforts to qualify such Registrable Securities for
inclusion on a national securities exchange or the OTCBB.

    

    (9)           Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and CUSIP number for all such Registrable Securities, in each
case not later than the effective date of such registration.

    

    (10)         Cooperate
with the selling Holders and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing the Registrable
Securities to be sold, which certificates will not bear any restrictive legends;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, shall request at
least two business days prior to any sale of the Registrable Securities to the
underwriters.

    

    (d)         Furnish Information.
 It shall be a condition precedent to the obligation of the Company to take
any action pursuant to this Section 7 with respect to the Registrable Securities
of any Holder that such Holder shall furnish to the Company such information
regarding the Holder, the Registrable Securities held by the Holder, and the
intended method of disposition of such securities as shall be reasonably
required by the Company to effect the registration of such Holder's Registrable
Securities.

    

    (e)         Registration
Expenses.  The Company shall bear and pay all Registration
Expenses incurred in connection with any registration, filing or qualification
of Registrable Securities, and shall pay the fees and expenses of one counsel to
the Holders to be designated by the Placement Agent (not to exceed $3,000) with
respect to reviewing the registration statement relating to such registrations
pursuant to Section 7 for each Holder, but excluding underwriting discounts and
commissions relating to Registrable Securities and excluding any professional
fees or costs of accounting, financial or legal advisors  to any of
the Holders (except as provided above).

    
      
         

      

      
        A-11

        
          

        

      

      
         

      

    

    

    (f)          Underwriting
Requirements.  In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under Section 7(b) to include any of the Holders' Registrable
Securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company.  If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of securities entitled to be included therein
owned by each selling Holder or in such other proportions as shall mutually be
agreed to by such selling Holders).  For purposes of the preceding
parenthetical concerning apportionment, for any selling Holder who is a holder
of Registrable Securities and is a partnership or corporation, the partners,
retired partners and stockholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single “selling Holder”,
and any pro-rata reduction with respect to such “selling Holder” shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such “selling Holder”, as defined in this
sentence.

    

    (g)         Delay of
Registration.  No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 7.

    

    (h)         Indemnification.  In
the event that any Registrable Securities are included in a registration
statement under this Section 7:

    

    (1)           To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
“Violation”):  (i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) 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, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, or any rule or regulation
promulgated under the Securities Act, or the Exchange Act, and the Company will
pay to each such Holder, underwriter or controlling person, as incurred, 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 indemnity agreement contained in this Section
7(h)(1) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person or a violation of any provision of the
Subscription Agreement by a Holder.

    
      
         

      

      
        A-12

        
          

        

      

      
         

      

    

    

    (2)           To
the extent permitted by law, each Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, or the Exchange Act,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration or a violation of any provision of the
Subscription Agreement by a Holder; and each such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 7(h)(2), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 7(h)(2) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that, in no
event shall any indemnity under this Section 7(h)(2) exceed the greater of the
cash value of the (i) gross proceeds from the offering received by such Holder
or (ii) such Holder’s investment pursuant to this Subscription Agreement as set
forth on the signature page attached hereto.

    

    (3)           Promptly
after receipt by an indemnified party under this Section 7(h) of notice of the
commencement of any action (including any governmental action), such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7(h), deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel selected by the indemnifying party and approved
by the indemnified party (whose approval shall not be unreasonably withheld);
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such
proceeding.  The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7(h), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 7(h).

    

    (4)           If
the indemnification provided for in this Section 7 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations.  The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the alleged omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.

    
      
         

      

      
        A-13

        
          

        

      

      
         

      

    

    

    (5)           Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.

    

    (6)           The
obligations of the Company and Holders under this Section 7(h) shall survive the
completion of any offering of Registrable Securities in a registration statement
under this Section 7, and otherwise.

    

    (i)          Reports Under Securities
Exchange Act of 1934.  With a view to making available to the
Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

    

    (1)           make
and keep public information available, as those terms are understood and defined
in Rule 144, at all times while the Registrable Securities are
outstanding;

    

    (2)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

    

    (3)           furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request such other information as may be reasonably requested in availing
any Holder of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.

    

    (j)          Permitted
Transferees.  The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Section
7 may be assigned in full by a Holder in connection with a transfer by such
Holder of its Registrable Securities if: (a) such Holder gives prior
written notice to the Company; (b) such transferee agrees to comply with the
terms and provisions of the Subscription Agreement; (c) such transfer is
otherwise in compliance with the Subscription Agreement, (d) such transfer
is otherwise effected in accordance with applicable securities laws and (e) such
Holder transfers at least 51% of its shares of Registrable Securities to the
transferee.  Except as specifically permitted by this Section 7(j),
the rights of a Holder with respect to Registrable Securities as set out herein
shall not be transferable to any other person, and any attempted transfer shall
cause all rights of such Holder therein to be forfeited.

    

    (k)         Termination of Registration
Rights  The right of any Holder to request inclusion in any
registration pursuant to Section 7 shall terminate if all shares of Registrable
Securities held by such Holder may immediately be sold under Rule 144 without
restriction.

    

    8.           Indemnification.  The
Purchaser agrees to indemnify and hold harmless the Company, the Placement
Agent, and their respective officers, directors, employees, agents, attorneys,
control persons and affiliates from and against all losses, liabilities, claims,
damages, costs, fees and expenses whatsoever (including, but not limited to, any
and all expenses incurred in investigating, preparing or defending against any
litigation commenced or threatened) based upon or arising out of any actual or
alleged false acknowledgment, representation or warranty, or misrepresentation
or omission to state a material fact, or breach by the Purchaser of any covenant
or agreement made by the Purchaser herein or in any other document delivered in
connection with this Subscription Agreement.

    
      
         

      

      
        A-14

        
          

        

      

      
         

      

    

    

    9.           Irrevocability; Binding
Effect.  The Purchaser hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the Purchaser, except as required by
applicable law, and that this Subscription Agreement shall survive the death or
disability of the Purchaser and shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives, and permitted assigns.  If the Purchaser is more than
one person, the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties, and acknowledgments
herein shall be deemed to be made by and be binding upon each such person and
such person's heirs, executors, administrators, successors, legal
representatives, and permitted assigns.

    

    10.         Modification.  Any
of the terms or provisions of this Subscription Agreement shall not be modified
or waived except by an instrument in writing signed by the party against whom
any such modification or waiver is sought.

     

    11.         Immaterial Modifications to the Transaction
Documents.  The Company may, at any time prior to the First
Closing, amend the Transaction Documents if necessary to clarify any provision
therein, without first providing notice or obtaining prior consent of the
Purchaser, if, and only if, such modification is not material in any
respect.

     

    12.         Notices.  Any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or
delivered against receipt to the party to whom it is to be given (a) if to the
Company, at the address set forth above, or (b) if to the Purchaser, at the
address set forth on the signature page hereof (or, in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 12).  Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.

    

    13.         Assignability.  This
Subscription Agreement and the rights, interests and obligations hereunder are
not transferable or assignable by the Purchaser and the transfer or assignment
of the Units shall be made only in accordance with all applicable
laws.

    

    14.         Applicable
Law.  This Subscription Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New
York.  Each of the parties hereto (1) agree that any legal suit,
action or proceeding arising out of or relating to this Subscription Agreement
shall be instituted exclusively in the state or federal courts located in New
York County, New York, (2) waive any objection which they may have now or
hereafter to the venue of any such suit, action or proceeding, and
(3) irrevocably consent to the jurisdiction of such courts in any such
suit, action or proceeding.  Each of the parties hereto further agrees
to accept and acknowledge service of any and all process which may be served in
any such suit, action or proceeding in such courts and agree that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it, in any such suit, action or
proceeding.  THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY.

    

    15.         Blue Sky
Qualification.  The purchase of Units under this Subscription
Agreement is expressly conditioned upon the exemption from qualification of the
offer and sale of the Units from applicable federal and state securities
laws.  The Company shall not be required to qualify this transaction
under the securities laws of any jurisdiction and, should qualification be
necessary, the Company shall be released from any and all obligations to
maintain its offer, and may rescind any sale contracted, in the
jurisdiction.

    
      
         

      

      
        A-15

        
          

        

      

      
         

      

    

    

    16.         Use of
Pronouns.  All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.

    

    17.         Confidentiality.  The
Purchaser acknowledges and agrees that any information or data the Purchaser has
acquired from or about the Company, not otherwise properly in the public domain,
was received in confidence (the “Confidential Information”).  Any
distribution of the Confidential Information to any person other than the
Purchaser named above, in whole or in part, or the reproduction of the
Confidential Information, or the divulgence of any of its contents (other than
to the Purchaser’s tax and financial advisers, attorneys and accountants, who
will likewise be required to maintain the confidentiality of the Confidential
Information) is unauthorized, except that any Purchaser (and each employee,
representative, or other agent of such Purchaser) may disclose to any and all
persons, without limitations of any kind (except as provided in the next
sentence) the tax treatment and tax structure of the transaction and all
materials of any kind (including opinions or other tax analyses) that are
provided to the Purchaser relating to such tax treatment and tax
structure.  Any such disclosure of the tax treatment, tax structure
and other tax-related materials shall not be made for the purpose of offering to
sell the Units offered hereby or soliciting an offer to purchase any such
securities.  Except as provided above with respect to tax matters, the
above named Purchaser agrees not to divulge, communicate or disclose, except as
may be required by law or for the performance of this Subscription Agreement, or
use to the detriment of the Company or for the benefit of any other person or
persons, or misuse in any way, any Confidential Information of the Company,
including any scientific, technical, trade or business secrets of the Company
and any scientific, technical, trade or business materials that are treated by
the Company as confidential or proprietary, including, but not limited to,
ideas, discoveries, inventions, developments and improvements belonging to the
Company and confidential information obtained by or given to the Company about
or belonging to third parties.

    

    18.         Most Favored Nations
Adjustment.  For a period commencing on the initial Closing and
terminating on the one year anniversary of the initial Closing (the “Adjustment
Period”), in the event the Company issues or grants any shares of Common Stock
or any warrants or other securities convertible, exchangeable or exercisable for
shares of Common Stock (hereinafter “Common Stock Equivalents”) pursuant to
which shares of Common Stock may be acquired at a price less than $0.15 per
share (other than Exempt Issuances (as described below)), then the Company shall
promptly issue additional shares of Common Stock to the Purchaser in an amount
sufficient that the subscription price paid hereunder, when divided by the total
number of shares issued and then held by such Purchaser (shares included in the
purchased Unit plus the additional shares issued under this provision), will
result in an actual price per share of Common Stock equal to such lower price
(this is intended to be a “full ratchet” adjustment). For example, if a
Purchaser purchases 1 Unit in the Offering (aggregating 200,000 shares of Common
Stock, excluding shares of Common Stock underlying Warrants) for a purchase
price of $30,000 (equals $0.15 per share of Common Stock) and then the Company
issues additional shares of Common Stock at $0.10 per share during the
Adjustment Period, the Company will provide notice to the Purchaser and to the
extent the Purchaser still owns such securities, promptly issue an additional
100,000 shares of Common Stock to the Purchaser.  Such adjustments
shall be made successively whenever such an issuance is made during the
Adjustment Period and shall be made with respect to shares of Common Stock still
owned by the Purchaser.  This clause shall not apply to an “Exempt
Issuance” which for purposes hereof shall mean (i) the issuance of any Common
Stock or Common Stock Equivalents to employees, officers or directors of, or
consultants or advisors or any other service providers to the Company or any
subsidiary; (ii) Common Stock or Common Stock Equivalents issued or issuable
pursuant to any rights or agreements, options, warrants or convertible
securities outstanding as of the initial closing of the Offering (so long as the
conversion or exercise price of such securities is not lowered to a price below
$0.15 other than in connection with any stock dividend, stock split or similar
transaction, and so long as the number of shares of Common Stock underlying such
securities is not otherwise increased other than in connection with any stock
dividend, stock split or similar transaction); (iii) Common Stock or Common
Stock Equivalents issued or issuable for consideration other than cash pursuant
to a merger, consolidation, strategic alliance, acquisition or similar business
combination; (iv) Common Stock or Common Stock Equivalents issued in connection
with bona fide strategic or OEM license agreements or other partnering
arrangements with a third party (whether or not affiliated with the Company as
of the date hereof)  so long as such issuances are not for the sole purpose
of raising capital; (v) Common Stock or Common Stock Equivalents issued in
settlement or extension of or otherwise in connection with any outstanding debt
of the Company existing as of the initial closing of the Offering; (vi) Common
Stock or Common Stock Equivalents issued or issuable in connection with any
stock split, stock dividend, distribution or recapitalization by the Company;
(vii) Common Stock or Common Stock Equivalents issued or issuable pursuant to
any equipment loan or leasing arrangement, real property leasing arrangement, or
debt financing from a bank or similar financial or lending institution and
(viii) Common Stock or Common Stock Equivalents issued or issuable to
Purchasers, the Placement Agent or any of their respective affiliates in
connection with the Offering

    
      
         

      

      
        A-16

        
          

        

      

      
         

      

    

    

    19.         Miscellaneous.

    

    (a)           The
Offering Documents, together with the Transaction Documents, constitute the
entire agreement between the Purchaser and the Company with respect to the
subject matter hereof and supersede all prior oral or written agreements and
understandings, if any, relating to the subject matter hereof.

    

    (b)           The
representations and warranties of the Company and the Purchaser made in this
Subscription Agreement shall survive the execution and delivery hereof and
delivery of the Units hereunder.

    

    (c)           Each
of the parties hereto shall pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such party) in
connection with this Subscription Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are
consummated.

    

    (d)           This
Subscription Agreement may be executed in one or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.

    

    (e)           Each
provision of this Subscription Agreement shall be considered separable and, if
for any reason any provision or provisions hereof are determined to be invalid
or contrary to applicable law, such invalidity or illegality shall not impair
the operation of or affect the remaining portions of this Subscription
Agreement.

    

    (f)           Paragraph
titles are for descriptive purposes only and shall not control or alter the
meaning of this Subscription Agreement as set forth in the text.

    

    (g)           The
Purchaser understands and acknowledges that there may be multiple Closings for
the Offering.

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
        A-17

        
          

        

      

      
         

      

    

     SPO
MEDICAL INC.

    SIGNATURE
PAGE TO THE

    SUBSCRIPTION
AGREEMENT

     

    Subscriber
hereby elects to subscribe under the Subscription Agreement for a total of
______ Units at a price of $30,000 Per Unit (NOTE: to be completed by
subscriber) and executes the Subscription Agreement.

     

    
      Date
(NOTE: To be completed by subscriber): ___________________________,
2010

    

    
      
        
          
            
              	 
	
                      If
      the Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as
      TENANTS IN COMMON, or as COMMUNITY
PROPERTY:

                    

            

          

        

      

    

    

    
      
        	 
      	 
      	 
      	 
      	 
      
	 
      	
                Print
      Name(s)

              	 
      	
                Social
      Security Number(s)

              	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
                Signature(s)
      of Subscriber(s)

              	 
      	
                Signature

              	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
                Date

              	 
      	
                Address

              	 
      

      

    

    

    If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:

    

    
      
        	 
      	 
      	 
      	 
      	 
      
	 
      	
                Name
      of Partnership,

              	 
      	
                Federal
      Taxpayer

              	 
      
	 
      	
                Corporation,
      Limited

              	 
      	
                Identification
      Number

              	 
      
	 
      	
                Liability
      Company or Trust

              	 
      	 
      	 
      

      

    

    

    
      
        	 
      	
                By:

              	 
      	 
      	 
      	 
      
	 
      	 
      	
                Name:

              	 
      	
                State
      of Organization

              	 
      
	 
      	 
      	
                Title:

              	 
      	 
      	 
      

      

    

    

    
      
        	 
      	 
      	 
      	 
      	 
      
	 
      	
                Date

              	 
      	
                Address

              	 
      

      

    

    

    
      
        	
                SPO
      MEDICAL INC.

              	 
      	
                EMERSON
      EQUITY LLC

              
	 
      	 
      	 
      
	
                By:

              	 
      	 
      	
                By:

              	 
      
	 
      	
                Authorized
      Officer

              	 
      	 
      	
                Authorized
      Officer

              

      

    

    
      
         

      

      
        A-18

        
          

        

      

      
         

      

    

    SPO
MEDICAL, INC.

    ACCREDITED
INVESTOR CERTIFICATION

    

    For
Individual Investors Only

    (all
Individual Investors must INITIAL where
appropriate):

    

    
      	
              Initial
      _______

            	
              I
      have a net worth (including the value of my primary residence, furnishings
      and automobiles) of at least $1 million either individually or through
      aggregating my individual holdings and those in which I have a joint,
      community property or other similar shared ownership interest with my
      spouse.

            

    

    

    
      	
              Initial
      _______

            	
              I
      initialed the above net worth category and confirm that I have a net worth
      (including furnishings and automobiles but excluding the
      value of my primary residence) of at least $1 million either individually
      or through aggregating my individual holdings and those in which I have a
      joint, community property or other similar shared ownership interest with
      my spouse.5

            

    

    

    
      	
              Initial
      _______

            	
              I
      have had an annual gross income for the past two years of at least
      $200,000 (or $300,000 jointly with my spouse) and expect my income (or
      joint income, as appropriate) to reach the same level in the current
      year.

            

    

    

    
      	
              Initial
      _______

            	
              I
      am a director or executive officer of SPO Medical,
  Inc.

            

    

    

    
      For
Non-Individual Investors

    

    
      (all
Non-Individual Investors must INITIAL where
appropriate):

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is a partnership, corporation, limited
      liability company or business trust that is 100% owned by persons who meet
      at least one of the criteria for Individual Investors set forth
      above.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is a partnership, corporation, limited
      liability company or any organization described in Section 501(c)(3)
      of the Internal Revenue Code, Massachusetts or similar business trust that
      has total assets of at least $5 million and was not formed for the purpose
      of investing the Company.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is an employee benefit plan within the meaning
      of the Employee Retirement Income Security Act of 1974, whose investment
      decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is
      a bank, savings and loan association, insurance company or registered
      investment adviser.

            

    

     

    
      

    

    
      	
              5

            	
              Based
      on language contained in the proposed Financial Regulatory Reform Bill
      (“FinReg Bill”), which may be enacted into law during the Offering Period,
      the net worth standard would remain at $1,000,000 but such threshold would
      exclude
      the value of a person’s primary residence.  In the event the
      FinReg Bill is enacted into law and becomes effective during the Offering
      Period, you are required to satisfy this revised net worth standard in the
      event you do not qualify as an accredited investor under another
      category.

            

    

    
      
         

      

      
        A-19

        
          

        

      

      
         

      

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is an employee benefit plan whose total assets
      exceed $5,000,000 as of the date of this
  Agreement.

            

    

    

    
      	
              Initial
      _______

            	
              The
      undersigned certifies that it is a self-directed employee benefit plan
      whose investment decisions are made solely by persons who meet either of
      the criteria for Individual
Investors.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is a U.S. bank, U.S. savings and loan
      association or other similar U.S. institution acting in its individual or
      fiduciary capacity.

            

    

    

    
      	
              Initial
      _______

            	
              The
      undersigned certifies that it is a broker-dealer registered pursuant to
      §15 of the Securities Exchange Act of
1934.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is an organization described in §501(c)(3) of
      the Internal Revenue Code with total assets exceeding $5,000,000 and not
      formed for the specific purpose of investing in the
    Company.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is a trust with total assets of at least
      $5,000,000, not formed for the specific purpose of investing in the
      Company, and whose purchase is directed by a person with such knowledge
      and experience in financial and business matters that he is capable of
      evaluating the merits and risks of the prospective
    investment.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is a plan established and maintained by a state
      or its political subdivisions, or any agency or instrumentality thereof,
      for the benefit of its employees, and which has total assets in excess of
      $5,000,000.

            

    

    

    
      	
              Initial
      _______

            	
              The
      investor certifies that it is an insurance company as defined in §2(13) of
      the Securities Act, or a registered investment
  company.

            

    

    

    
      	
              Initial
      _______

            	
              An
      investment company registered under the Investment Company Act of 1940 or
      a business development company as defined in Section 2(a)(48) of that
      Act.

            

    

    

    
      	
              Initial
      _______

            	
              A
      Small Business Investment Company licensed by the U.S.  Small
      Business Administration under Section 301(c) or (d) of the Small
      Business Investment Act of 1958.

            

    

    

    
      	
              Initial
      _______

            	
              A
      private business development company as defined in Section 202(a)(22)
      of the Investment Advisers Act of
1940

            

    

     

    
      
         

      

      
        A-20

        
          

        

      

      
         

      

    

    SPO
MEDICAL, INC.

    Investor
Profile

    (Must be completed by
Investor)

    

    Section A - Personal
Investor Information (Individual Investors)

    

    Investor
Name(s):
_________________________________________________________________________

     

    Individual(s)
executing: ________________________________________________________

     

    Social
Security Numbers / Federal I.D. Number:
_________________________________________________

     

    
      Date of
Birth:                       _________________            Marital
Status:  _______________________

      

      Joint
Party Date of
Birth:    _________________          
  Investment Experience (Years): __________

      

      Annual
Income:                   _________________             Liquid
Net Worth: ____________________

    

     

    Net Worth
(including value of primary residence): ________________

    

    Net Worth
(excluding value of primary residence): ________________

    

    Home
Street Address:
______________________________________________________________________

     

    Home
City, State & Zip Code:
_______________________________________________________________

     

    Home
Phone: ________________________ Home Fax: _____________________  Home
Email: _________

     

    Employer:
_______________________________________________________________________________

     

    Employer
Street Address:
___________________________________________________________________

     

    Employer
City, State & Zip Code:
____________________________________________________________

     

    Bus.
Phone: __________________________ Bus. Fax: __________________________ Bus.
Email: _______

     

    Type of
Business:
_________________________________________________________________________

     

    Emerson
Equity LLC Account Executive, if applicable:
________________________________________

    

    Section B - Investor
Information (Entity Investors)

    

    
      	
              If
      the investor is a corporation, partnership, limited liability company,
      trust, pension plan, foundation, joint Investor (other than a married
      couple) or other entity, an authorized officer, partner, or trustee must
      complete, date and sign this Certificate.

            
	 
      
	
              o Limited
      Partnership

            	
              o General
      Partnership

            
	 
      	 
      
	
              o Limited Liability
      Company

            	
              o Corporation

            
	 
      	 
      
	
              o Irrecoverable
      Trust:
      ________________________________________________________________

            
	 
      
	
              o Other form of
      organization:
      __________________________________________________________

            

    

     

    
      
         

      

      
        A-21

        
          

        

      

      
         

      

    

    

    Investor
Name(s):
_________________________________________________________________________

     

    Individual(s)
executing: ________________________________________________________

     

    Social
Security Numbers / Federal I.D. Number:
_________________________________________________

    

    Total
Assets:
_________________             Date
Entity Formed:____________________

    

    Street
Address:
_______________________________________________________________________________

     

    City,
State & Zip Code:
_________________________________________________________________________

     

    Bus.
Phone: __________________________ Bus. Fax: __________________________ Bus.
Email: ____________

     

    Type of
Business:
______________________________________________________________________________

     

    Emerson
Equity LLC Account Executive, if applicable:
___________________________________________________

    

    Section C – Certificate
Delivery Instructions

     

    ____
Please deliver certificate to the Employer Address listed in Section
A.

     

    ____
Please deliver certificate to the Home/Business Address listed in Sections A or
B, as applicable.

     

    ____
Please deliver certificate to the following address:
___________________________________________.

    

    Section D – Form of Payment
– Check or Wire Transfer

     

    ____
Check payable to Signature
Bank, As Agent for SPO Medical, Inc..

     

    ____ Wire
funds from my outside account according to the "How to subscribe for Shares"
Page.

     

    ____ Wire
funds from my Emerson Equity LLC account - See Following Page.

     

    
      ____ The
funds for this investment are rolled over, tax deferred from __________ within
the allowed 60 day window.

    

    

    Please
check if you are a FINRA member or affiliate of a FINRA member firm:
________

    

    
      
        	 
      	 
      	 
      
	
                Investor
      Signature

              	 
      	
                Date

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                Co-Investor
      Signature

              	 
      	
                Date

              

      

    

     

    
      
         

      

      
        A-22

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