Document:

admiralty8k_exhibit10-1.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

	“EXECUTION VERSION”

	EXHIBIT 10.1

SETTLEMENT AGREEMENT

          THIS AGREEMENT (the “Agreement”) is entered into on this 31st day of May, 2007 by and among New Millennium Capital Partners II, LLC, AJW Partners, LLC, AJW Offshore, Ltd. and AJW Qualified Partners LLC, each being funds managed by entities that are wholly owned subsidiaries of The NIR Group, LLC (collectively “NIR”), and Admiralty Holding Company, Inc., Admiralty Corporation and Admiralty Marine Operations, Ltd. (collectively, the “Companies”), G. Howard Collingwood and Walter S. Cytacki:

		WITNESSETH:

          WHEREAS Admiralty Holding Company, Inc. (“AHC”), formerly known as Ruby Mining Company, is a publicly traded holding company with no operations of its own.

           WHEREAS Admiralty Corporation (“Admiralty Corp.”) and Admiralty Marine Operations, Ltd. (“AMO”) are wholly owned subsidiaries of AHC, in the business of conducting search and salvage operations in Caribbean and United States waters.

          WHEREAS, AMO has been the record owner of an ocean-going vessel named the R/V New World Legacy (the “Ship”), a 110 foot vessel designed and outfitted for the purpose of locating and recovering shipwrecks in the Caribbean.

          WHEREAS, the Ship is registered in the Jamaican Boat Registry in the name of AMO with an assigned official Jamaican Registry Number of JMR04004 (“Jamaican Ship Registry”).

          WHEREAS G. Howard Collingwood (“Collingwood”) is an officer of each of the Companies and a director of AHC and AMO.

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          WHEREAS Walter S. Cytacki (“Cytacki”) is an owner of certain shares of AHC. WHEREAS, all defined terms in the NIR Loan Documents (defined below) are incorporated herein by reference.

          WHEREAS, on or about June 23, 2005, AHC and NIR entered into a Securities Purchase Agreement providing for, among other things, the terms under which NIR would purchase from AHC callable secured convertible notes in the aggregate principal amount of $2,500,000 in three tranches; and WHEREAS, Under the terms of a series of four Callable Secured Convertible Notes dated June 23, 2005 (the “June 2005 Notes”), AHC is indebted to NIR for the principal sum of $850,000.00, on which interest accrues at the rate of 8.0% per annum, payable quarterly.

          WHEREAS, On or about June 23, 2005, NIR and the Companies entered into a Security Agreement (the “Security Agreement”) under the terms of which the Companies granted to NIR, as security for payment of the June 2005 Notes, a security interest and first lien upon, an unqualified right to possession and disposition of, and a right of setoff against (the “Security Interest”) all of the Companies’ right, title and interest in and to certain collateral, including all of the Companies’ goods (specifically including boats and ships and documents of title representing same), inventory, contract rights and general intangibles, receivables, instruments and chattel paper, etc., subject only to an unrecorded first lien against the Ship in favor of Cytacki and Collingwood as security for four promissory notes, which NIR expressly took notice of and acknowledged in the Security Agreement at Schedule C.

          WHEREAS, the Security Agreement contains a provision in Section 12 that makes, constitutes, and appoints NIR as the true and lawful attorney in fact to, among other things at any time, or from time to time, to do all acts and things which NIR deems necessary to protect,

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preserve and realize upon the Collateral, the NIR Notes, and the Warrants, including the ability to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral (the “Attorney in Fact Powers”).

          WHEREAS, Under the terms of a series of four Callable Secured Convertible Notes dated September 28, 2005 (the “September 2005 Notes”), AHC is indebted to NIR for the principal sum of $800,000.00, on which interest accrues at the rate of 8.0% per annum, payable quarterly.

          WHEREAS, Under the terms of a series of four Callable Secured Convertible Notes dated December 21, 2005 (the “December 2005 Notes”), AHC is indebted to NIR for the principal sum of $850,000.00, on which interest accrues at the rate of 8.0% per annum, payable quarterly.

          WHEREAS, On or about September 28, 2006, the Companies and NIR concluded a financing transaction as a part of which AHC and NIR entered into a Securities Purchase Agreement providing for, among other things, the terms under which NIR would purchase from AHC secured convertible notes in the aggregate principal amount of $600,000.00 in a single tranche.

          WHEREAS, Under the terms of a series of four Callable Secured Convertible Notes dated September 28, 2006 (the “September 2006 Notes”), AHC is indebted to NIR for the principal sum of $600,000.00, on which interest accrues at the rate of 8.0% per annum, payable quarterly.

          WHEREAS, Under the terms of the Security Agreement, the Security Interest previously granted by the Companies to NIR in the Security Agreement as security for repayment of the

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June 2005 Notes, the September 2005 Notes, and the December 2005 Notes also stood as security for repayment of the September 2006 Notes.

           WHEREAS, NIR filed a financing statement with the Secretary of State of Colorado on November 18, 2005.

           WHEREAS, As further security for the Companies’ obligations under the NIR Notes, Collingwood executed and delivered to NIR a Guaranty and Pledge Agreement dated as of June 23, 2005 (the “Pledge Agreement”), pursuant to the terms of which, Collingwood delivered to NIR the certificates representing the shares of common stock of AHC currently owned by Collingwood, along with a stock transfer power executed in blank, to be held by NIR.

           WHEREAS, As of May 4, 2007, the current principal balances due on the June 2005 Notes, the September 2005 Notes, the December 2005 Notes and the September 2006 Notes (collectively, the “NIR Notes”) are as follows:

	 	(a)  	June 2005 Notes: $948,836.45 which includes $121,336.45 in interest;  
			
		(b)  	September  2005  Notes:  $901,172.59,  which includes  $101,172.59 in interest;  
			
		(c)  	December 2005 Notes: $946,131.51, which includes $96,131.51 in interest;  
			
		(d)  	September  2006  Notes:  $627,879.45,  which includes  $27,879.45 in interest.  

           WHEREAS, AHC has defaulted on interest payments due under the NIR Notes and each of the NIR Notes are in default.

           WHEREAS, in the Security Agreement, it acknowledges that the Companies granted to Cytacki and Collingwood a first-priority lien against the Ship as security for the following obligations (collectively, the “C&C Notes”) incurred in connection with AHC’s acquisition of the Ship:

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          (a)           A promissory note to Collingwood dated March 31, 2004, in the principal amount of $128,958.83, bearing interest at the rate of 6.75% per annum, with a term of 84 months; (b) A promissory note to Cytacki dated October 28, 2004, in the principal amount of $25,000.00, bearing interest at the rate of 6.75% per annum, with a term of 84 months; (c) A promissory note to Cytacki dated September 27, 2004, in the principal amount of $25,000.00, bearing interest at the rate of 6.75% per annum, with a term of 84 months; and (d) A promissory note to Cytacki dated March 31, 2004 in the principal amount of $150,000.00, bearing interest at the rate of 6.75% per annum, with a term of 84 months.

          WHEREAS, the security interest of Collingwood and Cytacki in the Ship is referenced in an attached Exhibit A to each of the C&C Notes.

          WHEREAS, On April 12, 2007, AHC filed with the SEC a report on Form 8-K regarding its suspension of operations and the disposition of the Ship.

          WHEREAS, In the April 8-K, AHC reported that Cytacki and Collingwood had taken immediate possession of the Ship, and that the Companies, Cytacki and Collingwood entered into a settlement agreement on April 11, 2007, under the terms of which the Companies conveyed the Ship to Cytacki and Collinwood in settlement of the Companies obligations under the C&C Notes, which totaled $393,560.61 in order to avoid a clear and present danger to the Ship.

          WHEREAS, the Companies’ sale or disposition of all to substantially all of their assets described herein constitutes an additional Event of Default under the NIR Notes.

          WHEREAS, the April 11, 2007 settlement agreement between the Companies, Collingwood, and Cytacki was entered into in order to avoid a clear and present danger to life limb and property, provide for funds to comply with orders of local maritime and law

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enforcement, and to extinguish notes payable by the Companies to Collingwood and Cytacki after official notice to NIR.

           WHEREAS, On or about May 4, 2007, NIR brought an action in the Superior Court of Fulton County, Georgia, Civil Action No. 2007CV13363 (the “Lawsuit”), alleging certain claims against the Companies and Cytacki and Collingwood (the “Individual Defendants”), including foreclosure of lien and fraudulent transfer claims, and seeking a variety of equitable relief, including a temporary restraining order, a preliminary injunction and appointment of a receiver.

           WHEREAS, On May 4, 2007, the Court entered an temporary restraining order (“TRO”) without a hearing or prior notice to the Companies or the Individual Defendants, enjoining the Companies and Individual Defendants from removing from the United States waters or transferring to any party the Ship;

           WHEREAS, the Companies and Collingwood and Cytacki responded to the injunction requests in the Lawsuit disputing that NIR is entitled to the possession of the Ship and asked the Court to permit Cytacki to sell the Ship to a third party;

           WHEREAS, the Companies and the Individual Defendants deny any wrongdoing, but understand NIR has asserted claims of wrongdoing, thereby creating a controversy and dispute;

           WHEREAS, the hearing on the TRO is now set for 4:00 p.m. EDT on May 24, 2007.

           WHEREAS, the parties wish to avoid further litigation and to completely resolve their disputes, concerns and controversies, including the dispute between the parties concerning the liens, loans, rights to possession, title to, and ownership of the Ship;

           WHEREAS, the Attorney in Fact Powers include the ability to direct the current officers and directors of the Company to take certain actions to effectuate the settlement contemplated 

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herein because NIR believes that this settlement will allow it to best protect, preserve, and realize upon the Collateral, the NIR Notes, and the Warrants.

          WHEREAS, NIR does not at this time have any plan or intention to cause AHC to be placed into voluntary or involuntary bankruptcy under the United States Bankruptcy Code;

          WHEREAS, AHC, Admiralty Corp. and AMO each individually and jointly acknowledge and agree that they too are receiving a benefit from the settlement provided for herein among which benefits include but are not limited to the fact that the Companies are not being forced to liquidate thereby causing the equity holders of the Companies to possibly lose their investments, and because their corporate entities have been throughout the time the Companies have operated (and still do operate) as one entity, any benefit and consideration paid or received by one is a benefit and represents consideration received by each of the Companies.

          WHEREAS, the settlement to be implemented pursuant to the terms of this Agreement shall occur through a closing to occur on May 31, 2007, at 10:00 o’clock a.m. EDT at the offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100, 1230 Peachtree Street N.E., Atlanta, Georgia 30309 (the “Closing Date”).

          NOW, THEREFORE, for the mutual considerations received and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

          1.           Accuracy of Recitals. The foregoing recitals are true and correct and are deemed to be a part of this Agreement.

          2.           Directives of NIR in the Exercise of its Attorney In Fact Powers. In order to settle the disputes herein and in the exercise of its Attorney in Fact Powers to allow NIR to protect, preserve and realize on its Collateral, the NIR Notes, and Warrants, NIR pursuant to its 

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Attorney in Fact Powers directs (i) the Companies to finance and implement the settlement outlined in this Agreement by (a) borrowing the amounts needed for the Settlement Payment (defined below) from NIR and pay the Settlement Payment to the Individual Defendants, (b) tender the Note to the Individual Defendants and pay the amounts due under the Note to the Individual Defendants, (c) execute the security agreements and ship mortgages referenced herein, and (d) execute the Guarantees referenced herein, and (ii) the Individual Defendants, in their capacities as officers, directors, and/or substantial shareholders of the Companies, as well as the Companies themselves, to perform each and every condition required of them under this Agreement which include (a) obtaining the resignations of the officers and directors of the Companies and designating those persons(s) NIR so designates to fill the positions of the officers and directors of the Companies on a going forward basis and (b) causing the transfer of Collingwood’s stock in AHC back to AHC, to be retired into the treasury of AHC.

          3.           Settlement Payment to Individual Defendants. NIR shall loan to the Companies the sum of Two Hundred Fifty Thousand Dollars ($250,000) for the sole purpose of paying this said sum jointly to the Individual Defendants as part of the settlement contemplated herein. Following its receipt of the Two Hundred Fifty Thousand Dollars ($250,000) the Companies shall cause these monies to be paid jointly to the Individual Defendants, which said monies shall be delivered into the trust account of McGuireWoods LLP one day prior to the Closing Date, in accordance with the payment instructions given for the Note (as defined in paragraph 4, below) (the “Settlement Payment”). Upon delivery to NIR of the fully executed settlement documents set out in the attached Schedule 3.1 (the “NIR Required Settlement Documents”), the settlement funds, exclusive of the payments to be made in the future pursuant to the Note, shall be paid from the trust account of McGuireWoods LLP to the Individual

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Defendants, without recourse by NIR. Should the NIR Required Settlement Documents not be forwarded to NIR as provided for herein, the Settlement Payment in the McGuireWoods LLP Trust Account shall be returned to NIR and the executed copies of the settlement documents shall be returned to the parties executing them at which time this Agreement shall be deemed null and void.

          4.           Execution and Delivery of Note. On the Closing Date, the Companies shall execute and deliver a promissory note (the “Note”), in a form substantially similar to that marked as Exhibit A and attached hereto, in the amount of $600,000, payable jointly to the Individual Defendants in thirty-six (36) monthly installments, with interest at the rate of 6 3/4 % per annum, with payments to commence on July 1, 2007 and to continue monthly thereafter, payable on or before the first day of each month. The Companies’ obligations under the Note shall be joint and several.

	 	The instructions for payment of the Settlement payment are:

BANK OF AMERICA

ABA: 026009593 (Domestic Wires)

Swift Code: BOFAUS3N (International Wires) 

Credit: McGuireWoods LLP IOLTA Account 

Account Number: 003252793080

Reference: 2051462/0001

The instructions for the payment of the Note are:

COMERICA BANK, Checking Account 6821206049, Routing 072000096

          5.           Security Agreement and Mortgage to Individual Defendants. On the Closing Date, contemporaneously with, and in consideration for, the agreements and covenants undertaken by the Individual Defendants hereunder, the Companies shall execute and deliver to the Individual Defendants a security agreement and ship mortgage (the “Individual Defendants’ Ship Mortgage”), in forms substantially similar to those marked as Exhibit B and attached 

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hereto, granting to the Individual Defendants a security interest in all of the Companies’ assets, including the Ship, to secure payment of the principal and interest due under the Note (collectively the “Individual Defendants’ Security Agreements”). The Individual Defendants’ Ship Mortgage shall be filed in the Jamaican Ship Registry and shall be subordinate to the NIR Ship Mortgage, defined below, subject to the provisions of the below referenced Intercreditor Agreement.

          6.           Security Agreement and Mortgage to NIR. On the Closing Date, contemporaneously with, and in consideration for, the agreements and covenants undertaken by the NIR hereunder, the Companies shall execute and deliver to NIR a security agreement and ship mortgage (the “NIR Ship Mortgage”), in forms substantially similar to those marked as Exhibit C and attached hereto, granting to NIR a security interest in all of the Companies’ assets, including the Ship, to secure payment and performance of all of the Companies’ obligations to NIR under the NIR Notes and this Agreement as well as future NIR Notes (the existing Security Interest as well as the security agreements and mortgages delivered pursuant to this Agreement shall collectively be defined herein as the “NIR Security Agreements”). The NIR Notes and the NIR Security Agreements shall be collectively defined herein as the “NIR Loan Documents”. Any and all provisions in the NIR Loan Documents relating to defaults and the enforcement of NIR’s security interest in any of the collateral in which NIR has a security interest as provided for in the NIR Loan Documents shall be available to NIR to be used by NIR in the enforcement of any of its security interests whether or not the particular security agreement or mortgage being enforced contains such provisions. The NIR Ship Mortgage shall be filed in the Jamaican Ship Registry and constitute a first lien on the Ship, subject to the provisions of the below referenced Intercreditor Agreement.

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          7.           On the Closing Date, Admiralty Corp. and AMO shall execute and tender to NIR guaranties in forms substantially similar to those marked Exhibit D and attached hereto (“Guaranties”).

          8.          Intercreditor Agreement. On the Closing Date, contemporaneously with, and in consideration for, the agreements and covenants undertaken by the parties hereunder, the Individual Defendants shall execute and deliver to NIR an intercreditor agreement, in a form substantially similar to that which is marked Exhibit E and is attached hereto (the “Intercreditor Agreement”). The Intercreditor Agreement shall provide that the security interest and liens granted to the Individual Defendants in the Individual Defendants’ Security Agreements as security for payment of the Note shall be subordinate to the security interest and liens granted to NIR in the NIR Security Agreements, except when a Trigger Default (as defined in paragraph 9, below) or when a sale of the property in which the Individual Defendants have a security interest as set forth in the Individual Defendants’ Security Agreements has occurred. Should a Trigger Default Occur, which is not cured as provided below, the security interests and liens of the Individual Defendants shall have priority for distribution purposes as provided in the Intercreditor Agreement. If a sale of the Collateral occurs, the security interests and liens of the Individual Defendants shall have priority for distribution purposes as provided in the Intercreditor Agreement. The priorities created by the UCCs filed to perfect the security interests granted pursuant to the Individual Defendants’ Security Agreements and the NIR Security Agreements shall be subject to the provisions of the Intercreditor Agreement. Additionally, the priorities created by the filing of the Individual Ship Mortgage and the NIR Ship Mortgage shall be subject to the provisions of the Intercreditor Agreement.

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          9.           Notice of Default and Right to Cure. Upon the occurrence of a payment default due under the Note, and upon the Companies’ failure to cure such payment default within seven (7) business days following the date of default pursuant to the terms of the Note (a “Trigger Default”), the Individual Defendants shall give a Notice of Default, in the form substantially similar to that which is marked as Exhibit F and attached hereto (the “Trigger Notice”), to NIR. If the Trigger Default is not cured within fifteen (15) days after receipt by NIR of the Trigger Notice (the “NIR 15 Day Right to Cure”), the Companies must sell their assets in a commercially reasonable manner for fair value, and the parties’ rights with respect to the proceeds received from the sale of the Companies’ assets shall be governed by the Intercreditor Agreement. During the NIR 15 Day Right to Cure period, the Companies and/or NIR shall have the right to cure such payment default, and if such default is cured no Trigger Default shall be deemed to have occurred.

               10.           Delivery of Quitclaim Deed to the Ship/Ownership of Ship. At Closing, Cytacki agrees to transfer to AMO title to the Ship, effective as of the date of this Agreement, pursuant to the form of quitclaim deed attached hereto as Exhibit G. Cytacki represents and warrants that he has full power and authority to transfer the Ship, and that neither Cytacki nor Collingwood have entered into any contracts or agreements, written or verbal, for the sale of the Ship to Caribbean Leasing Ltd. After transfer of title to the Ship as set forth above, each of the Individual Defendants hereby acknowledges and agrees that the Companies either collectively and/or individually own all right, title and interest in and to, and control and are entitled to possession of the Ship, and waive any and all right, title and interest in and to the Ship, except as identified in the Individual Defendants’ Security Agreement and the Individual Defendants’ Ship Mortgage.

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               11.           Existing Liens. The Companies and Individual Defendants acknowledge and agree that to their best knowledge and belief the Ship may be encumbered by only the following liens (copies of the underlying billings having been provided to NIR) in the following approximate amounts, and NIR agrees to provide funds to the Companies at closing sufficient to satisfy each of the amounts due as set forth below, in accordance with the payment provisions set forth in Paragraph 3 hereof, except as to Section 11(a), below, in the total amount of $27,284.46:

	(a)  	Crew wages and expenses - $44,500;  
		
	(b)  	Dockage fees due Harbortown Marina - $3,000;  
		
	(c)  	Due to Collingwood for fuel and ship expenses - $17,000;  
		
	(d)  	Lennox Patton Corp. Services - $1,185;  
		
	(e)  	Jerry’s Marine Services - $534.42;  
		
	(f)  	NMFTA - $35.00;  
		
	(g)  	Grainger - $81.11;  
		
	(h)  	Due to Russel Bradley for ship expenses - $1,915.17;  
		
	(i)  	Due to Murray Bradley for ship expenses - $3,563.76.  

          12.           Transfer of Shares of AHC. On the Closing Date, Collingwood shall transfer to AHC, to be held in the treasury of AHC, all of his right, title and interest in the shares of common stock of AHC currently owned, directly or indirectly, by Collingwood or an entity controlled by Collingwood (the “Shares”), which Shares are listed in the attached Schedule 12.1, and shall take such other and further actions required to transfer to AHC all of his right, title and interest in the Shares, including delivery of the certificates for the Shares and a stock transfer power executed in blank.

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          13.           Transition of Management. Effective as of Closing Date, Collingwood shall (i) first cause the current officers (including himself and including those officers that are not the Individual Defendants) (the “Non-Party Management”), as listed on Schedule 13.1 to this Agreement, to resign as officers and to cause the board of directors of the Companies to appoint those persons designated by NIR to be the officers of the Companies, (ii) to the extent applicable have the shareholders appoint new directors or replacement directors for the Companies, and (iii) following the occurrence of (i) and (ii) above, Collingwood shall cause the current directors (including himself and others that make up the Non-Party Management) to resign as directors of the Companies. Collingwood agrees to cooperate with the Companies and NIR in good faith and to use best efforts as reasonably necessary and as requested by the Companies and NIR in order to transition the business and ownership of the Companies in a manner that minimizes any disruption to the operation of the Companies’ business following Closing, for a period of time that should be approximately two (2) weeks from the date of the Closing; provided, however, if NIR is in need of actions to be taken by Collingwood for a reasonable period following the two week period he agrees to so cooperate.

          14.           Dismissal of Lawsuit. Within three business days of Closing the transactions contemplated under this Agreement, NIR shall dismiss the Lawsuit against the Companies, without prejudice, and Individual Defendants, with prejudice, each party to bear its own costs.

          15.           Ratification. The covenants, terms, conditions, stipulations, provisions and agreements contained in the Purchase Agreements, Security Agreement, NIR Notes and related transaction documents (collectively, the “NIR Documents”) are hereby ratified, confirmed, reaffirmed and incorporated herein by reference, it being the intention of Companies and NIR that the NIR Documents shall be and remain in full force and effect, except as modified by this

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Agreement and the Intercreditor Agreement. This ratification is made by each of the Companies and includes, but is not limited to, Admiralty Corp. and AMO affirming that the existing security agreements in favor of NIR from AHC included a grant of a security interest in the assets of Admiralty Corp. and AMO as well as AHC.

          16.           Mutual Releases.

                         (a)           Except for the terms and conditions contained in this Agreement, the Companies, for themselves and their respective partners, officers, directors, investors, employees, agents, attorneys, personal representatives, successors, affiliates, assigns, subsidiaries and divisions (incorporated and unincorporated), release and forever discharge, respectively, The NIR Group, LLC, and the funds making up NIR as defined herein and their respective agents, directors, officers, employees, attorneys, personal representatives, successors, affiliate subsidiaries and divisions (incorporated and unincorporated) (the “NIR Releasees”), the Individual Defendants and Non-Party Management, the individuals identified on Schedule 13.1 hereto, in their individual capacity and in their capacity as officers and directors of the respective Companies, the Board of Directors of each of AHC, and Admiralty Corp., and the officers of Admiralty Marine Operations Ltd., and their respective partners, officers, directors, investors, employees, agents, attorneys, personal representatives, successors, affiliates (including but not limited to Walterwood Partnership), assigns, subsidiaries and divisions (incorporated and unincorporated), from any and all claims, actions, demands, debts, damages, obligations and causes of action whether in contract, tort or otherwise, known or unknown, existing as of the date of the execution of this Agreement, which relate to or arise from any of the NIR Loan Documents or C&C Notes, or to the process of servicing the NIR Loan Documents or C&C Notes, or the charging and collecting of interest thereon or other charges, fees and expenses

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thereunder, the Lawsuit and all claims that were made or could have been made by complaint, amended complaint, counterclaim or cross claim in the Lawsuit, the operation of the Ship, transactions involving the stock of the Companies, or for any other reason directly or indirectly related to any of the foregoing.

                    (b)           Except for the terms and conditions contained in this Agreement, the Individual Defendants, for themselves and their respective partners, employees, agents, attorneys, personal representatives, successors, affiliates (including but not limited to Walterwood Partnership), assigns, release and forever discharge, respectively, each of the NIR Releasees and the Companies, and their respective agents, directors, officers, employees, attorneys, personal representatives, successors, affiliates, assigns, subsidiaries and divisions (incorporated and unincorporated), from any and all claims, actions, demands, debts, damages, obligations and causes of action whether in contract, tort or otherwise, known or unknown, existing as of the date of the execution of this Agreement, which relate to or arise from any of the NIR Loan Documents or C&C Notes, or to the process of servicing the NIR Loan Documents or C&C Notes, or the charging and collecting of interest thereon or other charges, fees and expenses thereunder, the Lawsuit and all claims that were made or could have been made by complaint, amended complaint, counterclaim or cross claim in the Lawsuit, the operation of the Ship, transactions involving the stock of the Companies, or for any other reason directly or indirectly related to any of the foregoing, except that Collingwood does not release the Companies from his claimed lien as set forth at Section 11(c) of this Agreement. THIS RELEASE IN THIS SECTION 16 IS NOT INTENDED TO IN ANY MANNER WHATSOEVER RELEASE THE COMPANIES FROM THEIR OBLIGATIONS UNDER THE INDIVIDUAL DEFENDANTS’ SECURITY AGREEMENTS OR THE NOTE OR

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UNDER ANY OF THE ADDITIONAL DOCUMENTS THEY ARE EXECUTING IN CONNECTION WITH THIS AGREEMENT.

                    (c)           Except for the terms and conditions contained in this Agreement, each of the NIR Releasees, for themselves and their respective partners, officers, directors, investors, employees, agents, attorneys, personal representatives, successors, affiliates, assigns, subsidiaries and divisions (incorporated and unincorporated), release and forever discharge the Individual Defendants and Non-Party Management, the individuals identified on Schedule 13.1 hereto, in their individual capacity and in their capacity as officers and directors of the respective Companies, the Board of Directors of each of AHC, and Admiralty Corp., and the officers of Admiralty Marine Operations Ltd., and their respective partners, officers, directors, investors, employees, agents, attorneys, personal representatives, successors, affiliates (including but not limited to Walterwood Partnership), assigns, subsidiaries and divisions (incorporated and unincorporated), from any and all claims, actions, demands, debts, damages, obligations and causes of action whether in contract, tort or otherwise, known or unknown, existing as of the date of the execution of this Agreement, which relate to or arise from any of the NIR Loan Documents or C&C Notes, or to the process of servicing the NIR Loan Documents or C&C Notes, or the charging and collecting of interest thereon or other charges, fees and expenses thereunder, the Lawsuit and all claims that were made or could have been made by complaint, amended complaint, counterclaim or cross claim in the Lawsuit, the operation of the Ship, transactions involving the stock of the Companies, or for any other reason directly or indirectly related to any of the foregoing. THIS RELEASE IN THIS SECTION 16 IS NOT INTENDED TO IN ANY MANNER WHATSOEVER RELEASE THE COMPANIES FROM THEIR OBLIGATIONS UNDER THE NIR LOAN DOCUMENTS OR UNDER

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ANY OF THE ADDITIONAL DOCUMENTS THEY ARE EXECUTING IN CONNECTION WITH THIS AGREEMENT.

          17.           Further Action. Each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper, or advisable under applicable law, and execute and deliver such documents and other papers, as may reasonably be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated hereby, and to vest in AMO good and valid title to the Ship, and to vest in NIR or its designee good and valid title to the Shares. Such further action also shall require the Individual Defendants, to the extent necessary, to cooperate with the Companies and NIR to accurately register the title to the Ship in AMO’s name in the Jamaican Ship Registry. AHC and NIR agree to cooperate with each other to file an appropriate 8-K relating to this settlement and the related transactions as required under the Securities and Exchange Act of 1934 and the rules and regs promulgated thereunder within the period specified therein.

          18.           Expenses. Except as otherwise expressly set forth in this Agreement and in the Intercreditor Agreement to the contrary, each of the parties hereto agrees to be responsible for its own costs, without right of reimbursement from the other, incurred by it incident to the performance of its obligations under this Agreement. In connection herewith, it is agreed that the expenses of McGuireWoods LLP shall be borne individually by the Individual Defendants and shall not be paid by the Companies.

          19.           Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be transferred, assigned or delegated by any of the parties hereto, in whole or in

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part, without the prior written consent of the other parties, and any attempt to make any such transfer, assignment or delegation without such consent shall be null and void.

          20.           Governing Law. This Agreement shall be governed by, construed and interpreted in accordance with the Laws of the State of Georgia applicable to agreements made and to be performed entirely within such state, including all matters of construction, validity and performance, and the parties hereto consent to the jurisdiction of the Superior Court of Fulton County, Georgia; provided however, this provision should not be deemed to change any of the governing law, venue and jurisdiction related provisions in the NIR Loan Documents.

          21.           Amendment and Waiver.

                              (i)           Any provision of this Agreement may be amended, supplemented, modified or waived if, but only if, (a) such amendment, supplement, modification or waiver is in writing and is signed by each party to this Agreement, and (b) only in the specific instance and for the specific purpose for which made or given.

                              (ii)           No failure or delay by any party hereto in exercising any right, power, remedy or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof, or the exercise of any other right, power, remedy or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

          22.           Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and deemed to be duly given, (i) when delivered by hand, with a record of receipt, (ii) the third day after mailing, if mailed by certified or registered mail, return receipt requested, with postage prepaid, (iii) the day delivered by a nationally recognized overnight courier, with a record of receipt, or (iv) the day of transmissions, with confirmation of 

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receipt, if delivered by facsimile or telecopy during regular business hours (which regular business hours shall be 9:00 am - 5:00 pm, Monday through Friday, excluding office holidays, at the office where received), or the next business day after transmission, with confirmation of receipt, if delivered by facsimile or telecopy after regular business hours, to the parties at the following addresses or telecopy numbers (or to such other address or telecopy number as a party may have specified by the notice given to the other party pursuant to this provision):

	                     	 If to the Companies:

Attention: Mr. Murray Bradley 

Fax: (770) 489-2269

with a copy (which shall not constitute notice) to:

McGUIREWOODS LLP

1170 Peachtree Street 

Suite 2100

Atlanta, Georgia 30309

Fax: (404) 443-5758

Attention: Milo S. Cogan

If to the Individual Defendants:

G. Howard Collingwood

Email: ghcollingwood@aol.com

Walter C. Cytacki 

Fax: (313) 842-8068

with a copy (which shall not constitute notice) to:

McGUIREWOODS LLP

1170 Peachtree Street 

Suite 2100

Atlanta, Georgia 30309

Fax: (404) 443-5758

Attention: Milo S. Cogan

20

	“EXECUTION VERSION”

	                     	 If to NIR:

The NIR Group, LLC 

1044 Northern Boulevard 

Suite 302

Roslyn, New York 11576 

Attention: Mr. Jonathan Schechter

Fax: 516-739-7115

with a copy (which shall not constitute notice) to:

Bryan Cave LLP

3500 One Kansas City Place 1

200 Main Street

Kansas City, Missouri 64105

Attention: Mark G. Stingley 

Fax: 816-374-3300

or to such other addresses as any party may provide to the others in writing.

          23.           Entire Agreement. Except as it relates to the NIR Loan Documents, this Agreement shall cancel, merge and supersede all prior and contemporaneous understandings and agreements relating to the subject matter of this Agreement, whether written or oral, among the parties hereto and contains the entire agreement of the parties hereto, and the parties hereto have no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein or therein. As it relates to the NIR Loan Documents, this Agreement, to the extent it changes any of the terms and conditions contained in the NIR Loan Documents (except the governing law, venue and jurisdiction provisions), shall be deemed to be added to and become a part of the NIR Loan Documents.

          24.           Successors. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and to their respective successors and permitted assigns.

          25.           Headings. The headings used in this Agreement are for convenience only and shall not constitute a part of this Agreement.

21

	“EXECUTION VERSION”

          26.           Exhibits. All of the exhibits are incorporated herein and made a part of this Agreement by reference.

          27.           Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is judicially determined not to be enforceable in accordance with its terms, the parties agree that the court judicially making such determination may modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases and, in its modified form, such provision will then be enforceable and will be enforced.

          28.           Cooperation. If, at any time after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties hereto shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably requests.

           29.           Construction. This Agreement has been freely and fairly negotiated among the parties. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement. Any reference to any law will be deemed to refer to such law as in effect on the date hereof and all rules and regulations promulgated thereunder, unless the context otherwise requires. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.

22

	“EXECUTION VERSION”

          30.           Time of the Essence. Time is of the essence of this Agreement, including the ancillary agreements hereto, but this provision shall not otherwise affect or limit a defaulting party’s right to receive notice of default and to cure any such default as specifically provided in this Agreement.

          31.           Survival of Certain Obligations. The warranties, representations, terms and conditions in this Agreement that by their sense and context are intended to survive the performance hereof by either or both parties hereunder shall so survive the termination or completion of performance of this Agreement.

          32.          No Admission of Liability. The parties hereto understand, agree and acknowledge that this Settlement Agreement involves the compromise of disputed claims and is not an admission of liability or wrongdoing by any party.

          33.           Counterparts; Facsimile Signature. This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same Agreement. This Agreement may be executed and sent via facsimile and a facsimile signature shall be deemed valid and binding on any party hereto.

[Signature pages follow.]

23

	“EXECUTION VERSION”

IN WITNESS WHEREOF, the parties, each acting through their duly authorized officers, have executed this Agreement effective as of the day and year first above written.

	ADMIRALTY CORPORATION  	  	ADMIRALTY HOLDING COMPANY, INC.  
	  
	By:  /s/ G. Howard Collingwod	  	By:  /s/ G. Howard Collingwood
	

G. Howard Collingwood, CEO  	  	

G. Howard Collingwood, CEO  

	ADMIRALTY MARINE

OPERATIONS, LTD.

	By:  /s/ Murray D. Bradley
	

Murray D. Bradley, Jr., President  

	WALTER S. CYTACKI  	  	G. HOWARD COLLINGWOOD  
	  		
	  		
	  /s/ Walter S. Cytacki		  /s/ G. Howard Collingwood
	

		

24

	AJW PARTNERS, LLC  	  	AJW OFFSHORE, LTD.  
	  
	  
	  
	By: SMS Group, LLC, its Manager  	  	   By: First Street Manager II, LLC, its Manager  
	  
	  
	  
	By:  /s/ Corey S. Ribosky	  	   By:  /s/ Corey S. Ribosky
	

		

	                   Corey S. Ribotsky  	  	                       Corey S. Ribotsky  
	                   Manager  	  	                       Manager  

	AJW QUALIFIED PARTNERS, LLC  	  	NEW MILLENNIUM CAPITAL  
	  	  	PARTNERS, LLC  
	  
	  
	  
	By:  /s/ Corey S. Ribosky	  	By:  /s/ Corey S. Ribosky
	

		

	                   Corey S. Ribotsky  	  	                   Corey S. Ribotsky  
	                   Manager  	  	                   Manager  

25

	“EXECUTION VERSION”

	Schedule 12.1

Shares

	G. Howard Collingwood  	  	  
	  
	UBD  	  	25639  	  	6/13/2002  	  	100,000  
	UBD  	  	25637  	  	6/10/2002  	  	30,000  
	UBD  	  	25616  	  	4/16/2002  	  	30,000  
	UBD  	  	25625  	  	4/26/2002  	  	70,000  
	UBD  	  	25631  	  	5/10/2002  	  	30,000  
	UBD  	  	25673  	  	7/19/2002  	  	25,333  
	UBD  	  	25913  	  	12/02/2002  	  	2,173,913  
	UBD  	  	25984  	  	3/11/2004  	  	50,000  
	UBD  	  	25944  	  	1/12/2004  	  	100,000  
	UBD  	  	25992  	  	3/30/2004  	  	645,670  
	  
	Collingwood Asset Trust  	  	  
	  
	UBD  	  	25678  	  	7/19/2002  	  	40,000  
	  
	HGC Global  	  	  	  	  
	  
	UBD  	  	25703  	  	7/19/2002  	  	692,500  

26

	“EXECUTION VERSION”

	Schedule 13.1

List of Officers and Directors of the Companies

	Admiralty Holding Company  	  	  
	Admiralty Corporation  	  	  
	  
	G. Howard Collingwood  	  	Chairman, CEO and Director  
	Murray D. Bradley, Jr.  	  	CFO, Director of AHC  
	  	  	Director, Sr. VP, Secretary and Treasurer of Admiralty  
	  	  	Corporation  
	William H. (Bill) Boone  	  	Director, Member of Audit & Chairman of Compensation  
	  	  	Committees  
	Marc S. Wallace  	  	Director, Chairman of Audit & Member of Compensation  
	  	  	Committees  
	Marc Geriene  	  	Director, Member of Audit & Compensation Committees  

Admiralty Marine Operations, Ltd.

	Murray D. Bradley, Jr.  	  	President and Treasurer, Director  
	G. Howard Collingwood  	  	Vice President, Director  

27admiralty8k_exhibit10-2.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

	EXHIBIT 10.2

	SECURITIES PURCHASE AGREEMENT

          SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 30, 2007, by and among Admiralty Holding Company, a Colorado corporation, with headquarters located at 3490 Piedmont Road, Suite 304, Atlanta, GA 30305 (the “Company”), and each of the purchasers set forth on the signature pages hereto (the “Buyers”).

	 	WHEREAS:

          A.           The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

          B.           Buyers desire to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) 8% secured convertible notes of the Company, in the form attached hereto as Exhibit “A”, in the aggregate principal amount of Six Hundred Thousand Dollars ($600,000) (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Notes”), convertible into shares of common stock, par value $.001 per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Notes and (ii) warrants, in the form attached hereto as Exhibit “B”, to purchase 10,000,000 shares of Common Stock (the “Warrants”).

          C.           Each Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Notes and number of Warrants as is set forth immediately below its name on the signature pages hereto; and

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

          NOW THEREFORE, the Company and each of the Buyers severally (and not jointly) hereby agree as follows:

                              1.           PURCHASE AND SALE OF NOTES AND WARRANTS.

                                           a.           Purchase of Notes and Warrants. On the Closing Date (as defined below), the Company shall issue and sell to each Buyer and each Buyer severally agrees to purchase from the Company such principal amount of Notes and number of Warrants as is set forth immediately below such Buyer’s name on the signature pages hereto.

                                           b.           Form of Payment. On the Closing Date (as defined below), (i) each Buyer shall pay the purchase price for the Notes and the Warrants to be issued and sold to it

1

at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Notes in the principal amount equal to the Purchase Price and the number of Warrants as is set forth immediately below such Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such Notes and Warrants duly executed on behalf of the Company, to such Buyer, against delivery of such Purchase Price.

                                        c.           Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Notes and the Warrants pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on May 30, 2007, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

                         2.           BUYERS’ REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not jointly) represents and warrants to the Company solely as to such Buyer that:

                                        a.           Investment Purpose. As of the date hereof, the Buyer is purchasing the Notes and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Notes (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Notes, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Notes and Section 2(c) of the Registration Rights Agreement or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”) and the Warrants and the shares of Common Stock issuable upon exercise thereof (the “Warrant Shares” and, collectively with the Notes, Warrants and Conversion Shares, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

                                        b.           Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

                                        c.           Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

                                        d.           Information. The Buyer and its advisors, if any, have been, and for so long as the Notes and Warrants remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating 

2

to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Notes and Warrants remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk.

                                        e.           Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

                                        f.           Transfer or Re-sale. The Buyer understands that (i) except as provided in the Registration Rights Agreement, the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to the Registration Rights Agreement). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within three (3) business days of delivery of the opinion to the Company, the Company shall pay to the Buyer liquidated damages of three percent (3%) of the outstanding amount of the Notes per month plus accrued and unpaid interest on the Notes, prorated for partial months, in cash or shares at the option of the Company (“Standard Liquidated Damages Amount”). If the Company elects to 

3

be pay the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

                                        g.           Legends. The Buyer understands that the Notes and the Warrants and, until such time as the Conversion Shares and Warrant Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares and Warrant Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

	 	“The securities represented by this certificate have not been 

registered under the Securities Act of 1933, as amended. The 

securities may not be sold, transferred or assigned in the absence of

an effective registration statement for the securities under said Act, 

or an opinion of counsel, in form, substance and scope customary 

for opinions of counsel in comparable transactions, that registration

is not required under said Act or unless sold pursuant to Rule 144 or 

Regulation S under said Act.”

          The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (c) such holder provides the Company with reasonable assurances that such Security can be sold pursuant to Rule 144 or Regulation S. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.

                                        h.           Authorization; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes, and upon execution and delivery by the Buyer of the Registration Rights Agreement, such agreement will constitute, valid and binding agreements of the Buyer enforceable in accordance with their terms.

                                        i.           Residency. The Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s name on the signature pages hereto.

                    3.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

The Company represents and warrants to each Buyer that:

4

                                        a.           Organization and Qualification.  The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, 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. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries 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. “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any document executed in connection with this financing, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s ability to perform under any of the documents executed in connection with this financing. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

                                        b.           Authorization; Enforcement.   (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Notes and the Warrants and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement, the Notes and the Warrants by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Notes and the Warrants and the issuance and reservation for issuance of the Conversion Shares and Warrant Shares issuable upon conversion or exercise thereof) 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 shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Registration Rights Agreement, the Notes and the Warrants, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

                              c.           Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 300,000,000 shares of Common Stock, of which [ ] shares are issued and outstanding, 0 shares are reserved for issuance pursuant to the Company’s stock option plans, 22,342,928 shares are reserved for issuance pursuant to securities (other than the Notes and the Warrants) exercisable for, or convertible into or exchangeable for shares of Common Stock and [ ] shares are reserved for issuance upon conversion of the Notes and exercise of the Warrants (subject to adjustment pursuant to the Company’s covenant set forth in Section 4(h) below); and (ii) shares of preferred stock, of which ________ shares are issued and outstanding. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and nonassessable. No shares of capital stock of the 

5

Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in Schedule 3(c), as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Notes, the Warrants, the Conversion Shares or Warrant Shares. The Company has furnished to the Buyer true and correct copies of the Company’s Articles of Incorporation as in effect on the date hereof (“Articles of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive or Chief Financial Officer on behalf of the Company as of the Closing Date.

                                        d.           Issuance of Shares. The Conversion Shares and Warrant Shares are duly authorized and reserved for issuance and, upon conversion of the Notes and exercise of the Warrants in accordance with their respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof

                                     e.           Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares and Warrant Shares upon conversion of the Note or exercise of the Warrants. The Company further acknowledges that its obligation to issue Conversion Shares and Warrant Shares upon conversion of the Notes or exercise of the Warrants in accordance with this Agreement, the Notes and the Warrants is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

                                     f.           No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Notes and the Warrants by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the 

6

Company or any of its Subsidiaries is a party, or (iii) to the Company’s knowledge, result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has 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 or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as a Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Registration Rights Agreement, the Notes or the Warrants in accordance with the terms hereof or thereof or to issue and sell the Notes and Warrants in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants. Except as disclosed in Schedule 3(f), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

                                        g.           SEC Documents; Financial Statements. Except as disclosed in Schedule 3(g), since December 31, 2005 the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 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. None of the statements 

7

made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may 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 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 set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2005 and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles 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.

                                        h.           Absence of Certain Changes. Since December 31, 2005, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations or prospects of the Company or any of its Subsidiaries.

                                        i.           Absence of Litigation. 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 or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

                                        j.           Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, except as set forth in Schedule 3(j) hereof, to the best of the Company’s knowledge, as presently contemplated to be operated in the future); there is no 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 (and, except as set forth in Schedule 3(j) hereof, to the best of the Company’s knowledge, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, 

8

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 and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

                                        k.           No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Except for the debenture obligations (the “Debenture Obligations”) described in Note 2 to the Company’s audited financial statements for the year ended December 31, 2005 which are included in the Company’s Form 10-KSB for the year ended December 31, 2005, neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

                                        l.           Tax Status. Except as set forth on Schedule 3(1), the Company and each of 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 (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) 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. 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, state or local tax. Except as set forth on Schedule 3(1), none of the Company’s tax returns is presently being audited by any taxing authority.

                                        m.           Certain Transactions. Except as set forth on Schedule 3(m) and except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

                                        n.           Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is 

9

true and correct in all material respects and the Company has not omitted 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. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

                                        o.           Acknowledgment Regarding Buyers’ Purchase of Securities. 

The Company acknowledges and agrees that the Buyers are acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by any Buyer or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyers’ purchase of the Securities. The Company further represents to each Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

                                        p.           No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyers. The issuance of the Securities to the Buyers will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

                                        q.           No Brokers. Except as set forth in Schedule 3(q), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

                                        r.           Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since December 31, 2004, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating 

10

to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

                                        s.           Environmental Matters.

                                                  (i)           Except as set forth in Schedule 3(s), there are, to the best of the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

                                                  (ii)           Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

                                                  (iii)           Except as set forth in Schedule 3(s), to the best of the Company’s knowledge there are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

                                        t.           Title to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

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                                        u.           Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. The Company has provided to Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.

                                        v.           Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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

                                        x.           Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information (other than the Debenture Obligations) that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did receive a qualified opinion from its auditors with respect to its most recent fiscal year end; however, after giving effect to the transactions contemplated by this Agreement, it does not anticipate the issuance by its auditors of a qualified opinion in respect of its current fiscal year.

                                        y.           No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

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                                        z.           Certain Registration Matters. Assuming the accuracy of the Buyers’ representations and warranties set forth in Section 3, no registration under the Securities Act is required for the offer and sale of the Conversion Shares and Warrant Shares by the Company to the Buyers under the transaction documents. Except as specified in Schedule 3(z), the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied.

                                        aa.           Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyers pursuant to this Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Company, until such breach is cured. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

                              4.        COVENANTS.

                                        a.           Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

                                        b.           Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyers at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to each Buyer on or prior to the Closing Date.

                                        c.           Reporting Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The Company’s Common Stock is registered under Section 12(g) of the 1934 Act. The Company represents and warrants that it meets the requirements for the use of Form S-3 (or if the Company is not eligible for the use of Form S-3 as of the Filing Date (as defined in the Registration Rights Agreement), the Company may use the form of registration for which it is eligible at that time) for registration of the sale by the Buyer of the Registrable Securities (as defined in the Registration Rights Agreement). So long as the Buyer beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination. The Company further agrees to file all reports required to be filed by the Company with the SEC in a timely manner so as to become eligible, and thereafter to maintain its eligibility, for the use of Form S-3. The Company shall issue a press release describing the material terms of the transaction contemplated hereby as soon as practicable following the Closing Date but in no event more than two (2) business days of the Closing Date, which press release shall be subject to prior review by the Buyers. The Company agrees that such press release shall not disclose the name of the Buyers unless expressly consented to in writing by the

13

Buyers or unless required by applicable law or regulation, and then only to the extent of such requirement.

                                        d.           Use of Proceeds. The Company shall use the net proceeds from the sale of the Notes and the Warrants in the manner set forth in Schedule 4(d) attached hereto and made a part hereof and shall not, directly or indirectly, use such proceeds for (i) any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries); (ii) the satisfaction of any portion of the Company’s debt (other than payment of trade payables and accrued expenses in the ordinary course of the Company’s business and consistent with prior past practices), or (iii) the redemption of any Common Stock.

                                        e.           Future Offerings. Subject to the exceptions described below, the Company will not, without the prior written consent of a majority-in-interest of the Buyers, negotiate or contract with any party to obtain additional equity financing (including debt financing with an equity component) that involves (A) the issuance of Common Stock at a discount to the market price of the Common Stock on the date of issuance (taking into account the value of any warrants or options to acquire Common Stock issued in connection therewith) or (B) the issuance of convertible securities that are convertible into an indeterminate number of shares of Common Stock or (C) the issuance of warrants during the period (the “Lock-up Period”) beginning on the Closing Date and ending on the later of (i) two hundred seventy (270) days from the Closing Date and (ii) one hundred eighty (180) days from the date the Registration Statement (as defined in the Registration Rights Agreement) is declared effective (plus any days in which sales cannot be made thereunder). In addition, subject to the exceptions described below, the Company will not conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the period beginning on the Closing Date and ending two (2) years after the end of the Lock-up Period unless it shall have first delivered to each Buyer, at least twenty (20) business days prior to the closing of such Future Offering, written notice describing the proposed Future Offering, including the terms and conditions thereof and proposed definitive documentation to be entered into in connection therewith, and providing each Buyer an option during the fifteen (15) day period following delivery of such notice to purchase its pro rata share (based on the ratio that the aggregate principal amount of Notes purchased by it hereunder bears to the aggregate principal amount of Notes purchased hereunder) of the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Capital Raising Limitations”). In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyers concerning the proposed Future Offering, the Company shall deliver a new notice to each Buyer describing the amended terms and conditions of the proposed Future Offering and each Buyer thereafter shall have an option during the fifteen (15) day period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Offering. The Capital Raising Limitations shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule 415 under the 1933 Act, an equity line of credit or similar financing arrangement) resulting in net proceeds to the Company of in excess of $1,500,000, or (ii) 

14

issuances of securities as consideration for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Company. The Capital Raising Limitations also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.

                                        f.            Expenses. At the Closing, the Company shall reimburse Buyers for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyers for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. If the Company fails to reimburse the Buyer in full within three (3) business days of the written notice or submission of invoice by the Buyer, the Company shall pay interest on the total amount of fees to be reimbursed at a rate of 15% per annum.

                                        g.            Financial Information. The Company agrees to send the following reports to each Buyer until such Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders.

                                        h.            Authorization and Reservation of Shares. Subject to obtaining the Stockholder Approval (as defined in Section 4(o)), the Company shall at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the full conversion or exercise of the outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant Shares in connection therewith (based on the Conversion Price of the Notes or Exercise Price of the Warrants in effect from time to time) and as otherwise required by the Notes. The Company shall not reduce the number of shares of Common Stock reserved for issuance upon conversion of Notes and exercise of the Warrants without the consent of each Buyer. The Company shall at all times maintain the number of shares of Common Stock so reserved for issuance at an amount (“Reserved Amount”) equal to no less than two (2) times the number that is then actually issuable upon full conversion of the Notes and Additional Notes and upon exercise of the Warrants and the Additional Warrants (based on the Conversion Price of the Notes or the Exercise Price of the Warrants in effect from time to time), If at any time the number of shares of Common Stock authorized and reserved for 

15

issuance (“Authorized and Reserved Shares”) is below the Reserved Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of shareholders to authorize additional shares to meet the Company’s obligations under this Section 4(h), in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the Reserved Amount. If the Company fails to obtain such shareholder approval within thirty (30) days following the date on which the number of Reserved Amount exceeds the Authorized and Reserved Shares, the Company shall pay to the Borrower the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Buyer. If the Buyer elects to be paid the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment. In order to ensure that the Company has authorized a sufficient amount of shares to meet the Reserved Amount at all times, the Company must deliver to the Buyer at the end of every month a list detailing (1) the current amount of shares authorized by the Company and reserved for the Buyer; and (2) amount of shares issuable upon conversion of the Notes and upon exercise of the Warrants and as payment of interest accrued on the Notes for one year. If the Company fails to provide such list within five (5) business days of the end of each month, the Company shall pay the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Buyer, until the list is delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

                                            i.            Listing. The Company shall promptly secure the listing of the Conversion Shares and Warrant Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as any Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares and Warrant Shares from time to time issuable upon conversion of the Notes or exercise of the Warrants. The Company will obtain and, so long as any Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers (“NASD”) and such exchanges, as applicable. The Company shall promptly provide to each Buyer copies of any notices it receives from the OTCBB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

                                            j.            Corporate Existence. So long as a Buyer beneficially owns any Notes or Warrants, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose 

16

Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

                                            k.            No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

                                            l.            Key Man Insurance. The Company shall use its best efforts to obtain, on or before five (5) business days from the date hereof, key man life insurance on all of the Company’s key executive officers.

                                            m.            Restriction on Short Sales. The Buyers agree that, so long as any of the Notes remain outstanding, but in no event less than two (2) years from the date hereof, the Buyers will not enter into or effect any “short sales” (as such term is defined in Rule 3b-3 of the 1934 Act) of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock.

                                            n.            Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyers pursuant to this Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Company, until such breach is cured. If the Company elects to pay the Standard Liquidated Damages Amount in shares, such shares shall be issued at the Conversion Price at the time of payment.

                                 5.         TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or exercise of the Warrants in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Conversion Shares and Warrant Shares under the 1933 Act or the date on which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares and Warrant Shares, prior to registration of the Conversion Shares and Warrant Shares under the 1933 Act or the date on which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If a Buyer 

17

provides the Company with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by such Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyers shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

                                 6.         CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. 

The obligation of the Company hereunder to issue and sell the Notes and Warrants to a Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

                                            a.            The applicable Buyer shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Company.

                                            b.            The applicable Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

                                            c.            The representations and warranties of the applicable Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the applicable Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the applicable Buyer at or prior to the Closing Date.

                                            d.            No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

                                 7.            CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.  The obligation of each Buyer hereunder to purchase the Notes and Warrants at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for such Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion:

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                                            a.            The Company shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Buyer.

                                            b.            The Company shall have delivered to such Buyer duly executed Notes (in such denominations as the Buyer shall request) and Warrants in accordance with Section 1(b) above.

                                            c.            The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyers, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

                                            d.            The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

                                            e.            No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

                                            f.            No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company.

                                            g.            The Conversion Shares and Warrant Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not have been suspended by the SEC or the OTCBB.

                                            h.            The Buyer shall have received an opinion of the Company’s counsel, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Buyer and in substantially the same form as Exhibit “D” attached hereto.

                                            i.            The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

                                 8.            GOVERNING LAW; MISCELLANEOUS.

                                            a.            Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE 

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PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY REGISTERED FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

                                            b.            Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

                                            c.            Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

                                            d.            Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

                                            e.            Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.

                                            f.            Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested) or 

20

delivered personally or by courier (including a recognized overnight delivery service) or by facsimile and shall be effective five days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier (including a recognized overnight delivery service) or by facsimile, in each case addressed to a party. The addresses for such communications shall be:

	 	If to the Company:

Admiralty Holding Company 

3490 Piedmont Road, Suite 304 

Atlanta, GA 30305

Attention: Chief Executive Officer

Telephone: (404) 231-8500

Facsimile: (404) 231-9400

	 	With a copy to:

	 	Steven A. Cunningham, P.C.

11660 Alpharetta Hwy., Suite 155

Roswell, GA 30076

Attention: Steve Cunningham, Esq.

Telephone: (770) 442-2364

Facsimile: (770) 442-2365

     If to a Buyer: To the address set forth immediately below such Buyer’s name on the signature pages hereto.

	 	With copy to:

	 	Ballard Spahr Andrews & Ingersoll, LLP

1735 Market Street

515E Floor

Philadelphia, Pennsylvania 19103

Attention: Gerald J. Guarcini, Esq. 

Telephone: 215-864-8625

Facsimile: 215-864-8999

Each party shall provide notice to the other party of any change in address.

                                            g.            Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from a Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company,

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                                            h.            Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

                                            i.            Survival. The representations and warranties of the Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless each of the Buyers and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in Sections 3 and 4 hereof or any of its covenants and obligations under this Agreement or the Registration Rights Agreement, including advancement of expenses as they are incurred,

                                             j.           Publicity. The Company and each of the Buyers shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCBB or NASD filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of each of the Buyers, to make any press release or SEC, OTCBB (or other applicable trading market) or NASD filings with respect to such transactions as is required by applicable law and regulations (although each of the Buyers shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

                                            k.            Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

                                            l.            No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

                                            m.            Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyers shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

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           IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this Agreement to be duly executed as of the date first above written.

	ADMIRALTY HOLDING COMPANY 
	
	 /s/ Herbert Leeming
	

Herbert Leeming 
	Chief Executive Officer 

	AJW PARTNERS, LLC 
	By: SMS Group, LLC 
	 
	 /s/ Corey S. Ribotsky
	

Corey S. Ribotsky 
	Manager 

RESIDENCE: Delaware

	ADDRESS: 	 	1044 Northern Boulevard 
	 	 	Suite 302 
	 	 	Roslyn, New York 11576 
	 	 	Facsimile: (516) 739-7115 
	 	 	Telephone: (516) 739-7110 

AGGREGATE SUBSCRIPTION AMOUNT:

	 	Aggregate Principal Amount of Notes: 	  $	                          
		Number of Warrants: 	 	                         
		Aggregate Purchase Price 	  $	                         
				

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	AJW MASTER FUND, LTD. 
	By: First Street Manager II, LLC 
	 
	 /s/ Corey /S. Ribotsky
	

Corey S. Ribotsky 
	Manager 

	 	RESIDENCE: Cayman Islands

	ADDRESS: 	 	AJW Offshore, Ltd. 
	 	 	P.O. Box 32021 SMB 
	 	 	Grand Cayman, Cayman Island, B.W.I. 

	AGGREGATE SUBSCRIPTION AMOUNT:

	 	Aggregate Principal Amount of Notes: 	 	$                      
		Number of Warrants: 	 	                        
		Aggregate Purchase Price 	 	$                      

24

	NEW MILLENNIUM CAPITAL PARTNERS II, LLC 
	By: First Street Manager II, LLP 
	 
	 /s/  Corey S. Ribotsky
	

Corey S. Ribotsky 
	Manager 

RESIDENCE: New York

	ADDRESS: 	 	1044 Northern Boulevard 
	 	 	Suite 302 
	 	 	Roslyn, New York 11576 
	 	 	Facsimile: (516) 739-7115 
	 	 	Telephone: (516) 739-7110 

	 	AGGREGATE SUBSCRIPTION AMOUNT:

	 	Aggregate Principal Amount of Notes: 	 	$                     
		Number of Warrants: 	 	                       
		Aggregate Purchase Price 	 	$                     

25

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