Document:

ex4-2.htm

    
      

    

    EXHIBIT 4.2

    

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

    

    
      	 
      	
              Right to Purchase ________ shares
      of Common Stock of
      IDO 

              Security Inc. (subject to adjustment as
      provided herein)

            

    

    

    FORM
OF CLASS A, CLASS B AND FINDER’S

    COMMON
STOCK PURCHASE WARRANT

    

    No. _________                                                                                                                                        Issue Date: _________

    IDO
SECURITY INC., a corporation organized under the laws of the State of Nevada
(the “Company”), hereby certifies that, for value received,
__________________________,
__________________________________________________________, or its assigns (the “Holder”), is entitled, subject to the terms set
forth below, to purchase from the Company at any time after the
Issue Date until 5:00 p.m., E.S.T on the fifth anniversary of the Issue Date: [Actual Effective Date
(as defined in Section 11.1(iv) of the Subscription Agreement) for Class A
Warrants, and Issue Date for Class B Warrants] (the “Expiration Date”), ________ fully paid and nonassessable
shares of Common Stock at a per share purchase price of $______ [$2.00 for Class A
Warrants, $3.00 for Class B
Warrants, $1.00 for
Finder’s
Warrants].  The aforedescribed purchase
price per share, as
adjusted from time to time as herein provided, is referred to herein as the
“Purchase
Price.”  The
number and character of such shares of Common Stock and the Purchase Price are
subject to adjustment as provided herein.  The Company may
reduce the Purchase Price without the consent
of the Holder.  Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Subscription Agreement
(the “Subscription
Agreement”), dated December 5, 2007, entered into by the Company and
Holders.

    

    As used herein the following terms,
unless the context otherwise requires, have the following respective
meanings:

     

    (a)           The term “Company” shall mean IDO Security Inc. and any corporation which shall succeed
or assume the obligations
of IDO Security Inc. hereunder.

     

    (b)           The term “Common Stock” includes (a) the
Company’s common stock, $0.001 par value per share, as authorized on
the date of the Subscription Agreement, and (b) any Other Securities into which or for which any of the
securities described in
(a) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

     

    (c)           The term “Other Securities” refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 5 or otherwise.

     

    (d)           The term “Warrant Shares” shall mean the Common Stock issuable
upon exercise of this Warrant.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    1.           Exercise of
Warrant.

     

    1.1.           Number of
Shares Issuable upon Exercise.  From and after the Issue
Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, Common Stock of the
Company, subject to adjustment pursuant to Section 4.

     

    1.2.           Full
Exercise.  This
Warrant may be exercised in full by the Holder hereof by delivery of an
original or facsimile copy
of the form of subscription attached as Exhibit A hereto (the “Subscription Form”) duly executed by such Holder
and delivery within two
days thereafter of payment,
in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price then in
effect.  The original Warrant is not required to be surrendered to the
Company until it has been fully
exercised.

     

    1.3.           Partial
Exercise.  This
Warrant may be exercised in part (but not for a fractional share) by surrender
of this Warrant in the manner and at the place provided in subsection 1.2
except that the amount payable by the Holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of whole shares of
Common Stock designated by the Holder in the Subscription Form by (b) the
Purchase Price then in effect.  On any such partial exercise
provided the Holder has surrendered the original
Warrant, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any applicable transfer taxes)
may request, the whole number of shares of Common Stock for which such Warrant
may still be exercised for the balance of.

     

    1.4.           Fair Market
Value. Fair Market Value of
a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

     

    (a)           If the Company’s Common Stock is traded on an exchange
or is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation (“NASDAQ”), National Market System, the NASDAQ
Capital Market or the American Stock Exchange, Inc., then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;

     

    (b)           If the Company’s Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ Capital Market or the American Stock Exchange,
Inc., but is traded in the over-the-counter
market, then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

     

    (c)           Except as provided in clause
(d) below, if the Company’s Common Stock is not publicly traded,
then as the Holder and the Company agree, or in the absence of such an
agreement, by arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

     

    (d)           If the Determination Date is the date of
a liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company’s charter, then all amounts to be
payable per share to holders of the Common Stock pursuant to the charter in the
event of such liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming
for the purposes of this clause (d) that all of the shares of Common Stock
then issuable upon exercise of all of the Warrants are outstanding at the Determination
Date.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    1.5.           Company
Acknowledgment. The Company
will, at the time of the exercise of the Warrant, upon the request of the Holder
hereof acknowledge in writing its continuing obligation to afford to such Holder
any rights to which such
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

     

    1.6.           Trustee for
Warrant Holders. In the
event that a qualified bank or trust company shall have been appointed as
trustee for the Holder of the Warrants pursuant to Subsection 3.2, such
bank or trust company shall have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all amounts
otherwise payable to the Company or such successor, as the case may be,
on exercise of this Warrant pursuant to
this Section 1.

     

                   
1.7.           Delivery of
Stock Certificates, etc. on Exercise. The Company agrees that the shares of
Common Stock purchased upon exercise of this Warrant shall be deemed to be
issued to the Holder hereof as the record owner of such shares as of
the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in
any event within three (3) business days thereafter (“Warrant Share Delivery Date”), the Company at its expense (including
the payment by it of any applicable issue taxes) will cause to be issued in the
name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of
any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Common Stock
(or Other Securities) to which such Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share of Common Stock, together with any other
stock or other securities and property (including cash, where applicable) to
which such Holder is entitled upon such exercise pursuant to Section 1 or
otherwise.  The
Company understands that a delay in the delivery of the Warrant Shares after the Warrant
Share Delivery Date could result in economic loss to the Holder.  As
compensation to the Holder for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Holder for late issuance of
Warrant Shares upon exercise of this
Warrant the amount of $100 per business day after the Warrant Share Delivery
Date for each $10,000 of Purchase Price of Warrant Shares for which this Warrant
is exercised which are not timely delivered.  The Company
shall pay any payments incurred under this
Section in immediately available funds upon demand.  Furthermore, in
addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of the
Warrant Shares by the Warrant Share
Delivery Date, the Holder may revoke all or part of the relevant Warrant
exercise by delivery of a notice to such effect to the Company whereupon the
Company and the Holder shall each be restored to their respective
positions immediately prior to the exercise of
the relevant portion of this Warrant, except that the liquidated damages
described above shall be payable through the date notice of revocation or
rescission is given to the Company.

     

    2.            
Cashless
Exercise.

     

    (a)           Commencing six months after the Closing Date (as defined in the Subscription
Agreement), payment upon exercise may be made at the
option of the Holder either in (i) cash, wire transfer or by certified or
official bank check payable to the order of the Company equal to the applicable aggregate Purchase
Price, (ii) by cashless exercise in accordance with Section (b) below
or (iii) by a combination of any of the foregoing methods, for the number
of shares of Common Stock specified in such form (as such exercise
number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein.

     

    
      
        
        

      

      
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    (b)           If the Fair Market Value of one share of
Common Stock is greater than the Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder
may elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant at
the principal office of the Company together with the properly endorsed Subscription Form in which
event the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:

     

                                    X=Y
(A-B)

                                              A

     

    
      
        	
                Where

              	
                X=

              	
                the number of shares of Common
      Stock to be issued to the holder

              

      

       

    

    
      	
               
      

            	
              Y=

            	
              the number of shares of Common
      Stock purchasable under the Warrant or, if only a portion of the Warrant
      is being exercised, the portion of the Warrant being exercised (at the
      date of such calculation)

            

    

     

    
      	
               
      

            	
              A=

            	
              the average of the closing sale
      prices of the Common
      Stock for the five (5) Trading Days immediately prior to (but not
      including) the Exercise Date

            

    

     

    
      	
               
      

            	
              B=

            	
              Purchase Price (as adjusted to the
      date of such calculation)

            

    

     

    (c)           The
Holder may employ the cashless exercise feature described in Section (b) above
only during the pendency of a Non-Registration Event as described in Section 11
of the Subscription Agreement.

     

    For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Subscription
Agreement.

     

    3.            
Adjustment
for
Reorganization, Consolidation, Merger, etc.

     

    3.1.           Reorganization,
Consolidation, Merger, etc.  In case at any time or from
time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person where the Company is not the surviving entity or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the
case may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in
Section 4.

     

    3.2.           Dissolution.  In the event of any
dissolution of the Company following the transfer of all or substantially all of
its properties or assets, the Company, prior to such dissolution, shall at its
expense deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable in accordance with
Section 3.1 by the Holder upon their exercise after the effective date of such
dissolution pursuant to this Section 3 to a bank or trust company
(a “Trustee”) having its principal office in
New York, NY, as trustee for the Holder.

     

    
      
        
        

      

      
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    3.3.           Continuation
of Terms.  Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of this Warrant as provided in
Section 4.  In the event this Warrant does not continue in full
force and effect after the consummation of the transaction described in this
Section 3, then only
in such event will the Company’s securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

     

    3.4           Share
Issuance.  Until
the Expiration Date, if the
Company shall issue any Common Stock except for the Excepted Issuances (as
defined in the Subscription Agreement), prior to the complete exercise of this
Warrant for a consideration less than the Purchase Price that would be in effect
at the time of such issue, then, and thereafter
successively upon each such issue, the Purchase Price shall be reduced to such
other lower purchase price.  For purposes of this adjustment, the
issuance of any security or debt instrument of the Company carrying the right
to convert such security or debt
instrument into Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Purchase Price upon the
issuance of the above-described security, debt instrument, warrant,
right, or option if such issuance is at a
price lower than the Purchase Price in effect upon such issuance.  The
reduction of the Purchase Price described in this Section 3.4 is subject to the
provisions of, and in addition to the other rights of the Holder described in, the Subscription
Agreement.

     

    4.            
Extraordinary
Events Regarding Common Stock.  In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of
Common Stock, or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4. The number of
shares of Common Stock that the Holder of this Warrant shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive shall be
adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise
(but for the provisions of this Section 4) be issuable on such exercise by
a fraction of which (a) the numerator is the Purchase Price that would
otherwise (but for the provisions of this Section 4) be in effect, and
(b) the denominator is the Purchase
Price in effect on the date of such exercise.

     

    5.           
 Certificate
as to Adjustments.  In each case of any
adjustment or readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Chief
Financial Officer or other appropriate designee to compute such adjustment or
readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold,
(b) the number of shares of Common
Stock outstanding or deemed to be outstanding,
and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to the Holder of the Warrant and any Warrant Agent of the Company
(appointed pursuant to Section 11 hereof).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    6.         
   Reservation
of Stock, etc.
Issuable on Exercise of Warrant; Financial Statements.   The Company will at
all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrants, all shares of Common Stock from time to time issuable
on the exercise of the
Warrant.  This Warrant entitles the Holder hereof to receive copies of
all financial and other information distributed or required to be distributed to
the holders of the Company’s Common Stock.

     

    7.        
    Assignment;
Exchange of Warrant.  Subject to compliance with applicable securities laws,
this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a “Transferor”). On the surrender for exchange of this
Warrant, with the Transferor’s endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with an opinion of
counsel reasonably satisfactory to the Company that the transfer of this Warrant
will be in compliance with applicable securities laws, the Company at its
expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each
a “Transferee”), calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant so surrendered by the Transferor.  No such
transfers shall result in a public distribution of the
Warrant.

     

    8.          
  Replacement
of Warrant.  On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of
this Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof,
a new Warrant of like tenor.

     

    9.         
   Registration
Rights.  The
Holder of this Warrant has been granted certain registration rights by the
Company.  These registration rights are set forth in the Subscription
Agreement.  The
terms of the Subscription Agreement are incorporated herein by this
reference.

     

    10.           Maximum
Exercise.  The
Holder shall not be entitled to exercise this Warrant on an exercise
date, in connection with
that number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates on an exercise date, and (ii) the number of shares of Common
Stock issuable upon the exercise of this Warrant with respect to which the
determination of this limitation is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock on such date.  For the purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder.  Subject to the foregoing, the Holder shall not be limited
to aggregate exercises which would result in the issuance of
more than 4.99%.  The restriction described in this
paragraph may be waived, in whole or in part, upon sixty-one (61) days
prior notice from the Holder to the Company to increase such percentage to up to
9.99%, but not in excess of 9.99%.  The Holder may decide whether to
convert a Convertible Note or exercise this Warrant to achieve an actual 4.99%
or up to 9.99% ownership position as described above, but not in excess of
9.99%.

     

    11.           Warrant
Agent.  The
Company may, by written
notice to the Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common
Stock on the exercise of this Warrant pursuant
to Section 1, exchanging this Warrant pursuant to Section 7, and
replacing this Warrant pursuant to Section 8, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such Warrant
Agent.

     

    12.           Transfer on
the Company’s
Books.  Until
this Warrant is transferred on the books of the Company, the Company may
treat the registered holder hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.

     

    
      
        
        

      

      
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    13.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) three business days after
deposited in the mail if delivered pursuant to subsection (ii)
above.  The addresses for such communications shall be: (i) if
to the Company to: IDO Security Inc., 17 State Street, New York, NY 10004,
Fax: (646) 285-0026, with a copy by telecopier only to: Aboudi &
Brounstein, 3 Gavish St., Kfar Saba, Israel, Fax: 972-9-764-4834, (ii) if to the
Holder, to the addresses and telecopier number set forth in the first paragraph
of this Warrant, with an additional copy by telecopier only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, Fax:
(212) 697-3575.

    

    14.           Miscellaneous.  This Warrant and any term
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of New York.  Any dispute relating to
this Warrant shall be adjudicated in New York County in the State of New York.  The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof.  The invalidity or unenforceability of
any provision hereof shall in no way affect the validity or enforceability of
any other provision.

    

    
      
        
        

      

      
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    IN WITNESS WHEREOF, the Company has executed
this Warrant as of the date first written above.

     

    
      	 
      	
              IDO SECURITY
      INC.

               

               

               

              By:                                                                                                                                           
      

                                         Name:

                                         Title:

               

               

               

               

               

               

            
	
              Witness:

               

               

                                                                                         

               

            	 
      

    

     

    
      
        
        

      

      
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    Exhibit A

    FORM OF SUBSCRIPTION

    (to be signed only on exercise of
Warrant)

    TO:  IDO Security Inc.

    The undersigned, pursuant to the
provisions set forth in the attached Warrant (No.____), hereby irrevocably
elects to purchase (check applicable box):

     

    ___           ________ shares of the Common
Stock covered by such
Warrant; or

     

    ___           the maximum number of shares of Common
Stock covered by such Warrant pursuant to the cashless exercise procedure set
forth in Section 2.

    

    The undersigned herewith makes payment
of the full purchase price for such shares at the price per share provided for in
such Warrant, which is $___________.  Such payment takes the form of
(check applicable box or boxes):

    ___           $__________ in lawful money of the
United States; and/or

    ___           the cancellation of the Warrant to the
extent necessary, in
accordance with the formula set forth in Section 2, to exercise this
Warrant with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in
Section 2.

    

    The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to
_____________________________________________________ whose address is
__________________________________________________________________________________________________________________________________________________________________________

    Number of Shares of Common
Stock Beneficially Owned on the date of exercise: Less than five percent (5%) of the
outstanding Common Stock of IDO Security
Inc.

    

    The undersigned represents and
warrants that the
representations and warranties in Section 4 of the Subscription Agreement (as
defined in this Warrant) are true and accurate with respect to the undersigned
on the date hereof.

    

    The undersigned represents and warrants
that all offers and sales
by the undersigned of the securities issuable upon exercise of the within
Warrant shall be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from
registration under the Securities
Act.

    
      	
              Dated:___________________

            	
                                                                             

              (Signature must conform to name of
      holder as 

              specified on the face of the
      Warrant)

               

                                                                             

                                                                             

              (Address)

            

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    Exhibit B

    

    FORM OF TRANSFEROR
ENDORSEMENT

    (To be signed only on transfer of
Warrant)

    For value received, the undersigned
hereby sells, assigns, and transfers unto the person(s) named below under the
heading “Transferees” the right represented by the within
Warrant to purchase the percentage and number of shares of Common Stock of
IDO Security Inc. to which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of
such person(s) and appoints each such person Attorney to transfer its respective
right on the books of
IDO Security Inc. with full power of substitution in the
premises.

     

    
      	
              Transferees

            	
              Percentage
      Transferred

            	
              Number
      Transferred

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

    

    

    
      	
              Dated:  ______________,
      ___________

               

               

               

              Signed in the presence
      of:

               

                                                                          
      

              (Name)

               

               

              ACCEPTED AND
      AGREED:

              [TRANSFEREE]

               

               

                                                                          
      

              (Name)

               

            	
                                                                                              
      

              (Signature must conform to name of
      holder as specified 

              on the face of the
      warrant)

               

               

               

                                                                                              
      

                                                                                              
      

              (address)

               

              
                                                                                                
      

                                                                                                
      

                (address)ex10-1.htm

    
      

    

    

     

    EXHIBIT
10.1

     

    SUBSCRIPTION
AGREEMENT

     

     

    THIS SUBSCRIPTION
AGREEMENT (this
“Agreement”), dated as of _________, by and among
IDO Security Inc. (formerly known as The Medical Exchange Inc.), a Nevada corporation (the “Company”), and the subscribers identified on
the signature page hereto (each a “Subscriber” and collectively “Subscribers”).

     

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

     

    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscribers, as provided herein, and the
Subscribers, in the aggregate, shall purchase up to Seven Million Dollars
($7,000,000) (the "Purchase
Price") of principal amount of promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, convertible into shares of the Company's common stock, $0.001 par
value (the "Common
Stock") at a per share conversion price set forth in the Note (“Conversion Price”); and share
purchase warrants (the “Warrants”), in the form
annexed hereto as Exhibit
B, to purchase shares of Common Stock (the “Warrant
Shares”).  The Notes, shares of Common Stock issuable upon
conversion of the Notes (the “Shares”), the Warrants and the
Warrant Shares are collectively referred to herein as the "Securities"; and

     

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

     

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

     

    1.           Closing.   The
“Closing Date” shall be
the date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement.   Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the Principal
Amount designated on the signature page hereto for the Purchase Price indicated
thereon, and Warrants as described in Section 2 of this
Agreement.  The foregoing notwithstanding, the Company shall have up
to twenty (20) additional business days after the first Closing Date to close on
the balance of the Closing Purchase Price in one or more
closings.  The Notes and Warrants to be issued on the additional
closing dates will have the same Maturity Dates and exercise periods,
respectively, as the Notes and Warrants issued on the First Closing
Date.  The first such Closing Date shall be the Closing Date for all
amounts representing the Closing Purchase Price.

    

    2.           Warrants.   On
the Closing Date, the Company will issue and deliver Warrants to the
Subscribers.  One Class A and one Class B Warrant will be issued for
each two Shares which would be issued on the Closing Date assuming the complete
conversion of the Notes issued on the Closing Date at the Conversion Price in
effect on the Closing Date.  The per Warrant Share exercise price to
acquire a Warrant Share upon exercise of a Class A Warrant shall be equal to
$2.00.   The per Warrant Share exercise price to acquire a
Warrant Share upon exercise of a Class B Warrant shall be equal to $3.00. The
Class A Warrants and Class B Warrants shall be exercisable until five (5) years
after the Actual Effective Date (as defined in Section 11.1(iv) of this
Agreement).

    

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

       

    

    3.           Security
Interest.   The
Subscribers will be granted a security interest in the assets of the Company
including ownership of the Subsidiaries (as defined in Section 5(a) of this
Agreement), which security interest will be memorialized in one or more “Security Agreements,” a form of which
is annexed hereto as Exhibit
D.   The Company will also execute all such documents
reasonably necessary in the opinion of Subscriber to memorialize and further
protect the security interest described herein.  The Subscribers will
appoint a Collateral Agent to represent them collectively in connection with the
security interest to be granted to the Subscribers. The appointment will be
pursuant to a “Collateral Agent
Agreement,” a form of which is annexed hereto as Exhibit E.

    

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

    

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

     

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

     

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

    

    (d)           Information
on Company.   The Subscriber
has been furnished with or has had access at the EDGAR Website of the Commission
to the Company's Form 10-KSB filed on November 9, 2006 for the fiscal year ended
June 30, 2006, the quarterly reports for each of the three month periods ended
March 31, 2007 and June 30, 2007, the Current Reports on Form 8-K filed through
November 30, 2007, together with all subsequent filings made with the Commission
available at the EDGAR website (hereinafter referred to collectively as the
"Reports").  In
addition, the Subscriber may have received in writing from the Company such
other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing, identified thereon as OTHER
WRITTEN INFORMATION (such other information is collectively, the "Other Written Information"),
and considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities. Each Subscriber, severally
and  not jointly, hereby represents that, in connection with the
Subscriber’s investment or the Subscriber’s decision to purchase the Securities,
except as herein provided, the Subscriber has not relied on any statement or
representation of any person, including any such statement or representation by
the Company or the placement agent or any of their respective controlling
persons,  officers, directors, partners, agents and employees or any of
their respective attorneys, except as specifically set forth in the Transaction
Documents.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

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

    

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

    

    (g)           Compliance with Securities
Act.   The
Subscriber understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933 Act
(based in part on the accuracy of the representations and warranties of
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such
registration.  The Subscribers will comply with all applicable
rules and regulations in connection with the sales of the securities including
laws relating to short sales.

    

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

    

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

    

    (i)          
 Warrants
Legend.  The Warrants shall bear the following

    or
similar legend:

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

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

    

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

     

    "THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
[THE COMPANY] THAT SUCH
REGISTRATION IS NOT REQUIRED."

     

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

     

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

    

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

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

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

    

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

    

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

     

    5.         
   Company Representations and
Warranties.  The Company represents and warrants to and agrees
with each Subscriber that as of the date hereof and the Closing Date and unless
the Company notifies the Subscribers prior to the Closing Date, as follows
(except as set forth on the Schedule of Exceptions delivered to the
Subscribers with each numbered Schedule corresponding to the section number
herein or in the Reports):

     

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

     

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

     

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (g)           The
Securities.  The
Securities upon issuance:

     

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

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

       

    

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

     

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

     

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

     

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

     

    (q)           Capitalization.  The authorized and
outstanding capital stock of the Company and Subsidiaries as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth in
the Reports or on Schedule
5(d).  Except as
set forth on Schedule
5(d), there are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company or any of its
Subsidiaries.

     

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

     

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

    

    
      
         

      

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

     

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

    

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

    

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

    

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

    

    (y)           Solvency.   Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the Notes
hereunder, the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).

    

    (z)         
  Company
Predecessor and Subsidiaries.   The Company makes
each of the representations contained in Sections 5(a), (b), (c), (d), (e), (f),
(h), (j), (l), (o), (p), (q), (s), (t), and (u) of this Agreement, as same
relate to the Subsidiary of the Company.  All representations made by
or relating to the Company of a historical or prospective nature and all
undertakings described in Sections 9(g) through 9(l) shall relate, apply and
refer to the Company and its predecessors.

    

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

     

    
      
         

      

      
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    (BB)        The Company agrees and acknowledges that
for purposes of Rule 144 (as currently in effect), the holding period of the
Securities issued on the Bridge Fundings of February 28, 2007 and November 11, 2007, as amended, commence on those
dates, respectively.

     

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

     

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

    

                                   
7.1.          Conversion
of Note.

    

    (a)           Upon the conversion of a Note or part
thereof, the Company shall, at its own cost and expense, take all necessary
action, including obtaining and delivering, an opinion of counsel to assure that
the Company's transfer agent shall issue stock certificates in the name of
Subscriber (or its permitted nominee) or such other persons as designated by
Subscriber and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such
conversion.  The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that the certificates representing such shares shall
contain no legend other than the usual 1933 Act restriction from transfer
legend.  If and when the Subscriber sells the Shares, assuming (i) the
Registration Statement (as defined below) is effective and the prospectus, as
supplemented or amended, contained therein is current and (ii) the Subscriber or
its agent confirms in writing to the transfer agent that the Subscriber has
complied with the prospectus delivery requirements, the Company will reissue the
Shares without restrictive legend and the Shares will be free-trading, and
freely transferable.  In the event that the Shares are sold in a
manner that complies with an exemption from registration, the Company will
promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if pursuant to Rule 144(k) of
the 1933 Act, or for 90 days if pursuant to the other provisions of Rule 144 of
the 1933 Act).

    

    (b)           Subscriber will give notice of its
decision to exercise its right to convert the Note, interest, or part thereof by
telecopying, or otherwise delivering a completed Notice of Conversion (a form of
which is annexed as Exhibit A to the Note) to the Company via
confirmed telecopier transmission or otherwise pursuant to Section 13(a) of this
Agreement.  The Subscriber will not be required to surrender the
Note until the Note has
been fully converted or satisfied.  Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
by 6 PM (or if received by the Company after
6 PM then the next business day) shall be
deemed a “Conversion
Date.”  The
Company will itself or cause the Company’s transfer agent to transmit the
Company's Common Stock certificates representing the Shares issuable upon
conversion of the Note to the Subscriber via express courier for receipt by such
Subscriber within three (3) business days after receipt by the Company of the
Notice of Conversion (such third day being the "Delivery
Date").  In the
event the Shares are electronically transferable, then delivery of the Shares
must be made by electronic transfer provided
request for such electronic transfer has been made by the Subscriber.   A Note
representing the balance of the Note not so converted will be provided by the
Company to the Subscriber if requested by Subscriber, provided the Subscriber
delivers the original Note
to the Company. In the event that a Subscriber elects not to surrender a Note
for reissuance upon partial payment or conversion of a Note, the Subscriber
hereby indemnifies the Company against any and all loss or damage attributable
to a third-party claim in an amount in excess of the actual amount then due
under the Note.

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

       

    

    (c)           The Company understands that a delay in
the delivery of the Shares in the form required pursuant to Section 7.1 hereof,
or the Mandatory Redemption Amount described in Section 7.2 hereof, respectively
later than the Delivery Date or the Mandatory Redemption Payment Date (as
hereinafter defined) could result in economic loss to the
Subscriber.  As compensation to the Subscriber for such loss, the
Company agrees to pay (as liquidated damages and not as a penalty) to the
Subscriber for late issuance of Shares in the form required pursuant to Section
7.1 hereof upon Conversion of the Note in the amount of $100 per business day
after the Delivery Date for each $100,000 of Note principal amount (and
proportionately for other amounts) being converted of the corresponding Shares
which are not timely delivered.  The Company shall pay any payments
incurred under this Section in immediately available funds upon
demand.  Furthermore, in addition to any other remedies which may be
available to the Subscriber, in the event that the Company fails for any reason
to effect delivery of the Shares within seven (7) business days after the
Delivery Date or make payment within seven (7) business days after the Mandatory
Redemption Payment Date (as defined in Section 7.2 below), the Subscriber will
be entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery of a
notice to such effect to the Company whereupon the Company and the Subscriber
shall each be restored to their respective positions immediately prior to the
delivery of such notice, except that the liquidated damages described above
shall be payable through the date notice of revocation or rescission is given to
the Company.

    

    (d)           The Company agrees and acknowledges that
despite the pendency of a not yet effective Registration Statement which
includes for registration the Registrable Securities (as defined in Section
11.1(iv)), the Subscriber is permitted to and the Company will issue to the
Subscriber Shares upon conversion of the Note and Warrant Shares upon exercise
of the Warrants.  Such Shares will, if required by law, bear the
legends described in Section 4 above and if the requirements of Rule 144 under
the 1933 Act are satisfied, be resalable thereunder.

    

    7.2.           Mandatory
Redemption at Subscriber’s Election.  In the event (i) the
Company is prohibited from issuing Shares, (ii) upon the occurrence of any other
Event of Default (as defined in the Note or in this Agreement), that continues
for more than twenty (20) business days, (iii) a Change in Control (as defined
below), or (iv) of the liquidation, dissolution or winding up of the Company,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber (“Calculation
Period”), a sum of money
determined by multiplying up to the outstanding principal amount of the Note
designated by the Subscriber by 120% ("Mandatory Redemption
Payment"). The Mandatory
Redemption Payment must be received by the Subscriber on the same date as the
Shares otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption
Payment Date"). Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal
and interest will be deemed paid and no longer
outstanding.  Liquidated damages calculated pursuant to Section 7.1(c)
hereof, that have been paid or accrued for the ten day period prior to the
actual receipt of the Mandatory Redemption Payment by the Subscriber shall be
credited against the Mandatory Redemption Payment.  For purposes of
this Section 7.2, “Change in
Control” shall mean (i) the
Company no longer having a class of shares publicly traded or listed on a
Principal Market, (ii) the Company becoming a Subsidiary of another entity
(other than a corporation formed by the Company for purposes of reincorporation
in another U.S. jurisdiction) and (iii) the sale, lease or transfer of
substantially all the assets of the Company or Subsidiaries.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

       

    

                   
7.3.           Maximum
Conversion.  The
Subscriber shall not be entitled to convert on a Conversion Date that amount of
the Note in connection with that number of shares of Common Stock which would be
in excess of the sum of (i) the number of shares of Common Stock beneficially
owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the
number of shares of Common Stock issuable upon the conversion of the Note with
respect to which the determination of this provision is being made on a
Conversion Date, which would result in beneficial ownership by the Subscriber
and its Affiliates of more than 4.99% of the outstanding shares of Common Stock
of the Company on such Conversion Date.  For the purposes of the
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder.  Subject to the
foregoing, the Subscriber shall not be limited to aggregate conversions of only
4.99% and aggregate conversions by the Subscriber may exceed
4.99%.  The Subscriber may increase the permitted beneficial ownership
amount up to 9.99% upon and effective after 61 days’ prior written notice to the
Company.  The Subscriber may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
4.99% amount described above and which shall be allocated to the excess above
4.99%.

    

    7.4.           Injunction Posting of
Bond.  In the
event a Subscriber shall elect to convert a Note or part thereof, the Company
may not refuse conversion or exercise based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction from a court,
on notice, restraining and or enjoining conversion of all or part of such Note
shall have been sought and obtained by the Company or at the Company’s request
or with the Company’s assistance, and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the outstanding
principal and interest of the Note, or aggregate purchase price of the Shares
which are sought to be subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the extent Subscriber
obtains judgment in Subscriber’s favor.

    

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

    

    7.6         
  Adjustments.   The Conversion Price,
Warrant exercise price and amount of Shares issuable upon conversion of the
Notes and exercise of the Warrants shall be equitably adjusted and as otherwise
described in this Agreement, the Notes and Warrants.

     

    7.7.           Redemption.    The Notes and
Warrants shall not be redeemable or callable by the Company except as described
in the Notes, Warrants and Subscription Agreement.

    

                                   
8.            
 Finder Fee/Due
Diligence Fee/Legal Fees.

    

    (a)            Finder’s Fee/Due Diligence
Fee.   The Company on the one hand, and each Subscriber
(for himself only) on the other hand, agrees to indemnify the other against and
hold the other harmless from any and all liabilities to any persons claiming
Finder’s Fee/Due Diligence Fee other than the one or more entities identified on
Schedule 8 hereto, (each
a “Finder”) on account
of services purported to have been rendered on behalf of the indemnifying party
in connection with this Agreement or the transactions contemplated hereby and
arising out of such party’s actions.  Anything in this Agreement to
the contrary notwithstanding, each Subscriber is providing indemnification only
for such Subscriber’s own actions and not for any action of any other
Subscriber.  Each Subscriber’s liability hereunder is several and not
joint.  The Company agrees that it will pay the Finder the fees set
forth on Schedule 8
hereto (“Finder/Due Diligence
Fees”).   The Company represents that there are no other
parties entitled to receive fees, commissions, or similar payments in connection
with the offering described in this Agreement except the Finder.

    

    
      
         

      

      
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    (b)           Legal
Fees.   The
Company shall pay to Grushko & Mittman, P.C., a cash fee of $25,000 (“Legal
Fees”) as reimbursement for
services rendered to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes and Warrants (the “Offering”).  Reimbursement for
estimated UCC searches and filing fees (less any amounts paid prior to a Closing
Date), and estimated printing and shipping costs for the closing statements to
be delivered to Subscribers, will be payable on the Closing Date out of funds
held pursuant to the Escrow Agreement.

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

    (f)          
 Reservation.   Prior to the Closing
Date, and at all times thereafter, the Company shall have reserved, pro rata, on behalf of each holder of a Note or
Warrant, from its authorized but unissued Common Stock, a number of common
shares equal to 125% of the
amount of Common Stock necessary to allow each holder of a Note to be able to
convert all such outstanding Notes and interest and 100% of the Warrant Shares
issuable upon exercise of the Warrants.

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

    (n)           Confidentiality/Public
Announcement.  From the date of this Agreement and until the
End Date, the Company agrees that except in connection with a Form 8-K and the
registration statement or statements regarding the Subscribers’ securities or in
correspondence with the SEC regarding same, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber or only to the extent required by law and then only upon five
days prior notice to Subscriber.  In any event and subject to the
foregoing, the Company undertakes to file a Form 8-K or make a public
announcement describing the Offering not later than the fourth business day
after the Closing Date.  Prior to filing or announcement, such Form
8-K or public announcement will be provided to Subscribers for their review and
approval.  In the Form 8-K or public announcement, the Company will
specifically disclose the amount of Common Stock outstanding immediately after
the Closing.  Upon  delivery by the Company to Subscriber
after the Closing Date of any notice or information, in writing, electronically
or otherwise, and while a Note, Shares, Warrants, or Warrant Shares are held by
Subscriber, unless the  Company has in good faith determined that the
matters relating to such notice do not constitute material, nonpublic
information relating to the Company or
Subsidiaries, the Company  shall within one business day after
any such delivery publicly disclose such  material,  nonpublic 
information on a Report on Form 8-K or otherwise. 
In the event that
the Company believes that a notice or communication to
Subscriber contains material, nonpublic information, relating to the Company or
Subsidiaries, the Company shall so indicate to the Subscriber contemporaneously
with delivery of such notice or information.  In the absence of any
such indication, the Subscriber shall be allowed to presume that all
matters relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.

     

                  
 (o)           Non-Public
Information.  The
Company covenants and agrees that except for the Reports, Other Written
Information and schedules and exhibits to this Agreement, which information the
Company undertakes to will publicly disclose not later than the sooner of the
required or actual filing date of the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to keep such information in
confidence.  The Company understands and confirms that each Subscriber
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

    

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

    

    
      
         

      

      
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    (i)          create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the
Excepted Issuances (as defined in Section 12 hereof), (B) (a) Liens imposed by
law for taxes that are not yet due or are being contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property; and (g) up to $1,000,000 line of credit with a recognized
banking institution or up to $1,000,000 of inventory factoring for the Closing
Date’s ordinary course of business by a recognized factor which typically
conducts such factoring arrangements (each of (a) through (g), a “Permitted Lien”), (C)
indebtedness for borrowed money which is not senior or pari passu in right of
payment to the payment of the Notes or distribution of the Company’s assets and
(D) indebtedness which shall be used to repay the Notes;

    

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

    

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

    

    (iv)        engage in any transactions with any
officer, director, employee or any Affiliate of the Company, including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $100,000 other than (i)
for payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company, and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company; or

    

    (v)         prepay
or redeem any financing related debt or past due obligations outstanding as of
the Closing Date except as described on Schedule 9(e).

    

    
      
         

      

      
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    (q)           Further
Registration Statements.   Except for a
registration statement filed on behalf of the Subscribers pursuant to Section 11
of this Agreement, and as set forth on Schedule
11.1 hereto, the Company
will not, without the consent of the Subscribers, file with the Commission or
with state regulatory authorities any registration statements or amend any
already filed registration statement to increase the amount of Common Stock
registered therein, or reduce the price of which such Common Stock is registered
therein, (except for Forms S-8 for shares of the Company’s Common Stock or
Common Stock equivalents issued pursuant to contractual obligations prior to
August 1, 2007 and up to an additional 250,000 Shares of the Company’s Common
Stock to attract key employees or directors) until the expiration of the
“Exclusion
Period,” which shall be defined as the sooner
of (i) the Registration Statement having been current and available for use in
connection with the resale of all of the Registrable Securities (as defined in
Section 11.1(i)) for a period of one hundred and eighty (180) days, or (ii)
until all the Shares and Warrant Shares have been resold or transferred by the
Subscribers pursuant to the Registration Statement or Rule 144, without regard
to volume limitations.  The Exclusion Period will be tolled or
reinstated, as the case may be, during the pendency of an Event of Default as
defined in the Note.

     

    (r)          
 Blackout.    The Company undertakes and covenants that,
until the end of the Exclusion Period, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction or fail to take any
action that could have the effect of delaying the effectiveness of any pending
Registration Statement or causing an already effective Registration Statement to
no longer be effective or current for a period of sixty or more days in the
aggregate during any three hundred and sixty-five day
period.

     

    (s)           Offering
Restrictions.    Until the
expiration of the Exclusion Period and/or during the pendency of an Event of
Default, except for the Excepted Issuances, the Company will not enter into an
agreement to issue nor issue any equity, convertible debt or other securities
convertible into Common Stock or equity of the Company nor modify any of the
foregoing which may be outstanding at anytime, without the prior written consent
of Subscribers holding 66.67% of the outstanding principal amounts of the Notes,
which consent may be withheld for any reason.  For so long as the Notes are
outstanding, the Company will not enter into any Equity Line of Credit or
similar agreement, nor issue nor agree to issue any floating or Variable Priced
Equity Linked Instruments nor any of the foregoing or equity with price reset
rights (collectively, the “Variable Rate
Restrictions”).   For purposes
hereof, “Equity Line of
Credit” shall include any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has the
right to “put” its securities to the investor or underwriter over an agreed
period of time and at an agreed price or price formula, and “Variable Priced Equity Linked
Instruments” shall include: (A) any debt or equity securities which are
convertible into, exercisable or exchangeable for, or carry the right to receive
additional shares of Common Stock either (1) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the initial issuance
of such debt or equity security, or (2) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date at any time
after the initial issuance of such debt or equity security due to a change in
the market price of the Company’s Common Stock since date of initial issuance,
and (B) any amortizing convertible security which amortizes prior to its
maturity date, where the Company is required or has the option to (or the
investor in such transaction has the option to require the Company to) make such
amortization payments in shares of Common Stock which are valued at a price that
is based upon and/or varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or equity security
(whether or not such payments in stock are subject to certain equity
conditions).  The only officer, director, employee and consultant
stock option or stock incentive plan currently in effect or contemplated by the
Company is described on Schedule 5(d).

     

    (t)       
    Limited
Standstill.   The Company will
deliver to the Subscribers on or before the Closing Date and enforce the
provisions of an irrevocable lock up agreement (“Lock Up
Agreement”) in the form
annexed hereto as Exhibit G, with the parties identified on
Schedule
9(t)
hereto.

     

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

     

    (v)           Notices.   For so long as the
Subscribers hold any Securities, the Company will maintain as United States
address and United States fax number for notices purposes under the Transaction
Documents.

     

    
      
         

      

      
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    (w)           Blackout
Policy.   On or before December
31, 2007, the Company will adopt and institute an "Insider Trading
Policy" regarding the
purchase and sale of the Company's securities in the open market or through a
broker unless pre-approved, covering all members of the Board of Directors,
executive officers, all employees reporting directly to the Chief Financial
Officer, certain employees involved with preparation of financial statements,
any person who possess material non-public information about the Company,
investor relations professionals, and family members living in the same
household as anyone covered by the Policy, and which must include a provision
that officers and directors of the Company may not sell on any trading day more
than 5% of the average daily trading volume reported by Bloomberg L.P. for the
Principal Market for the immediately preceding five trading days, The Insider Trading Policy will
be not less restrictive to
the shareholders subject thereto than the terms of the Lockup Agreement annexed
hereto as Exhibit G.

     

    10.           Covenants of
the Company and Subscriber Regarding Indemnification.

     

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

     

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

     

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

     

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

     

    11.1.        Registration
Rights.  The
Company hereby grants the following registration rights to holders of the
Securities.

     

    (i)           On one occasion, for a period commencing
one hundred and twenty-one (121) days after the Closing Date, but not later than
two (2) years after the Closing Date, upon a written request therefor from any
record holder or holders of more than 50% of the Shares issued and issuable upon
conversion of the outstanding Notes and outstanding Warrant Shares, the Company
shall prepare and file with the Commission a registration statement under the
1933 Act registering the Registrable Securities, as defined in Section 11.1(iv)
hereof, which are the subject of such request for unrestricted public resale by
the holder thereof.  For purposes of Sections 11.1(i) and 11.1(ii),
Registrable Securities shall not include Securities which are (A) registered for
resale in an effective registration statement, (B) included for registration in
a pending registration statement, or  (C) which have been issued
without further transfer restrictions after a sale or transfer pursuant to Rule
144 under the 1933 Act.  Upon the receipt of such request, the Company
shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it has
received written requests within ten (10) days after the Company gives such
written notice.  Such other requesting record holders shall be deemed
to have exercised their demand registration right under this Section
11.1(i).

     

    
      
         

      

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

     

    (iii)           If, at the time any written request for
registration is received by the Company pursuant to Section 11.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account and the
Company actually does file such other registration statement, such written
request shall be deemed to have been given pursuant to Section 11.1(ii) rather
than Section 11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section
11.1(ii).

     

    (iv)           The Company shall file with the
Commission a Form SB-2 registration statement (the “Registration
Statement”) (or such other
form that it is eligible to use) in order to register the Registrable Securities
for resale and distribution under the 1933 Act within sixty (60) calendar days
after the Closing Date (the
“Filing
Date”), and use
commercially reasonable best efforts to cause the Registration Statement to be
declared effective not
later than one hundred and twenty (120) calendar days after the Closing Date
(or, in the case of review, one hundred fifty (150) days thereafter);
(the “Actual Effective
Date”).  The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to 125% of the Shares issuable upon
conversion of all of the Notes issuable to the Subscribers (collectively the
“Registrable
Securities”). The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber, pro rata, and not issued, employed or reserved
for anyone other than each such Subscriber.  The Registration
Statement will immediately be amended or additional registration statements will
be immediately filed by the Company as necessary to register additional shares
of Common Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities.  Except with the
written consent of the Subscriber, no securities of the Company other than the
Registrable Securities will be included in the Registration
Statement.

     

    
      
         

      

      
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    (v)           The amount of Registrable Securities
required to be included in the Registration Statement as described in Section
11.1(iv) (“Initial Registrable
Securities”) shall be
limited to not less than 100% of the maximum amount (“Rule 415
Amount”) of Common Stock
which may be included in a single Registration Statement without exceeding
registration limitations imposed by the Commission pursuant to Rule 415 of the
1933 Act but in any event not less than 6,000,000 shares of Common
Stock.  In the event that less than all of the Initial Registrable
Securities are included in the Registration Statement as a result of the
limitation described in this Section 11.1(v), then the Company will file
additional Registration Statements each registering the Rule 415 Amount (each
such Registration Statement a “Subsequent
Registration Statement”),
seriatim, until all of the Initial Registrable
Securities have been registered.  The Filing Date and Actual Effective
Date of each such additional Registration Statement shall be, respectively,
thirty (30) and sixty (60) days after the first day such Subsequent Registration
Statement may be filed without objection by the Commission based on Rule 415 of
the 1933 Act.  The Subscribers agree and acknowledge that
notwithstanding anything contained herein to the contrary, the Registration
Statement will include for registration on behalf of the Subscribers not fewer
than 6,000,000 shares of Common Stock for the Shares issuable upon conversion of
the Notes and thereafter may include, at the Company’s discretion, up to
6,000,000 shares of Common Stock on behalf of the holders thereof (“Other
Holders”) described on
Schedule
11.1.  In the
event for any reason the amount of Common Stock to be registered must be
reduced, then such reduction must come entirely from the Common Stock being
registered on behalf of the Other Holders and not the
Subscribers.

     

    (vi)           Unless otherwise instructed in writing
by a holder of Registrable Securities and only if the initial Registration
Statement does not include all of the Registrable Securities, the Registrable
Securities will be registered on behalf of each such holder in the Registration
Statements based in the following order and priority:

     

    (A)           Shares.

     

    (B)           Conversion Shares issued and issuable
upon conversion of the Notes (based on the multiple set forth
above).

     

    (C)           Warrants Shares issued and issuable to
the Subscribers with lower exercise priced Warrant Shares being registered first
and then the higher exercise priced Warrant Shares.  In the case of
Warrants with the same exercise prices but different Issue Dates, the Warrants
issuable upon later issued Warrants will be registered
first.

    

    (vii)           The
foregoing notwithstanding, Registrable Securities shall be allocated and
registered pro rata among the Subscribers based upon their initial investments
in the Offering.  

     

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

     

    (a)           subject to the timelines provided in
this Agreement, prepare and file with the Commission a registration statement
required by Section 11, with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein provided),
promptly provide to the holders of the Registrable Securities copies of all
filings and Commission letters of comment and notify Subscribers (by telecopier
and by e-mail addresses provided by Subscribers) and Grushko & Mittman, P.C.
(by telecopier and by email to Counslers@aol.com) on or before 6:00 PM EST on the same
business day that the Company receives notice that (i) the Commission has no
comments or no further comments on the Registration Statement, and (ii) the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company’s obligation and an Event of Default as defined in the Notes and a Non-Registration Event as
defined in Section 11.4 of this Agreement);

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    11.4.        Non-Registration
Events.  The
Company and the Subscribers agree that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not declared
effective by the Commission by the Actual Effective Date, and any registration
statement required under Section 11.1(i) or 11.1(ii) is not filed within 60 days
after written request and declared effective by the Commission within 120 days
after such request, and maintained in the manner and within the time periods
contemplated by Section 11 hereof, and it would not be feasible to ascertain the
extent of such damages with precision.  Accordingly, if (A) the
Registration Statement is not filed on or before the Filing Date, (B) is not
declared effective on or before the Actual Effective Date, (C) due to the action
or inaction of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its attorneys of
a written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
(D) if the registration statement described in Sections 11.1(i) or 11.1(ii) is
not filed within 60 days after such written request, or is not declared
effective within 120 days after such written request, or (E) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective without being
succeeded within twenty (20) business days by an effective replacement or
amended registration statement or for a period of time which shall exceed
forty-five (45) days in the aggregate per year (defined as a period of 365 days
commencing on the Actual Effective Date (each such event referred to in clauses
A through E of this Section 11.4 is referred to herein as a "Non-Registration
Event"), then the Company
shall deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty (30) days or part thereof of
the Aggregate Principal Amount of the Notes remaining unconverted and purchase
price of Shares issued upon conversion of the Notes and exercise of the Warrants
owned of record by such holder which are subject to such Non-Registration
Event.  The Company must pay the Liquidated Damages in cash, or at the
Company’s election, with Qualified Shares (as hereinafter
defined) of the Common
Stock valued at the Fixed Conversion Price, pari passu to each
Subscriber.  The Liquidated Damages must be paid within ten (10) days
after the end of each thirty (30) day period or shorter part thereof for which
Liquidated Damages are payable.  In the event a Registration Statement
is filed by the Filing Date but is withdrawn prior to being declared effective
by the Commission, then such Registration Statement will be deemed to have not
been filed.  All
oral or written comments received from the Commission relating to the
Registration Statement must be responded to within fifteenth (15) business days
after receipt of comments from the Commission.  Failure to timely respond to Commission
comments is a Non-Registration Event for which Liquidated Damages shall accrue
and be payable by the Company to the holders of Registrable Securities at the
same rate set forth above.  Notwithstanding the foregoing, the Company
shall not be liable to the Subscriber under this Section 11.4 for any events or
delays occurring as a consequence of the acts or omissions of the Subscribers
contrary to the obligations undertaken by Subscribers in this
Agreement.  Liquidated Damages will not accrue nor be payable pursuant
to this Section 11.4 nor will a Non-Registration Event be deemed to have
occurred for times during which Registrable Securities are transferable by the
holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act.
As used herein the term
“Qualified Shares” shall mean (i) registered shares, (ii) shares that can be
resold under Rule 144 of the Securities Act without volume restriction or (iii) shares which can be resold
under Rule 144, subject to the volume limitations specified in subsection (e)
thereof.  Qualified Shares delivered
pursuant to sections (ii) and (iii) of the preceding sentence must be
immediately resellable and transferable by the Subscriber without any additional
holding period.  Such Qualified Shares, when delivered to the
Subscriber, must be accompanied by an opinion of Company’s counsel reasonably
acceptable to Subscriber and the Company’s transfer agent that all such
Qualified Shares are immediately resellable or transferable pursuant to Rule 144
of the 1933 Act, by each Subscriber who receives such Qualified
Shares.

     

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

     

    
      
         

      

      
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    11.6.        Indemnification
and Contribution.

     

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

     

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

     

    
      
         

      

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

     

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

     

    11.7.        Delivery of
Unlegended Shares.

     

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

     

    
      
         

      

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

    

    (c)           The Company understands that a delay in
the delivery of the Unlegended Shares pursuant to Section 11 hereof later than
two business days after the Unlegended Shares Delivery Date could result in
economic loss to a Subscriber.  As compensation to a Subscriber for
such loss, the Company agrees to pay late payment fees (as liquidated damages
and not as a penalty) to the Subscriber for late delivery of Unlegended Shares
in the amount of $100 per business day after the Delivery Date for each $10,000
of purchase price of the Unlegended Shares subject to the delivery
default.  If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
(30) days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to redeem all or any portion of
the Shares and Warrant Shares subject to such default at a price per share equal
to 120% of the Purchase Price of such Common Stock and Warrant Shares
(“Unlegended Redemption
Amount”).  The
amount of the aforedescribed liquidated damages that have accrued or been paid
for the twenty day period prior to the receipt by the Subscriber of the
Unlegended Redemption Amount shall be credited against the Unlegended Redemption
Amount.  The Company shall pay any payments incurred under this
Section in immediately available funds upon demand.

     

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

    

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

    

    
      
         

      

      
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    12.           (a)           Right of First
Refusal.   Until one year after
the Closing Date, the Subscribers shall be given not less than ten (10) business
days prior written notice of any proposed sale by the Company of its common
stock or other securities or debt obligations, except in connection with (i)
full or partial consideration in connection with a strategic merger,
acquisition, consolidation or purchase of substantially all of the securities or
assets of corporation or other entity which holders of such securities or debt
are not at any time granted registration rights, (ii) the Company’s issuance of securities in
connection with strategic license agreements and other partnering arrangements
so long as such issuances are not for the primary purpose of raising capital and
which holders of such
securities or debt are not at any time granted registration rights, (iii) the Company’s issuance of Common
Stock or the issuances or grants of options to purchase Common Stock pursuant to
director stock option plans and employee stock purchase plans described on
Schedule
12(a)) hereto at prices
equal to or higher than the closing price of the Common Stock on the issue date
of any of the foregoing, except as provided in Schedule 12(a)(iv) as a result of the exercise of
Warrants or conversion of Notes which are granted or issued pursuant to this
Agreement or that have been issued prior to the Closing Date on the same terms
and conditions as disclosed in a Report filed not less than five (5) days prior
to the Closing Date without amendment thereto, and (v) the payment of any
interest on the Notes and Liquidated Damages pursuant to the Transaction
Documents (collectively the
foregoing are “Excepted
Issuances”).  The
Subscribers who exercise their rights pursuant to this Section 12(a) shall have
the right during the ten (10) business days following receipt of the notice to
purchase such offered common stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale in the same proportion
to each other as their purchase of Notes in the Offering.  In the
event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the ten (10) business days following the notice of modification to
exercise such right.

     

    (b)           Favored Nations
Provision.   Other than in connection with the Excepted
Issuances, if at any time the Notes or Warrants are outstanding, the Company
shall offer, issue or agree to issue (the “Lower Price Issuance”) any Common
Stock or securities convertible into or exercisable for shares of Common Stock
(or modify any of the foregoing which may be outstanding) to any person or
entity at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price in respect of the Shares , or if less
than the Warrant exercise price in respect of the Warrant Shares, without the
consent of Subscribers holding 66.67% of the outstanding principal amount of
Notes, then the Company shall issue, for each such occasion, additional shares
of Common Stock to each Subscriber respecting those Notes, Warrants and Shares
that remain outstanding at the time of the Lower Price Issuance so that the
average per share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price.  The average Purchase Price of the Shares and average
exercise price in relation to the Warrant Shares shall be calculated separately
for the Shares and Warrant Shares.  The foregoing calculation and
issuance shall be made separately for Shares received upon conversion of the
Notes and separately for Warrant Shares.  The delivery to the
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue
additional shares of Common Stock.  The Subscriber is granted the
registration rights described in Section 11 hereof in relation to such
additional shares of Common Stock.  For purposes of the issuance and
adjustment described in this paragraph, the issuance of any security of the
Company carrying the right to convert such security into shares of Common Stock
or of any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is at
a price lower than the Conversion Price or Warrant exercise price in effect upon
such issuance.  The rights of the Subscriber set forth in this Section
12 are in addition to any other rights the Subscriber has pursuant to this
Agreement, the Note, any Transaction Document, and any other agreement referred
to or entered into in connection herewith or to which the Subscriber and Company
are parties.  The Subscriber is also given the right to elect to
substitute any term or terms of any other offering in connection with which the
Subscriber has rights as described in Section 12(a), for any term or terms of
the Offering in connection with Securities owned by Subscriber as of the date
the notice described in Section 12(a) is required to be given to
Subscriber.

     

    
      
         

      

      
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    (c)           Maximum Exercise of
Rights.   In the event the exercise of the rights
described in Sections 12(a) and 12(b) would result in the issuance of an amount
of common stock of the Company that would exceed the maximum amount that may be
issued to a Subscriber calculated in the manner described in Section 7.3 of this
Agreement, then the issuance of such additional shares of common stock of the
Company to such Subscriber will be deferred in whole or in part until such time
as such Subscriber is able to beneficially own such common stock without
exceeding the maximum amount set forth calculated in the manner described in
Section 7.3 of this Agreement.  The determination of when such common
stock may be issued shall be made by each Subscriber as to only such
Subscriber.

     

    13.           Miscellaneous.

     

    (a)           Notices.  All notices, demands,
requests, consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.  Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the
date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first
occur.  The addresses for such communications shall be: (i) if to the
Company, to: IDO Security Inc., 17 State Street, New York, NY 10004,
Fax: (646) 285-0026, with a copy by telecopier only to: Aboudi &
Brounstein, 3 Gavish St., Kfar Saba, Israel, Fax: 972-9-764-4834, and (ii) if to
the Subscriber, to: the one or more addresses and telecopier numbers indicated
on the signature pages hereto, with an additional copy by telecopier only to:
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
10176, Fax: (212) 697-3575, and (iii) if to the Finder, to: the address and
telecopier number set forth on Schedule 8
hereto.

     

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

     

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

     

    
      
         

      

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

     

    (e)           Specific
Enforcement, Consent to Jurisdiction.  To the extent permitted by
law, the Company and Subscriber acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that the parties shall be entitled
to one or more preliminary and final injunctions to prevent or cure breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.  Subject to Section 13(d)
hereof, each of the Company, Subscriber and any signator hereto in his personal
capacity hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.

     

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

     

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

     

    
      
         

      

      
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    (h)           Consent.   As
used in the Agreement, “consent of the Subscribers” or similar language means
the consent of holders of not less than 66.67% of the total of the Shares issued
and issuable upon conversion of outstanding Notes owned by Subscribers on the
date consent is requested.

     

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

     

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

     

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

     

     

     

     

    [THIS
SPACE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
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    SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT

     

    

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

    

                                            IDO SECURITY
INC.

                                            a Nevada corporation

    

    

    

    

                                            By:_________________________________

                                            Name: Michael
Goldberg

                                            Title:  CEO

    

                                            Dated:
_______________ _____

    

    

    

    
      	 	
              SUBSCRIBER

            	 	
              NOTE
      

              PRINCIPAL
      

              AMOUNT

            	 	
              CLASS
      A 

              WARRANTS

            	 	
              CLASS
      B 

              WARRANTS

            
	 	
               

              Name
      of Subscriber:
      __________________________________________________

              __________________________________________________________________

               

              Address:
      __________________________________________________________

               

              __________________________________________________________________

               

              Fax
      No.:
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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]