Document:

SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      is
      dated as of September 12, 2007, by and among Franklin Towers Enterprises 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”);
      and

     

    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 $5,000,000 (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, $0.0001 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
      Date.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Closing Date, Subscriber shall purchase and the Company shall sell to
      Subscribers Notes in the aggregate principal amount of $2,500,000 of Purchase
      Price (“First
      Closing Date”)
      designated on the signature page hereto for the purchase price set forth on
      the
      signature page hereto. 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, as soon as practicable following
      the satisfaction or waiver of all conditions to closing set forth in this
      Agreement (the “Closing
      Date”).
      The
      Company shall have up to ten (10) additional days after the first Closing 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 Share 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 $0.50. The per Warrant Share exercise price
      to
      acquire a Warrant Share upon exercise of a Class B Warrant shall be equal to
      $1.00. The Class A 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).

    
      
         

      

      
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    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.
      Xinshengxiang Industrial Development Co., Ltd., the holder of 17,100,000 shares
      of Common Stock, and Dingliang
      Kuang, the majority owner of the Subsidiary and its manager, will pledge all
      of
      the Common Stock of the Company owned by him as additional security for the
      Company’s obligations to the Subscribers. The pledge will be memorialized in a
Stock
      Pledge Agreement,
      a form
      of which is annexed hereto as Exhibit
      F.

    

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

    

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

    

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

     

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

    

    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB filed on March 26, 2007 for the fiscal
      year ended December 31, 2006, and the financial statements included therein
      for
      the year ended December 31, 2006, together with all subsequent filings made
      with
      the Commission available at the EDGAR website (hereinafter referred to
      collectively as the "Reports").
      In
      addition, the Subscriber 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. 

    
      
         

      

      
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    (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:

     

    "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."

    
      
         

      

      
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    (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.

    

    (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.

    
      
         

      

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

     

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

     

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

     

    (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.

    
      
         

      

      
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    (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;

    

    (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.

    
      
         

      

      
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    (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.

     

    (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.

    
      
         

      

      
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    (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 December 31, 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
      December 31, 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.

    

    (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.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    (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 FRTW.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, (i) the Company’s fair saleable value of its assets exceeds the
      amount that will be required to be paid on or in respect of the Company’s
      existing debts and other liabilities (including known contingent liabilities)
      as
      they mature; (ii) the Company’s assets do not constitute unreasonably small
      capital to carry on its business for the current fiscal year as now conducted
      and as proposed to be conducted including its capital needs taking into account
      the particular capital requirements of the business conducted by the Company,
      and projected capital requirements and capital availability thereof; and (iii)
      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.

     

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

     

    (CC) Preferred
      Shares.
      The
      Company will convert the Series A Convertible Preferred Shares within thirty
      (30) days of Closing. 

     

    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
      G.
      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.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    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.

    

    (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 $10,000 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.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    

    (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), (iii) a majority of the board
      of
      directors of the Company as of the Closing Date no longer serving as directors
      of the Company except due to natural causes and except due to the appointment
      of
      Dingliang Kuang to the board, (iv) the sale, lease or transfer of substantially
      all the assets of the Company or Subsidiaries, (v) if the holders of the
      Company’s Common Stock as of the Closing Date beneficially own at any time after
      the Closing Date less than 40% of the Common Stock owned by them on the Closing
      Date, or (vi) if the Chief Executive Officer of the Company, as of the Closing
      Date, no longer serves as Chief Executive Officer of the Company unless the
      new
      Chief Executive Officer is Dingliang Kuang, who is currently the principal
      and
      majority owner of the Subsidiary. 

    

    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. Such 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%.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    

    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. Commissions/Due
      Diligence/Legal Fees.

     

    (a) Commissions.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby or in connection with any investment in the Company at
      any
      time, whether or not such investment was consummated and arising out of such
      party’s actions. The Company represents that there are no parties entitled to
      receive fees, commissions, or similar payments in connection with the Offering
      except as identified on Schedule
      8(a)
      who will
      receive the amount of compensation described in Schedule
      8(a).
      The
      Company is solely responsible for payment to the broker(s) identified on
Schedule
      8(a).

    
      
         

      

      
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    (b) Subscriber’s
      Legal Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $25,000
      (“Subscriber’s
      Legal Fees”)
      (of
      which $5,000 has been paid) as reimbursement for services rendered to the
      Subscribers in connection with this Agreement and the purchase and sale of
      the
      Notes and Warrants (the “Offering”).
      The
      Subscriber’s Legal Fees and expenses will be payable out of funds held pursuant
      to the Escrow Agreement. Grushko & Mittman, P.C. will be reimbursed at
      Closing for all lien searches, filing fees, and printing and shipping costs
      for
      the closing statements to be delivered to Subscribers.

     

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

     

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

     

    (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.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement and the Closing
      Date, the Bulletin Board is and will be the Principal Market.

     

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

     

    (d) Filing
      Requirements.
      From
      the
      date of this Agreement and until the last to occur of (i) two (2) years after
      the Closing Date, (ii) until all the 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.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    

     

    (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. 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 150%
      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 reserve the amount of
      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.

     

    (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.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    

     

    (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, 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:

    

    (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; and (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 (each of (a) through (f), 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;

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    

    (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.     

     

    (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, (including but not limited to Forms S-8), 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 forty or more days in the aggregate during any three hundred
      and
      sixty-five day period.

    
      
         

      

      
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    (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 the Subscriber, 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
      H,
      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. 

     

    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.

    
      
         

      

      
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    (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 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, 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 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).

     

    (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.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    

     

    (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
      cause the Registration Statement to be declared effective not
      later
      than one hundred and fifty (150) calendar days after the Closing Date
(the
      “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 150%
      of
      the Shares issued and issuable upon conversion of all of the Notes ( the
“Registrable
      Securities”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber and Warrant holder, pro rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber and
      Warrant holder. 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. It shall be deemed a Non-Registration Event if at any
      time after the date the Registration Statement registering the Initial
      Registrable Securities (as defined in Section 11.1(v)) is declared effective
      by
      the Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Subscribers
      for
      thirty or more consecutive days lees than the
      amount of Common Shares required to be registered as described in this Section
      11. Except for Common Stock described on Schedule
      11.1,
      no
      other securities of the Company will be included in the Registration Statement
      other than the Registrable Securities.

     

    (v) The
      amount of Registrable Securities required to be included in the initial
      Registration Statement as described in Section 11.1(iv) (“Initial
      Registrable Securities”)
      shall
      be not less than 100% of the maximum amount of Common Stock which may be
      included in a Registration Statement without exceeding registration limitations
      imposed by the Commission pursuant to Rule 415 of the 1933 Act (“Rule
      415 Amount”),
      but
      in any event not less than 26,000,000 shares of Common Stock. In the event
      that
      less than all of the 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 Effective Date of each such additional Registration Statement shall be,
      respectively, fourteen (14) and forty-five (45) 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.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission. Subscriber’s
      failure to comment on any Registration Statement or other document provided
      to a
      Subscriber or its counsel shall not be construed to constitute approval thereof
      nor the accuracy thereof.

     

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

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Registration Statement is not declared effective by the Commission by the
      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) any Registration Statement filed by the Filing Date or
      is
      not declared effective on or before the required Effective Date, (B) 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, (C) 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 (D)
      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 forty (40) business days by an effective replacement
      or
      amended registration statement or for a period of time which shall exceed sixty
      (60) days in the aggregate per year (defined as every rolling period of 365
      consecutive days commencing on the Actual Effective Date (each such event
      referred to in clauses A through D 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 such lesser
      pro-rata amount for any period of less than thirty (30) days) of the principal
      amount of the outstanding Notes and purchase price of Shares and Warrant Shares
      issued upon conversion of Notes and exercise of Warrants held by Subscriber
      which are subject to such Non-Registration Event. The Company must pay the
      Liquidated Damages in cash, or at the Company’s election, with registered shares
      of the Common Stock valued at 75% of the average of the closing bid prices
      of
      the Common Stock for the five trading days preceding such payment. 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 and Liquidated
      Damages will be calculated accordingly. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      ten (10) 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 and amounts set forth above calculated
      from the date the response was required to have been made.

     

    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 NASD, 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 pursuant to 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, 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 the Depository Trust Company 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 (and proportionate for other amounts) 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 the greater
      of (i) 120%, or (ii) a fraction in which the numerator is the highest closing
      price of the Common Stock during the aforedescribed thirty day period and the
      denominator of which is the lowest conversion price during such thirty day
      period, multiplied by the Purchase Price of such Common Stock and exercise
      price
      of such Warrant Shares (“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.

    
      
         

      

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

    

    12. (a) Right
      of First Refusal.
      Until
      six months after the Actual Effective Date, the Subscribers shall be given
      not
      less than ten business days prior written notice of any proposed sale by the
      Company of its Common Stock or other securities or equity linked debt
      obligations, except in connection with (i) full or partial consideration in
      connection with a strategic merger, acquisition, consolidation or purchase
      of
      substantially all of the securities
      or assets of corporation or other entity which holders of such securities or
      debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which holders of such securities or debt are
      not
      at any time granted registration rights, (iii) the Company’s issuance of Common
      Stock or the issuances or grants of options to purchase Common Stock to
      employees, directors, and consultants, as described on Schedule
      5(d),
      (iv)
      attorney’s fees which may be paid with Common Stock and included for
      registration on Form S-8, and (v) as a result of the exercise of Warrants or
      conversion of Notes which are granted or issued pursuant to this Agreement
      on
      the terms described in the Transaction Documents as of the Closing Date
      (collectively the foregoing are “Excepted
      Issuances”).
      The
      Subscribers who exercise their rights pursuant to this
      Section
      12(a) shall have the right during the ten business days following receipt of
      the
      notice to purchase in cash or by using the outstanding balance including
      principle, interest, liquidated damages and any other amount then owing to
      such
      Subscriber by the Company, in the aggregate up to all of such offered Common
      Stock, debt or other securities in accordance with the terms and conditions
      set
      forth in the notice of sale in the same proportion to each other as their
      purchase of Notes in the Offering. In the event such terms and conditions are
      modified during the notice period, the Subscribers shall be given prompt notice
      of such modification and shall have the right during the ten business days
      following the notice of modification to exercise such right.

     

    (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 each Subscriber, 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
      or
      could result in the issuance of an amount of Common Stock of the Company that
      would exceed the maximum amount that may be issued to a Subscriber calculated
      in
      the manner described in Section 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 applicable 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: Franklin Towers Enterprises
      Inc., 5 Ash Drive, Center Barnstead, New Hampshire 03225, Attn: Kelly Fan,
      telecopier:
      (702) 943-0714, with a copy by telecopier only to: David Lubin & Associates,
      26 East Hawthorne Avenue, Valley Stream, NY 11580, Attn: David Lubin, Esq.,
      telecopier: (516) 887-8250, (ii) if to the Subscriber, to: the one or more
      addresses and telecopier numbers indicated on the signature pages hereto, with
      an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
      Avenue, Suite 1601, New York, New York 10176, telecopier: (212) 697-3575, and
      (iii) if to the Broker, to: the name, address and telecopier number indicated
      on
Schedule
      8(a)
      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. 

    
      
         

      

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

     

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

     

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage would
      occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek an injunction
      or
      injunctions to prevent or cure breaches of the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof, this being in addition
      to any other remedy to which any of them may be entitled by law or equity.
      Subject to Section 13(d) hereof, the Company hereby irrevocably 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) 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.

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    

     

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

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 75% 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 Subscribers and their
      permitted successors and assigns.

     

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

     

    (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.

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    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.

    

    
      	 	
              FRANKLIN
                TOWERS ENTERPRISES INC.

            
	 	
              a
                Nevada corporation

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Kelly Fan

            
	 	 	
              Name:
                Kelly Fan

            
	 	 	
              Title:
                Chief Executive Officer 

            
	 	 	 
	 	Dated:
              September 12,, 2007

    

     

    
      
        	
                SUBSCRIBER

                 

              	
                PURCHASE
                  PRICE AND NOTE PRINCIPAL 

              
	
                Name
                  of Subscriber: 

                 

                Double
                  U Master Fund, L.P._____________________________

                 

                Address:
                  Harbour
                  House, Waterfront Drive__________________

                 

                Road
                  Town, Tortola BVI__________________________________

                 

                Fax
                  No.: -______________________________________________

                 

                Taxpayer
                  ID# (if applicable): __________________________________

                 

                 

                 

                _________________________________________________________

                (Signature)

                By:
                  

                 

              	
                $150,000

              

      

     

    

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

     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.

    

    
      	 	
              FRANKLIN
                TOWERS ENTERPRISES INC.

            
	 	
              a
                Nevada corporation

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Kelly Fan

            
	 	 	
              Name:
                Kelly Fan

            
	 	 	
              Title:
                Chief Executive Officer 

            
	 	 	 
	 	Dated:
              September 12, 2007

    

     

     

      
        	
                SUBSCRIBER

                 

              	
                PURCHASE
                  PRICE AND NOTE PRINCIPAL 

              
	
                Name
                  of Subscriber: 

                 

                Vision
                  Opportunity Master Fund, Ltd.______________________

                 

                Address:
                  20
                  West 55th
                  Street, Fifth Floor_________________

                 

                New
                  York, NY 10019_______________________________________

                 

                Fax
                  No.: _________________________________________________

                 

                Taxpayer
                  ID# (if applicable): __________________________________

                 

                 

                 

                _________________________________________________________

                (Signature)

                By:
                  

                 

              	
                $500,000

              

      

    

    

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    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.

    

    
      	 	
              FRANKLIN
                TOWERS ENTERPRISES INC.

            
	 	
              a
                Nevada corporation

            
	 	 	 
	 	 	 
	 	
              By:
                

            	
              /s/
                Kelly Fan

            
	 	 	
              Name:
                Kelly Fan

            
	 	 	
              Title:
                Chief Executive Officer 

            
	 	 	 
	 	Dated:
              September 12, 2007

    

    

      
        	
                SUBSCRIBER

                 

              	
                PURCHASE
                  PRICE AND NOTE PRINCIPAL 

              
	
                Name
                  of Subscriber: 

                 

                Bursteine
                  & Lindsay Security Corp.________________________

                 

                Address:
                  140
                  Birmensdorfer Str. CH 8003____________________

                 

                Zurich,
                  Switzerland_____________________________________

                 

                Fax
                  No.: ______________
                  __________________________________

                 

                Taxpayer
                  ID# (if applicable): __________________________________

                 

                 

                 

                _________________________________________________________

                (Signature)

                By:
                  

                 

              	
                $100,000

              

      

    

    

     

    

    

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    LIST
      OF EXHIBITS AND SCHEDULES

    
      	 	 
	
              Exhibit
                A

            	
              Form
                of Note

            
	 	 
	
              Exhibit
                B

            	
              Form
                of Warrant

            
	 	 
	
              Exhibit
                C

            	
              Escrow
                Agreement

            
	 	 
	
              Exhibit
                D

            	
              Form
                of Security Agreement

            
	 	 
	
              Exhibit
                E

            	
              Form
                of Collateral Agent Agreement

            
	 	 
	
              Exhibit
                F

            	
              Form
                of Stock Pledge Agreement

            
	 	 
	
              Exhibit
                G

            	
              Form
                of Legal Opinion

            
	 	 
	
              Exhibit
                H

            	
              Form
                of Lockup Agreement

            
	 	 
	
              Schedule
                5(a)

            	
              Subsidiaries

            
	 	 
	
              Schedule
                5(d)

            	
              Additional
                Issuances / Capitalization / Reset Rights

            
	 	 
	
              Schedule
                5(o)

            	
              Undisclosed
                Liabilities

            
	 	 
	
              Schedule
                5(x)

            	
              Transfer
                Agent

            
	 	 
	
              Schedule
                8(a)

            	
              Brokerage
                Fee

            
	 	 
	
              Schedule
                9(t)

            	
              Lockup
                Agreement Providers

            
	 	 
	
              Schedule
                11.1

            	
              Other
                Registrable Shares

            

    

     

     

     

    
      
         

      

      
        32Unassociated Document

    Exhibit
      10.1 

     

    Agreement
      and Plan of Reorganization

    

    Dated
      September 14, 2007

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      AGREEMENT
        AND PLAN OF REORGANIZATION

       

      This
        AGREEMENT AND PLAN OF REORGANIZATION dated as of September 14, 2007 (the
        “Agreement”), between Downside Up, Inc.,
        a
        Colorado corporation (“DUI”), ESP Resources Inc.
        ,
        a
        Delaware corporation (“ESP”) and DUI
        Operations, Inc.,
        a
        wholly-owned Subsidiary of DUI in organization (“Subsidiary”) and the
        shareholders of ESP, set forth on Schedule A hereto (the “ESP Shareholders”).
        ESP, DUI and Subsidiary may also be referred to herein as the “Constituent
        Corporations” or the “Parties.”

       

      WHEREAS,
        the Parties acknowledge and affirm the following:

       

      
        	
                 

              	
                A.

              	
                DUI
                  is a corporation duly organized and existing under the laws of
                  the State
                  of Colorado.

              

      

       

      
        	
                 

              	
                B.

              	
                ESP
                  is a corporation duly organized and existing under the laws of
                  the State
                  of Delaware. 

              

      

       

      
        	
                 

              	
                C.

              	
                Subsidiary
                  is a corporation which is 100% owned by DUI and is duly organized
                  and
                  existing under the laws of the State of
                  Delaware.

              

      

       

      
        	
                 

              	
                D.

              	
                The
                  Colorado Business Corporation Act and the Delaware General Corporation
                  Law
                  permit the merger of ESP with and into the
                  Subsidiary..

              

      

       

      
        	
                  

              	
                E.

              	
                DUI
                  and ESP and their respective Boards of Directors declare it advisable
                  and
                  to the advantage, welfare, and best interests of said corporations
                  and
                  their respective stockholders to merge Subsidiary with and into
                  ESP
                  pursuant to the provisions of their respective state laws upon
                  the terms
                  and conditions hereinafter set
                  forth.

              

      

       

      
        	
                 

              	
                F.

              	
                The
                  respective Boards of Directors of DUI and ESP have approved this
                  Agreement; and the shareholders of ESP have approved the
                  merger.

              

      

       

      
        	
                 

              	
                G.

              	
                For
                  federal income tax purposes, it is intended that the merger qualify
                  as a
                  tax free reorganization under Section 368(a) of the Internal Revenue
                  Code
                  of 1986, as amended (the “IRC”).

              

      

       

      ARTICLE
        1

      THE
        MERGER

       

      
        
          	
                  1.1

                	
                  Merger.

                

        

      

       

      In
        accordance with the provisions of this Agreement and applicable provisions
        of
        their respective state laws, Subsidiary shall be merged with and into ESP
        (the
“Merger”). Following the Merger, the separate existence of Subsidiary shall
        cease and ESP shall be, and is herein sometimes referred to as, the “Surviving
        Corporation.” For the purposes of this Agreement, this form of transaction may
        also be referred to herein as a “reverse triangular merger.”

      

        
          	
                  1.2

                	
                  Filing
                    and
                    Effectiveness.

                

        

      

       

      The
        Merger shall become effective when the following actions shall have been
        completed:

       

      
        	
                 

              	
                (a)

              	
                This
                  Agreement and the Merger shall have been adopted and approved by
                  the
                  shareholders of ESP and DUI in accordance with the requirements
                  of the
                  Colorado Business Corporation Act and the Delaware General Corporation
                  Law
                  ;

              

      

       

      
        	
                 

              	
                (b)

              	
                DUI
                  shall have formed a wholly-owned subsidiary for the purposes of
                  this
                  Merger in accordance with the requirements of the DGCL (the
                  “Subsidiary”);

              

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                  

              	
                (c)

              	
                All
                  of the conditions precedent to the consummation of the Merger specified
                  in
                  this Agreement shall have been satisfied or duly waived, in writing,
                  by
                  the Party entitled to satisfaction
                  thereof;

              

      

       

      
        	
                 

              	
                (d)

              	
                As
                  soon as practicable following the Closing, the Parties shall execute
                  a
                  Certificate of Merger meeting the requirements of the Colorado
                  Business
                  Corporation Act and the Delaware General Corporation Law and file
                  same
                  with the Secretaries of State of the States of Colorado and Delaware
                  in
                  substantially the form attached hereto as Exhibit A; the time the
                  Certificate of Merger is filed with the Secretary of State of the
                  State of
                  Colorado is the “Effective Time”;
                  and

              

      

       

      
        	 	
                (e)

              	
                The
                  closing of the transactions described in this Agreement is herein
                  called
                  the “Closing.” The Parties agree that the Closing of the transactions
                  identified in this Agreement shall take place at the offices of
                  Joseph J.
                  Tomasek, Esq., or at such other place as the Parties may mutually
                  determine, on or before October 31,
                  2007.

              

      

       

      
        	
                 

              	
                (f)

              	
                The
                  audit of the financial statements of ESP for the period ended June
                  30,
                  2007 shall have been completed with all necessary data and materials
                  delivered by ESP to DUI.

              

      

       

      
        
          	
                  1.3

                	
                  Effect
                    of the Merger.

                

        

         

      Upon
        the
        Effective Time, hereinafter defined, and upon the terms and subject to the
        conditions of this Agreement and in accordance with applicable state laws,
        the
        separate existence of Subsidiary shall cease and, ESP, as the Surviving
        Corporation,: (i) shall continue to possess all of the assets, rights, powers
        and property of ESP and Subsidiary as constituted immediately prior to the
        Effective Time, and all debts, liabilities and duties of ESP and Subsidiary
        shall become the debts, liabilities and duties of the Surviving Corporation,
        all
        as more fully provided under the applicable provisions of the applicable
        state
        laws. 

        

      ARTICLE
        2

      CHARTER
        DOCUMENTS, DIRECTORS AND OFFICERS

       

      
        
          	
                  2.1

                	
                  Certificate
                    of Incorporation: ESP.

                

        

         

      Attached
        hereto as Exhibit B and made a part hereof is a copy of the Certificate of
        Incorporation of ESP as in effect in the State of Delaware immediately prior
        to
        the Closing; and at the Effective Time said Certificate of Incorporation
        shall
        continue in full force and effect as the Certificate of Incorporation of
        the
        Surviving Corporation until duly amended in accordance with the provisions
        thereof and applicable law.

       

      
        
          	
                  2.2

                	
                  Subsidiary.

                

        

       

      Attached
        hereto as Exhibit C and made a part hereof is a copy of the Certificate of
        Incorporation of Subsidiary as in effect immediately prior to the
        Closing.

       

      
        
          	
                  2.3

                	
                  Bylaws.

                

        

       

      Attached
        hereto as Exhibit D and made a part hereof is a copy of the Bylaws of ESP
        as in
        effect immediately prior to the Closing; and at the Effective Time said Bylaws
        shall continue in full force and effect as the Bylaws of the Surviving
        Corporation until duly amended in accordance with the provisions thereof
        and
        applicable law.

        

      
        
          	
                  2.4

                	
                  Directors
                    and Officers.

                

        

       

      The
        directors and officers of ESP immediately prior to the Closing shall be the
        directors and officers of the Surviving Corporation until their successors
        shall
        have been duly elected and qualified or until as otherwise provided by law,
        the
        Certificate of Incorporation of the Surviving Corporation or the Bylaws of
        the
        Surviving Corporation. The Board of Directors of DUI following the Merger
        shall
        consist of Michael Cavaleri of DUI and David Dugas and Anthony Primeaux of
        ESP
        until their successors shall have been duly elected and qualified. 

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      ARTICLE
        3

      TERMS
        OF MERGER, PAYMENT, EXCHANGE OF STOCK AND INVESTMENT
        COMMITMENTS

       

      
        
          	
                  3.1

                	
                  Conversion
                    of ESP Shares.

                

        

      

      

        
          	 	
                  
                    (a)

                  

                	
                  
                    Conversion
                      of Subsidiary Common Stock. At the Effective Time, each outstanding
                      share
                      of the common stock no par value per share, of Subsidiary shall,
                      by virtue
                      of the Merger and without any action on the part of DUI, Subsidiary
                      or
                      ESP, be converted into one fully paid and non-assessable share
                      of common
                      stock of the Surviving Corporation. 

                  

                
	 	 	 
	 	
                  (b)

                	
                  Each
                    share of the common stock, $.0001 par value per share, of ESP
                    (“ESP Common
                    Stock”) issued and outstanding prior to the Effective Time shall by
                    virtue
                    of the Merger and without any action on the part of DUI, Subsidiary,
                    ESP
                    or any holder thereof, be converted into and be exchangeable
                    for the right
                    to receive newly issued , fully paid and non-assessable voting
                    common
                    shares, no par value, of DUI ("DUI Shares"), based upon an exchange
                    ratio
                    (“Exchange Ratio”) determined in accordance with the provisions below.
                    

                
	 	 	 
	 	
                  (c)

                	
                  Amount
                    of DUI Shares to be Exchanged:
                    Upon the Closing, DUI shall issue and exchange for the ESP Common
                    Stock
                    with the ESP Shareholders newly issued DUI Shares at the conversion
                    rate
                    of .608108 DUI Shares for each share of the common stock of ESP.
                    

                
	 	 	 
	 	 	
                  At
                    the Effective Time, each share of the ESP Common Stock held by
                    the ESP
                    immediately prior to the Effective Time shall, by virtue of the
                    Merger and
                    without any action on the part of Merger Sub or the Company,
                    be canceled,
                    retired and cease to exist and no payment shall be made with
                    respect
                    thereto.

                
	 	 	 
	 	 	
                  No
                    Further Ownership Rights in ESP Common Stock. All DUI Shares
                    issued and
                    exchanged in accordance with the terms of this Article 3 shall
                    be deemed
                    to have been issued in full satisfaction of all rights pertaining
                    to the
                    ESP Common Stock.

                
	 	 	 
	 	
                  (d)

                	
                  Appraisal
                    Rights: This executed Agreement shall constitute each of the
                    ESP
                    Stockholders' acknowledgment to decline any appraisal rights
                    under the
                    statutes and laws of the State of Delaware. By executing this
                    Agreement,
                    each ESP Stockholder acknowledges receipt of written notice of
                    appraisal
                    rights and a copy of the applicable section of the DGCL at least
                    20 days
                    prior to the date of executing this Agreement.

                

        

         

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

         

        
          	
                  3.2

                	
                  Status
                    of DUI Common Shares.

                

        

         

          
            	
                     

                  	
                    (a)

                  	
                    The
                      DUI Common Shares to be issued to the ESP Shareholders in the
                      reorganization will
                      not be registered under the Securities Act of 1933, as amended
                      (the "1933
                      Act") and may not be sold, transferred or otherwise disposed
                      of except in
                      compliance with the 1933 Act or pursuant to an exemption from
                      the
                      registration provisions thereof and the Securities Exchange
                      Act of 1934,
                      as amended (the "1934 Act").

                  
	 	 	 
	
                       

                  	
                    (b)

                  	
                    Each
                      Certificate representing the DUI Common Shares shall bear the
                      following or
                      substantially similar legend:

                  
	 	 	 
	
                     

                  	 	
                    "The
                      Shares represented by this Certificate have not been registered
                      under

                    the
                      Securities Act of 1933, as amended. These Shares have been acquired
                      

                    for
                      investment purposes and not with a view to distribution or
                      resale,
                      and

                    may
                      not be sold, assigned, pledged, hypothecated or otherwise
                      transferred

                    without
                      an effective Registration Statement for such Shares under the

                      Securities
                        Act of 1933, as amended, or an opinion of counsel to the
                        effect

                      that
                        registration
                        is not required under such
                        Act."

                    

                  

          

            

        

      

      ARTICLE
        4

      REPRESENTATIONS
        AND WARRANTIES OF ESP AND THE ESP SHAREHOLDERS

       

      ESP
        and
        the ESP Shareholders represent and warrant to DUI that the statements contained
        in this Article 4 are correct and complete as of the date of this Agreement
        and
        will be correct and complete as of the Closing as though made then and as
        though
        the Closing were substituted for the date of this Agreement throughout this
        Article 4, with respect to itself.

       

      
        
          	
                  4.1

                	
                  Organization
                    of
                    ESP.

                

        

      

       

      ESP
        is
        duly organized, validly existing, and in good standing under the laws of
        Delaware.

       

      
        
          	
                  4.2

                	
                  Authorization
                    of Transaction.

                

        

        

          
            	 	
                    (a)

                  	
                    ESP
                      has full corporate power and authority to execute and deliver
                      this
                      Agreement and to perform his obligations hereunder. This Agreement
                      constitutes the valid and legally binding obligation of ESP,
                      enforceable
                      in accordance with its terms and conditions. Except as expressly
                      contemplated hereby, ESP need not give any notice to, make
                      any filing
                      with, or obtain any authorization, consent, or approval of
                      any government
                      or governmental agency in order to consummate the transactions
                      contemplated by this Agreement.

                  
	 	 	 
	 	
                    (b)

                  	
                    The
                      ESP Shareholders, individually represent and warrant to DUI
                      that: this
                      Agreement constitutes the legal, valid and binding obligation
                      of each of
                      the ESP Shareholders and is enforceable against each of them
                      in accordance
                      with the terms hereof; each of them own their respective ESP
                      Common Shares
                      free and clear of any and all liens, claims, pledges, restrictions,
                      obligations, security interests and encumbrances of any kind;
                      Attached
                      hereto as Schedule A is an accurate and complete list of the
                      ESP Common
                      Shares owned by each ESP Shareholder; none of the ESP Shareholders
                      have
                      issued any calls, puts, options and/or any other rights in
                      favor of any
                      third party whatsoever with respect to their ESP Common Shares,
                      and; none
                      of their respective ESP Common Shares are subject to any voting
                      agreements, voting trusts, stockholder agreements and/or any
                      other
                      agreements, obligations or
                      understandings.

                  

          

        

         

      

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      
        
          	
                  4.3

                	
                  Non-contravention.

                

        

       

      Neither
        the execution and the delivery of this Agreement, nor the consummation of
        the
        transactions contemplated hereby, will (i) violate any constitution, statute,
        regulation, rule, injunction, judgment, order, decree, ruling, charge, or
        other
        restriction of any government, governmental agency, or court to which ESP
        is
        subject or any provision of its charter or bylaws; or (ii) conflict with,
        result
        in a breach of, constitute a default under, result in the acceleration of,
        create in any party the right to accelerate, terminate, modify, or cancel,
        or
        require any notice under any agreement, contract, lease, license, instrument,
        or
        other arrangement to which ESP is a party or by which it is bound or to which
        any of its assets is subject, except for such notices or consents which have
        been given or obtained by ESP on or prior to the Closing.

       

      
        
          	
                  4.4

                	
                  Capitalization.

                

        

       

      The
        authorized capital stock of ESP consists of 100,000,000 shares of Class A
        Common
        Stock, $.0001 par value per share, of which 29.6 million shares are issued
        and
        outstanding; 5,000,000 shares of Class B Common Stock, $.0001 par value per
        share, none of which are issued and outstanding, and; 20,000,000 shares of
        Class
        A Preferred Stock, $.0001 par value per share of which none are outstanding.
        There are no outstanding or authorized options, warrants, purchase rights,
        subscription rights, conversion rights, exchange rights, or other contracts
        or
        commitments that could require ESP to issue, sell, or otherwise cause to
        become
        outstanding any of its capital stock. There is no outstanding or authorized
        stock appreciation, phantom stock, profit participation, or similar rights
        with
        respect to ESP’s Common Stock. There are no voting trusts, proxies, or other
        agreements or understandings with respect to the voting of the capital stock
        of
        ESP.

       

      
        
          	
                  4.5

                	
                  Investment.

                

        

       

      The
        ESP
        Shareholders are not acquiring the Common Shares of DUI with a view to or
        for
        sale in connection with any distribution thereof within the meaning of the
        Securities Act of 1933. ESP and the ESP Shareholders have had access to all
        information concerning DUI and its operations which it required to make its
        investment decision.

       

      
        
          	
                  4.6

                	
                  Brokers'
                    Fees.

                

        

      

       

      ESP
        has
        incurred no obligation to pay any commission, finder’s fee or other charge in
        connection with the transactions contemplated in this Agreement for which
        DUI
        could become liable or obligated. ESP and the ESP Shareholders, jointly and
        severally, will indemnify and hold DUI, and the Subsidiary, their respective
        officers, directors, employees, accountants and lawyers harmless from and
        against any and all liabilities and claims of any nature whatsoever arising
        out
        of or in connection with any commission, fee or charge so far as any arises
        by
        reason of services alleged to have been rendered to, or at the instance of,
        ESP
        and/or the ESP Shareholders. This
        indemnification shall survive the Closing and shall be included in the terms
        of
        indemnification set forth in Article 4.7 of this Agreement. 

       

      
        
          	
                  4.7

                	
                  Events
                    Subsequent to Fiscal Year
                    End.

                

        

       

      Since
        the
        most recent fiscal year end of ESP there has not been any material adverse
        change in the business, financial condition, operations, results of operations,
        or future prospects of ESP taken as a whole. ESP and the ESP Shareholders,
        jointly and severally, shall indemnify, defend and hold DUI and Subsidiary,
        their successors and assigns, harmless from and against any order, action,
        cost,
        claim, damage, disbursement, expense, liability, loss, deficiency, obligation,
        penalty, fine, assessment or settlement of any kind or nature, whether
        foreseeable or unforeseeable, including, but not limited to, any and all
        attorney’s fees, costs, and other expenses, directly or indirectly, as a result
        of, or upon or arising from (i) any inaccuracy or breach or non-performance
        of
        any of the representations, warranties, covenants or agreements made by ESP
        or
        the ESP Shareholders in or pursuant to this Agreement, (ii) any order, action,
        cost, claim, damage, liability or lien arising out of ESP’s or ESP Shareholder’s
        conduct before or after the Closing, (iii) any third party claims against
        ESP or
        the ESP Shareholders, before or after the Closing that arise from ESP’s or ESP
        Shareholder’s conduct, or (iv) any loss or liability the proximate cause of
        which is determined to be the result of ESP’s or ESP Shareholder’s negligence or
        failure to comply with their respective obligations under this Agreement.
        DUI
        and/or Subsidiary, as the case may be, their successors and assigns, shall
        notify ESP and/or the ESP Shareholders of any claim for indemnification with
        reasonable promptness, and ESP’s or ESP’s legal representatives or ESP
        Shareholder’s or their legal representatives shall have, at their election, the
        right to compromise or defend any such matter involving such asserted liability
        of ESP and/or the ESP Shareholders through counsel of their own choosing,
        at the
        expense of ESP and the ESP Shareholders. ESP and the ESP Shareholders shall
        notify DUI and the Subsidiary, or their successors or assigns, in writing
        promptly of their intention to compromise or defend any claim and DUI and/or
        the
        Subsidiary, or their successors or assigns, shall cooperate with ESP and
        the ESP
        Shareholders, their respective counsel in compromising or defending any such
        claim, in accordance with Article 8 hereof. The terms of this Article 4.7
        shall
        survive Closing.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      
        
          	
                  4.8

                	
                  Undisclosed
                    Liabilities.

                

        

       

      ESP
        has
        no material liability (whether known or unknown, whether asserted or unasserted,
        whether absolute or contingent, whether accrued or un-accrued, whether
        liquidated or un-liquidated, and whether due or to become due, including
        any
        liability for taxes), except for (i) liabilities set forth on the ESP Financial
        Statements; and (ii) liabilities which have arisen after the date of the
        ESP
        Financial Statements in the ordinary course of business. As used herein,
“ESP
        Financial Statements” consist of the financial statements of ESP previously
        delivered to DUI in the form attached hereto as Exhibit E.

       

      
        
          	
                  4.9

                	
                  Legal
                    Compliance.

                

        

         

      

      ESP
        has
        complied with all applicable laws (including rules, regulations, codes, plans,
        injunctions, judgments, orders, decrees, rulings, and charges thereunder)
        of
        federal, state, local, and foreign governments (and all agencies thereof),
        and
        no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
        demand, or notice has been filed or commenced against ESP alleging any failure
        so to comply, except where the failure to comply would not have a material
        adverse effect on the business, financial condition, operations, results
        of
        operations, or future prospects of ESP.

       

      
        
          	
                  4.10

                	
                  Tax
                    Matters.

                

        

      

       

      
        	
                 

              	
                (a)

              	
                ESP
                  has filed all income tax returns that it has been required to file.
                  All
                  such income tax returns were correct and complete in all material
                  respects. All income taxes owed by ESP (whether or not shown on
                  any income
                  tax return) have been paid. ESP is not currently the beneficiary
                  of any
                  extension of time within which to file any income tax
                  return.

              

      

        

      
        	
                 

              	
                (b)

              	
                There
                  is no material dispute or claim concerning any income tax liability
                  of ESP
                  either (i) claimed or raised by any authority in writing; or (ii)
                  as to
                  which ESP has knowledge based upon personal contact with any agent
                  of such
                  authority.

              

      

       

      
        
          	
                  4.11

                	
                  Contracts.

                

        

         

      

      The
        ESP
        Financial Statements disclose all material contracts of ESP. Each contract
        or
        legal obligation of ESP which is to be assumed by DUI in connection with
        the
        Merger is listed on Exhibit F hereto. To the extent requested, true and correct
        copies of such contracts have been delivered to DUI for due diligence
        purposes.

       

      
        
          	
                  4.12

                	
                  Environmental,
                    Health and Safety
                    Matters.

                

        

      

       

      ESP
        and
        its predecessors and affiliates have complied and are in compliance, in each
        case in all material respects, with all Environmental, Health, and Safety
        Requirements. As used herein “Environmental, Health & Safety Requirements”
means any Environmental, Health & Safety law or regulation including air and
        water quality laws and regulations and other similar requirements.

       

      
        
          	
                  4.13

                	
                  Disclosure.

                

        

       

      The
        representations and warranties contained in this Article 4 do not contain
        any
        untrue statement of a material fact or omit to state any material fact necessary
        in order to make the statements and information contained in this Article
        4 not
        misleading.

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      
        
          	
                  4.14

                	
                  Financial
                    Statements.

                

        

       

      The
        ESP
        Financial Statements are true and correct in all material respects, have
        been
        prepared on a consistent basis, and fairly represent the business, financial
        condition, assets and liabilities of ESP.

       

      
        	
                4.15

              	
                Litigation.

              

      

       

      There
        is
        no claim, suit, action, proceeding or investigation pending or, to the knowledge
        of ESP, pending against ESP or any of its subsidiaries or assets which,
        individually or in the aggregate, could reasonably be expected to have a
        material adverse effect on ESP.

       

      
        
          	
                  4.16

                	
                  Materials
                    Required for Audit.

                

        

       

      To
        the
        best of its knowledge, ESP has maintained its records, data and materials
        related to the financial accounting of the business, and have all such data
        and
        materials immediately available, such that an audit may be completed per
        regulatory requirements.

       

      ARTICLE
        5

      REPRESENTATIONS
        AND WARRANTIES OF DUI

       

      DUI
        represents and warrants to ESP and to the ESP Shareholders that the statements
        contained in this Article 5 are correct and complete as of the date of this
        Agreement and will be correct and complete as of the Closing (as though made
        then and as though the Closing were substituted for the date of this Agreement
        throughout this Article 5).

       

      
        
          	
                  5.1

                	
                  Organization
                    of
                    DUI

                

        

       

      DUI
        is a
        corporation duly organized, validly existing, and in good standing under
        the
        laws of Colorado. DUI has one subsidiary, DUI Operations, Inc., the
        Subsidiary.

       

      
        
          	
                  5.2

                	
                  Authorization
                    of
                    Transaction.

                

        

       

      DUI
        has
        full corporate power and authority to execute and deliver this Agreement
        and to
        perform its obligations hereunder, and no approval of DUI’s shareholders is
        required under the laws of Colorado to consummate the Merger and other
        transactions contemplated in this Agreement. This Agreement constitutes the
        valid and legally binding obligation of DUI, enforceable in accordance with
        its
        terms and conditions. Except as expressly contemplated hereby, DUI need not
        give
        any notice to, make any filing with, or obtain any authorization, consent,
        or
        approval of any government or governmental agency in order to consummate
        the
        transactions contemplated by this Agreement.

       

      
        
          	
                  5.3

                	
                  Non-contravention.

                

        

       

      Neither
        the execution and the delivery of this Agreement, nor the consummation of
        the
        transactions contemplated hereby, will (i) violate any constitution, statute,
        regulation, rule, injunction, judgment, order, decree, ruling, charge, or
        other
        restriction of any government, governmental agency, or court to which DUI
        is
        subject or any provision of its charter or bylaws; or (ii) conflict with,
        result
        in a breach of, constitute a default under, result in the acceleration of,
        create in any party the right to accelerate, terminate, modify, or cancel,
        or
        require any notice under any agreement, contract, lease, license, instrument,
        or
        other arrangement to which DUI is a party or by which it is bound or to which
        any of its assets is subject, except for such notices or consents which have
        been given or obtained by DUI on or prior to the Closing.

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      
        
          	
                  5.4

                	
                  Capitalization.

                

        

         

        The
          authorized capital stock of DUI consists of 20,000,000 shares of Common
          Stock,
          no par value per share, and 5,000,000 shares of Preferred Stock. As of
          the date
          of this Agreement, no preferred shares are outstanding, 1,230,000 shares
          of
          Common Stock are outstanding and upon the Closing, there shall be 6,000,000
          shares of its Common Stock outstanding. There are no outstanding options,
          warrants, or other outstanding purchase rights, subscription rights, conversion
          rights, exchange rights, or other contracts or commitments that could require
          DUI to issue, sell, or otherwise cause to become outstanding any of its
          capital
          stock except as may be set forth in one or more of the material agreements
          identified in Exhibit I hereto. There are no outstanding or authorized
          stock
          appreciation, phantom stock, profit participation, or similar rights with
          respect to DUI’s Common Stock. There are no voting trusts, proxies, or other
          agreements or understandings with respect to the voting of the capital
          stock of
          DUI. 

      

       

      
        
          	
                  5.5

                	
                  Intentionally
                    Omitted

                

        

      

       

      
        
          	
                  5.6

                	
                  Brokers'
                    Fees.

                

        

       

      DUI
        has
        incurred no obligation to pay any commission, finder’s fee or other charge in
        connection with the transactions contemplated in this Agreement for which
        DUI
        could become liable or obligated. DUI will indemnify and hold ESP, and the
        ESP
        Shareholders, their respective officers, directors, employees, accountants
        and
        lawyers harmless from and against any and all liabilities and claims of any
        nature whatsoever arising out of or in connection with any commission, fee
        or
        charge so far as any arises by reason of services alleged to have been rendered
        to, or at the instance of, DUI or Subsidiary. This indemnification shall
        survive
        the Closing and shall be included in the terms of indemnification set forth
        in
        Article 5.7 of this Agreement. 

       

      
        
          	
                  5.7

                	
                  Events
                    Subsequent to Year
                    End.

                

        

         

      

      Since
        the
        most recent calendar-fiscal year end of DUI, there has not been any material
        adverse change in the business, financial condition, operations, results
        of
        operations, or future prospects of DUI taken as a whole.

      DUI
        shall
        indemnify, defend and hold ESP, ESP Shareholders, their successors and assigns,
        harmless from and against any order, action, cost, claim, damage, disbursement,
        expense, liability, loss, deficiency, obligation, penalty, fine, assessment
        or
        settlement of any kid or nature, whether foreseeable or unforeseeable,
        including, but not limited to, any and all attorney’s fees, costs, and other
        expenses, directly or indirectly, as a result of, or upon or arising from
        (i)
        any inaccuracy or breach or non-performance of any of the representations,
        warranties, covenants or agreements made by DUI or Subsidiary in or pursuant
        to
        this Agreement, (ii) any order, action, cost, claim, damage, liability or
        lien
        arising out of DUI’s conduct before or after the Closing, (iii) any third party
        claims against DUI, Subsidiary before or after the Closing that arise from
        DUI’s
        conduct, or (iv) any loss or liability the proximate cause of which is
        determined to be the result of DUI’s negligence or failure to comply with its
        obligations under this Agreement. ESP and ESP’s Shareholders, their successors
        and assigns, shall notify DUI of any claim for indemnification with reasonable
        promptness, and DUI or DUI’s legal representatives shall have, at their
        election, the right to compromise or defend any such matter involving such
        asserted liability of DUI through counsel of their own choosing, at the expense
        of DUI. DUI shall notify ESP, ESP’s Shareholders, or their successors or
        assigns, in writing promptly of their intention to compromise or defend any
        claim and ESP, ESP’s Shareholders, or their successors or assigns, shall
        cooperate with DUI and DUI’s counsel in compromising or defending any such
        claim, in accordance with Article 8 hereof. The terms of this Article 5.7
        shall
        survive Closing.

       

      
        
          	
                  5.8

                	
                  Undisclosed
                    Liabilities.

                

        

       

      DUI
        has
        no material liability (whether known or unknown, whether asserted or unasserted,
        whether absolute or contingent, whether accrued or un-accrued, whether
        liquidated or un-liquidated, and whether due or to become due, including
        any
        liability for taxes), except for (i) liabilities set forth on the DUI Financial
        Statements; and (ii) liabilities which have arisen after the date of the
        DUI
        Financial Statements in the ordinary course of business. As used herein,
“DUI
        Financial Statements” consist of the financial statements of DUI previously
        delivered to ESP in the form attached hereto as Exhibit H.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      
        	
                5.9

              	
                Legal
                  Compliance.

              

      

       

      DUI
        has
        complied with all applicable laws (including rules, regulations, codes, plans,
        injunctions, judgments, orders, decrees, rulings, and charges thereunder)
        of
        federal, state, local, and foreign governments (and all agencies thereof),
        and
        no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
        demand, or notice has been filed or commenced against DUI alleging any failure
        so to comply, except where the failure to comply would not have a material
        adverse effect on the business, financial condition, operations, results
        of
        operations, or future prospects of DUI.

       

      
        
          	
                  5.10

                	
                  Tax
                    Matters.

                

        

      
      

       

      
        	
                 

              	
                (a)

              	
                DUI
                  has filed all income tax returns that it has been required to file.
                  All
                  such income tax returns were correct and complete in all material
                  respects. All income taxes owed by DUI (whether or not shown on
                  any income
                  tax return) have been paid. DUI is not currently the beneficiary
                  of any
                  extension of time within which to file any income tax
                  return.

              

      

       

      
        	
                 

                 

              	
                (b)

              	
                There
                  is no material dispute or claim concerning any income tax liability
                  of DUI
                  either (i) claimed or raised by any authority in writing; or (ii)
                  as to
                  which DUI has knowledge based upon personal contact with any agent
                  of such
                  authority.

              

      

       

      
        
          	
                  5.11

                	
                  Contracts.

                

        

       

      The
        DUI
        Financial Statements disclose all material contracts of DUI. Each contract
        or
        legal obligation of DUI to which DUI shall remain subject after the Merger
        is
        listed on Exhibit I hereto. To the extent requested, true and correct copies
        of
        such contracts have been delivered to ESP for due diligence
        purposes.

      

        
          	
                  5.12

                	
                  Environmental,
                    Health and Safety
                    Matters.

                

        

      

      

      DUI
        and
        its predecessors and affiliates have complied and are in compliance, in each
        case in all material respects, with all Environmental, Health, and Safety
        Requirements. As used herein “Environmental, Health & Safety Requirements”
means any Environmental, Health & Safety law or regulation including air and
        water quality laws and regulations and other similar requirements.

       

      
        
          	
                  5.13

                	
                  Disclosure.

                

        

      

       

      The
        representations and warranties contained in this Article 5 do not contain
        any
        untrue statement of a material fact or omit to state any material fact necessary
        in order to make the statements and information contained in this Article
        5 not
        misleading.

       

      
        
          	
                  5.14

                	
                  Financial
                    Statements.

                

        

      

       

      The
        DUI
        Financial Statements are true and correct in all material respects, have
        been
        prepared on a consistent basis, and fairly represent the business, financial
        condition, assets and liabilities of DUI.

       

      
        
          	
                  5.15

                	
                  Litigation.

                

        

      

       

      There
        is
        no claim, suit, action, proceeding or investigation pending or, to the knowledge
        of DUI, pending against DUI or any of its subsidiaries or assets which,
        individually or in the aggregate, could reasonably be expected to have a
        material adverse effect on DUI.

       

      
        
          	
                  5.16

                	
                  Materials
                    Required for Audit.

                

        

      

      

      To
        the
        best of its knowledge, DUI has maintained its records, data and materials
        related to the financial accounting of the business, and has all such data
        and
        materials immediately available, such that an audit may be completed per
        regulatory requirements.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      ARTICLE
        6

      REPRESENTATIONS
        AND WARRANTIES OF SUBSIDIARY

       

      DUI
        represents and warrants to ESP that Subsidiary has been formed solely for
        the
        purpose of this Merger and that no contract, liabilities or other obligations
        exist in Subsidiary.

       

      
        
          	
                  6.1

                	
                  Organization
                    of
                    Subsidiary.

                

        

      

       

      Subsidiary
        is a corporation duly organized, validly existing, and in good standing under
        the laws of Delaware and 100% owned by DUI.

       

      
        
          	
                  6.2

                	
                  Authorization
                    of Transaction.

                

        

         

      

       DUI
        has
        full corporate power and authority to execute and deliver Subsidiary with
        regard
        to this Agreement and to perform its obligations hereunder, including
        shareholder approval as may be required by the DGCL. 

       

      
        
          	
                  6.3

                	
                  Non-contravention.

                

        

      

       

      Neither
        the execution and the delivery of this Agreement, nor the consummation of
        the
        transactions contemplated hereby, will (i) violate any constitution, statute,
        regulation, rule, injunction, judgment, order, decree, ruling, charge, or
        other
        restriction of any government, governmental agency, or court to which DUI
        or
        Subsidiary is subject or any provision of its charter or bylaws; or (ii)
        conflict with, result in a breach of, constitute a default under, result
        in the
        acceleration of, create in any party the right to accelerate, terminate,
        modify,
        or cancel, or require any notice under any agreement, contract, lease, license,
        instrument, or other arrangement to which DUI or Subsidiary is a party or
        by
        which it is bound or to which any of its assets is subject, except for such
        notices or consents which have been given or obtained by ESP on or prior
        to the
        Closing.

       

      
        
          	
                  6.4

                	
                  Capitalization.

                

        

      

       

      The
        authorized capital stock of Subsidiary consists of two hundred (200) shares
        of
        Common Stock, $.01 par value per share, and no shares of Preferred Stock.
        As of
        the date of the Closing, there shall be 200 shares issued and outstanding
        and
        owned by DUI. There are not now nor shall there be any outstanding or authorized
        options, warrants, purchase rights, subscription rights, conversion rights,
        exchange rights, or other contracts or commitments that could require Subsidiary
        to issue, sell, or otherwise cause to become outstanding any of its capital
        stock. There are no outstanding or authorized stock appreciation, phantom
        stock,
        profit participation, or similar rights with respect to Subsidiary’s Common
        Stock. There are no voting trusts, proxies, or other agreements or
        understandings with respect to the voting of the capital stock of
        Subsidiary.

      

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      ARTICLE
        7

      PRE-CLOSING
        COVENANTS

       

      The
        Parties agree as follows with respect to the period between the execution
        of
        this Agreement and the Closing:

       

      
        
          	
                  7.1

                	
                  General.

                

        

       

      Each
        of
        the Parties will use its reasonable best efforts to take all action and to
        do
        all things necessary, proper, or advisable in order to consummate and make
        effective the transactions contemplated by this Agreement (including
        satisfaction, but not waiver, of the closing conditions set forth in Article
        9
        below).

       

      
        
          	
                  7.2

                	
                  Notices
                    and
                    Consents.

                

        

      

       

      Each
        of
        the Parties will give any notices to, make any filings with, and use its
        reasonable best efforts to obtain any and all authorizations, consents, and
        approvals of governments and governmental agencies in connection with the
        transactions contemplated hereby. 

       

      
        
          	
                  7.3

                	
                  Operation
                    of
                    Business.

                

        

      

       

      ESP,
        DUI,
        including Subsidiary, will not engage in any practice, take any action, or
        enter
        into any transaction outside the ordinary course of business, including,
        but not
        limited to declaration of dividends or distributions, redemptions, splits,
        recapitalizations, or similar events respecting its capital stock prior to
        Closing except, however, DUI shall prepare and file all documents necessary
        to
        increase its authorized common shares and enter into employment and consulting
        agreements pursuant to which it may issue its securities. 

       

      
        
          
            	
                    7.4

                  	
                    Full
                      Access For Due
                      Diligence.

                  

          

      

       

      The
        Parties shall permit their respective representatives to have full access
        at all
        reasonable times, and in a manner so as not to interfere with their respective
        normal business operations, to all premises, properties, personnel, books,
        records (including tax records), contracts, and documents. The Parties shall
        treat and hold as such any Confidential Information they receive from ESP,
        will
        not use any of the Confidential Information except in connection with this
        Agreement, and, if this Agreement is terminated for any reason whatsoever,
        will
        return to ESP all tangible embodiments (and all copies) of the Confidential
        Information which are in their possession.

       

      
        
          
            	
                    7.5

                  	
                    No
                      Shop
                      Promises.

                  

          

        

      

      

      Each
        of
        DUI, ESP and the ESP Shareholders have promised to each other that they shall
        utilize their respective best efforts to undertake any and all measures and
        deliver any and all documents necessary to consummate the transactions
        contemplated in this Agreement. The Parties make the following covenants
        to each
        other:

      

      (a)
        Except in the case that it terminates this Agreement pursuant to Article
        10(c)
        or in the event of an automatic termination pursuant to Article 10(d), the
        ESP
        Shareholders shall
        not
        solicit or seek to acquire any assets or stock of any third party, nor shall
        they accept any offer to purchase or exchange any assets or securities of
        ESP
        from the date of this Agreement to the Closing or through the date they
        terminate this Agreement pursuant to the Articles set forth in this Article
        10(a).

      

      (b)
        Except
        in
        the case that it terminates this Agreement pursuant to Article 10(b) or in
        the
        event of an automatic termination pursuant to Article 10(d), DUI
        shall
        not solicit or seek to acquire any assets or stock of any third party from
        the
        date of this Agreement to the Closing or through the date it terminates this
        Agreement pursuant to the Articles set forth in this Article 10(b).

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      ARTICLE
        8

      POST-CLOSING
        COVENANTS

       

      The
        Parties agree as follows with respect to the period following the
        Closing.

       

      
        
          	
                  8.1

                	
                  General.

                

        

      

      

      In
        case
        at any time after the Closing any further action is necessary to carry out
        the
        purposes of this Agreement, each of the Parties will take such further action
        (including the execution and delivery of such further instruments and documents)
        as any other Party reasonably may request, all at the sole cost and expense
        of
        the requesting Party. ESP acknowledges and agrees that from and after the
        Closing, DUI will be entitled to possession of all documents, books, records
        (including tax records), agreements, and financial data of any sort relating
        to
        ESP.

       

      
        
          	
                  8.2

                	
                  Intentionally
                    Omitted

                

        

      

       

      
        
          	
                  8.3

                	
                  Litigation
                    Support.

                

        

      

       

      In
        the
        event and for so long as DUI or ESP actively are contesting or defending
        against
        any action, suit, proceeding, hearing, investigation, charge, complaint,
        claim,
        or demand in connection with (i) any transaction contemplated under this
        Agreement; or (ii) any fact, situation, circumstance, status, condition,
        activity, practice, plan, occurrence, event, incident, action, failure to
        act,
        or transaction on or prior to the Closing Date involving ESP, then ESP and
        its
        affiliates will cooperate with DUI or ESP in the contest or defense, make
        available their personnel, and provide such testimony and access to their
        books
        and records as shall be necessary in connection with the contest or defense,
        all
        at the sole cost and expense of the contesting or defending Party. 

       

      ARTICLE
        9

      CONDITIONS
        TO OBLIGATION TO CLOSE

       

      
        
          	
                  9.1

                	
                  Assumption
                    of ESP
                    Liabilities by DUI.
                    DUI shall pay for only
                    such liabilities as disclosed in Exhibit J hereto.
                    

                

        

       

      
        
          	
                  9.2

                	
                  Conditions
                    to Obligation of DUI and
                    Subsidiary.

                

        

      

       

      The
        obligations of DUI and Subsidiary to consummate the transactions to be performed
        by them in connection with the Closing are subject to satisfaction of the
        following conditions:

       

      
        	
                 

              	
                (a)

              	
                the
                  representations and warranties set forth in Article 4 above shall
                  be true
                  and correct in all material respects at and as of the Closing
                  Date;

              

      

       

      
        	
                 

              	
                (b)

              	
                ESP
                  shall have performed and complied with all of its covenants hereunder
                  in
                  all material respects through the Closing, including Article 4
                  hereby;

              

      

       

      
        	
                  

              	
                (c)

              	
                No
                  action, suit, or proceeding shall be pending before any court or
                  quasi-judicial or administrative agency of any federal, state,
                  local, or
                  foreign jurisdiction or before any arbitrator wherein an unfavorable
                  injunction, judgment, order, decree, ruling, or charge would (i)
                  prevent
                  consummation of any of the transactions contemplated by this Agreement;
                  (ii) cause any of the transactions contemplated by this Agreement
                  to be
                  rescinded following consummation; or (iii) affect materially and
                  adversely
                  the right of ESP to own its assets and to operate its businesses
                  (and no
                  such injunction, judgment, order, decree, ruling, or charge shall
                  be in
                  effect);

              

      

       

      
        	
                  

              	
                (d)

              	
                ESP
                  shall have delivered to DUI a certificate to the effect that each
                  of the
                  conditions specified above in paragraphs 9.2 (a) through (c) is
                  satisfied
                  in all respects;

              

      

       

      
        	
                 

              	
                (e)

              	
                All
                  actions to be taken by ESP in connection with consummation of the
                  transactions contemplated hereby and all certificates, opinions,
                  instruments, and other documents required to effect the transactions
                  contemplated hereby will be reasonably satisfactory in form and
                  substance
                  to DUI.

              

      

       

      
        	
                 

              	
                (f)

              	
                ESP
                  shall have delivered to DUI its audited financial statements for
                  six month
                  period ended June 30, 2007.

              

      

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      
        
          	
                  9.3

                	
                  Conditions
                    to Obligation of ESP and the ESP
                    Shareholders.

                

        

      

       

      The
        obligation of ESP and the ESP Shareholders to consummate the transactions
        to be
        performed by them in connection with the Closing is subject to satisfaction
        of
        the following conditions:

       

      
        	
                 

              	
                (a)

              	
                the
                  representations and
                  warranties set forth in Articles 5 and 6 above shall be true and
                  correct
                  in all material respects at and as of the Closing
                  Date;

              

      

       

      
        	
                 

              	
                (b)

              	
                DUI
                  shall have performed and complied with all of their covenants hereunder
                  in
                  all material respects through the
                  Closing;

              

      

       

      
        	
                 

              	
                (c)

              	
                No
                  action, suit, or proceeding shall be pending before any court or
                  quasi-judicial or administrative agency of any federal, state,
                  local, or
                  foreign jurisdiction or before any arbitrator wherein an unfavorable
                  injunction, judgment, order, decree, ruling, or charge would (i)
                  prevent
                  consummation of any of the transactions contemplated by this Agreement;
                  or
                  (ii) cause any of the transactions contemplated by this Agreement
                  to be
                  rescinded following consummation (and no such injunction, judgment,
                  order,
                  decree, ruling, or charge shall be in
                  effect);

              

      

       

      
        	
                 

              	
                (d)

              	
                DUI
                  shall have delivered to ESP a certificate to the effect that each
                  of the
                  conditions specified above in paragraphs 9.3 (a) through (c) is
                  satisfied
                  in all respects;

              

      

       

      
        	
                 

              	
                (e)

              	
                All
                  actions to be taken by DUI in connection with consummation of the
                  transactions contemplated hereby and all certificates, opinions,
                  instruments, and other documents required to effect the transactions
                  contemplated hereby will be reasonably satisfactory in form and
                  substance
                  to ESP;

              

      

       

      
        	 	(f) 	The representations,
                warranties and covenants of the parties contained in Articles 4,
                5,
                6, 7 and 8 of
                this Agreement shall survive the Closing
                hereunder;

      

       

      
        	 	(g) 	
                DUI
                  shall have filed certificates of Amendment to its Articles of
                  Incorporation (i) increasing its authorized
                  common shares from 20,000,000 to 200,000,000 shares and changed
                  its
                  corporate name
                  to ESP Enterprises, Inc.;

              

      

       

      
        	 	(h) 	DUI shall
                have
                obtained the approval of its shareholders to the Merger in accordance
                with
                the Colorado
                Business Corporation Act and applicable securities
                laws. 

      

       

      
        	 	(i) 	ESP shall
                have
                received no less than $700,000 in loans from DUI, all of which
                outstanding principal
                balances and accrued interest shall be forgiven by DUI at the
                Closing. 

      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      ARTICLE
        10

      TERMINATION

      

      10.1
        Termination

       

      This
        Agreement may be terminated:

       

      
        (a)
          by
          the mutual written consent of DUI and ESP;

        

        (b)
          by
          DUI, in the event that any of the conditions to obligation to close enumerated
          in Section 9.2 
          have not
          been satisfied or waived by DUI in writing at or prior to the
          Closing;

        

         (c)
          by
          ESP and the ESP Shareholders, in the event that any of the conditions to
          obligation to close enumerated in Section 9.3 have not been satisfied or
          waived
          by ESP and the ESP Shareholders, in writing, at or prior to the
          Closing;

         

        (d)
          automatically, in the event that the Closing has not occurred on or before
          October 1, 2007 unless extended by mutual agreement of the
          parties.

         

      

      In
        the
        event of the termination of this Agreement in accordance with the provisions
        of
        this Article 10: this Agreement shall forthwith become null and void and
        there
        shall be no liability or obligation on the part of DUI, ESP or the ESP
        Shareholders or their respective officers and directors, and; the parties
        shall
        cooperate to rescind any corporate filings made with the Secretaries of State,
        States of Colorado and Delaware, if filed. 

      

      ARTICLE
        11

      MISCELLANEOUS

       

      
        
          	
                  11.1

                	
                  Further
                    Assurances

                

        

      

       

      From
        time
        to time, as and when required by DUI, ESP and/or the ESP Shareholders shall
        execute and deliver on behalf of ESP such deeds and other instruments, and
        shall
        take or cause to be taken by it such further and other actions, as shall
        be
        appropriate or necessary in order to vest or perfect in or conform of record
        the
        title to and possession of all the property, interests, assets, rights,
        privileges, immunities, powers, franchises and authority of ESP and to otherwise
        carry out the purposes of this Agreement. The officers and directors of ESP
        are
        fully authorized in the name and on behalf of ESP to take any and all such
        action and to execute and deliver any and all such deeds and other
        instruments.

       

      
        
          	
                  11.2

                	
                  Agreement

                

        

      

       

      Executed
        copies of this Agreement will be on file at the office of DUI’s counsel at
        Joseph J. Tomasek, Esq., 77 North Bridge Street, Somerville, New Jersey 08876,
        and copies thereof will be furnished to any stockholder of a Constituent
        Corporation, upon request at such shareholder’s cost. DUI shall be responsible
        for all post-closing filings with any and all state and federal
        agencies.

       

      
        
          	
                  11.3

                	
                  No
                    Third-Party
                    Beneficiaries.

                

        

       

      This
        Agreement shall not confer any rights or remedies upon any Person other than
        the
        Parties and their respective successors and permitted assigns.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      
        
          	
                  11.4

                	
                  Entire
                    Agreement.

                

        

      

       

      This
        Agreement (including the documents referred to herein) constitutes the entire
        agreement among the Parties and supersedes any prior understandings, agreements,
        Letter of Intent, or representations by or among the Parties, written or
        oral,
        to the extent they related in any way to the subject matter hereof.

       

      
        
          	
                  11.5

                	
                  Succession
                    and
                    Assignment.

                

        

      

       

      This
        Agreement shall be binding upon and inure to the benefit of the Parties named
        herein and their respective successors and permitted assigns. No Party may
        assign either this Agreement or any of his or its rights, interests, or
        obligations hereunder without the prior written approval of the other
        Parties.

       

      
        
          	
                  11.6

                	
                  Counterparts.

                

        

      

       

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

       

      
        
          	
                  11.7

                	
                  Headings.

                

        

      

       

      The
        section headings contained in this Agreement are inserted for convenience
        only
        and shall not affect in any way the meaning or interpretation of this
        Agreement.

      

        
          	
                  11.8

                	
                  Notices.

                

        

      

       

      All
        notices, requests, demands, claims, and other communications hereunder will
        be
        in writing. Any notice, request, demand, claim, or other communication hereunder
        shall be deemed duly given if (and then two business days after) it is sent
        by
        registered or certified mail, return receipt requested, postage prepaid,
        and
        addressed to the intended recipient as set forth below:

       

      
        	
                 

              	
                If
                  to DUI:

              	
                Downside
                  Up, Inc.

                C/O
                  Joseph J. Tomasek, Esq.

                77
                  North Bridge Street

                Somerville,
                  New Jersey 08876

              
	 	 	 
	
                 

              	
                 

              	 
	
                 

              	
                To
                  ESP:

              	
                ESP
                  Resources, Inc.

                P.O.
                  Box 53846

                Lafeyette,
                  Louisiana 70505

                 

                Attention:
                  David Dugas, President

              

      

       

      Any
        Party
        may send any notice, request, demand, claim, or other communication hereunder
        to
        the intended recipient at the address set forth above using any other means
        (including personal delivery, expedited courier, messenger service, telecopy,
        telex, ordinary mail, or electronic mail), but no such notice, request, demand,
        claim, or other communication shall be deemed to have been duly given unless
        and
        until it actually is received by the intended recipient. Any Party may change
        the address to which notices, requests, demands, claims, and other
        communications hereunder are to be delivered by giving the other Parties
        notice
        in the manner herein set forth.

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      
        
          	
                  11.9

                	
                  Governing
                    Law.

                

        

      

       

      This
        Agreement shall be governed by and construed in accordance with the domestic
        laws of the State of Delaware without giving effect to any choice or conflict
        of
        law provision or rule (whether of the State of Delaware or any other
        jurisdiction).

       

      
        
          	
                  11.10

                	
                  Amendments
                    and
                    Waivers.

                

        

      

       

      No
        amendment of any provision of this Agreement shall be valid unless the same
        shall be in writing and signed by each of the Parties. No waiver by any Party
        of
        any default, misrepresentation, or breach of warranty or covenant hereunder,
        whether intentional or not, shall be deemed to extend to any prior or subsequent
        default, misrepresentation, or breach of warranty or covenant hereunder or
        affect in any way any rights arising by virtue of any prior or subsequent
        such
        occurrence.

       

      
        
          	
                  11.11

                	
                  Severability.

                

        

      

       

      Any
        term
        or provision of this Agreement that is invalid or unenforceable in any situation
        in any jurisdiction shall not affect the validity or enforceability of the
        remaining terms and provisions hereof or the validity or enforceability of
        the
        offending term or provision in any other situation or in any other
        jurisdiction.

       

      
        
          	
                  11.12

                	
                  Expenses.

                

        

       

      Each
        of
        the Parties will bear its own costs and expenses incurred in connection with
        this Agreement and the transactions contemplated hereby. 

       

      
        
          	
                  11.13

                	
                  Construction.

                

        

      

       

      The
        Parties have participated jointly in the negotiation and drafting of this
        Agreement. In the event an ambiguity or question of intent or interpretation
        arises, this Agreement shall be construed as if drafted jointly by the Parties
        and no presumption or burden of proof shall arise favoring or disfavoring
        any
        Party by virtue of the authorship of any of the provisions of this Agreement.
        Any reference to any federal, state, local, or foreign statute or law shall
        be
        deemed also to refer to all rules and regulations promulgated thereunder,
        unless
        the context requires otherwise. 

       

      
        
          	
                  11.14

                	
                  Status.

                

        

      

       

      Nothing
        contained in this Agreement shall cause a Party to be deemed an agent, employee,
        franchisee, joint venture, partner or legal representative of any other Party,
        and no Party shall purport to act in any such capacity for any other
        Party.

       

      
        
          	
                  11.15

                	
                  Arbitration. 

                

        

      

      

      Any
        and
        all disputes arising out of or relating to this Agreement shall be resolved
        by
        arbitration. All arbitration hereunder will be conducted by the American
        Arbitration Association (“AAA”). If the AAA is dissolved, disbanded or becomes
        subject to any state or federal bankruptcy or insolvency proceeding, the
        parties
        will remain subject to binding arbitration which will be conducted by a mutually
        agreeable arbitral forum. The parties agree that all arbitrator(s) selected
        will
        be attorneys with at least five (5) years securities and corporate
        reorganization experience. The arbitrator(s) will decide if any inconsistency
        exists between the rules of any applicable arbitral forum and the arbitration
        provisions contained herein. If such inconsistency exists, the arbitration
        provisions contained herein will control and supersede such rules. The site
        of
        all arbitration proceedings will be in the City of Princeton and State of
        New
        Jersey in which AAA maintains a regional office. Any arbitration award rendered
        shall be final, conclusive and binding upon the Parties hereto, and a judgment
        thereon may be entered in any court of competent jurisdiction. 

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
        Merger to be signed by their respective officers thereunto duly authorized
        as of
        the date first written above.

       

       

      
        	
                 ATTEST:

              	
                DOWNSIDE
                  UP, INC.

              
	
                 

              	
                 

              
	
                 ________________________

              	
                By: 
                  /s/ Michael J. Cavaleri

              
	
                 
                  , Secretary

                 

                 

                ATTEST:

                 

                 

                ________________________

              	
                Michael
                  J. Cavaleri, CEO and President

                 

                 

                DUI
                  OPERATIONS, INC. (In Organization)

                 

                 

                By: 
/s/
                  Michael J. Cavaleri

              
	
                 
                  ,
                  Secretary

              	
                
                  Michael
                    Cavaleri, Chief Executive Officer

                

                 

                 

                ESP
                  RESOURCES, INC. 

              
	
                 ATTEST:

              	
                 

              
	
                 

              	
                By: 
                  /s/
                  David Dugas

              
	
                 ________________________

              	
                David
                  Dugas, President

              
	
                ,
                  Secretary

              	 

      

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      
        SCHEDULE
          A

        LIST
          OF SHAREHOLDERS AND STOCKHOLDINGS OF ESP RESOURCES, INC.

         

        
          
             

          

          
            18

            
              

            

          

          
             

          

        

      

       

      EXHIBIT
        A

      

      CERTIFICATE
        OF MERGER

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

       

      EXHIBIT
        B

      ESP
        RESOURCES, INC.

      CERTIFICATE
        OF INCORPORATION

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      EXHIBIT
        C

      CERTIFICATE
        OF INCORPORATION 

      FOR
        MERGER SUB

      DUI
        Operations, Inc.

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      EXHIBIT
        D

      BYLAWS
        OF ESP RESOURCES, INC.

      

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

      

      EXHIBIT
        E

      FINANCIAL
        STATEMENTS

      ESP
        RESOURCES, INC.

      

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

       

      EXHIBIT
        F

      ESP
        RESOURCES, INC.

      MATERIAL
        CONTRACTS

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      EXHIBIT
        G

      CERTIFICATE
        OF POWERS, DESIGNATIONS,

      PREFERENCES
        AND RIGHTS OF THE SHARES

      OF
        THE
        PREFERRED STOCK OF

      DOWNSIDE
        UP, INC.

      

      To
        Be
        Designated

      Series
        A Senior Convertible Preferred Stock

       

      Downside
        Up, Inc.., a Colorado corporation (the “Corporation”), in accordance with
        Section 7-106-102 of the Colorado Business Corporations Law of the State
        of
        Colorado (“CBCL”), by its President, does hereby certify that pursuant to a
        unanimous written consent of all of the members of the Board of Directors
        of the
        Corporation, dated August 22, 2007, duly adopted the following resolutions
        providing for the issuance of a series of Preferred Stock to be designated
        Series A Senior Convertible Preferred Stock, par value $.001, and to consist
        of
        1,500,000 shares:

      

        RESOLVED,
          that the Corporation is hereby authorized to amend its

        Articles
          of Incorporation and to file an amendment referred to as a Certificate
          of  

        Designations
          of Preferred Stock to provide for 1,500,000 shares of Series A 

        Senior
          Convertible Preferred Stock, $.001 par value (“Series A Senior 

        Preferred”),pursuant
          to the terms and conditions set forth in the Certificate of 

        Designations;

        

        RESOLVED,
          that the rights, privileges and limitations of each share

        of
          Series
          A Senior Preferred shall be as follows:

      

       

      1.
        Issuance.
        The
        series of Preferred Stock designated as Series A Senior Preferred shall consist
        of 1,500,000 shares.

      

      2.
        Dividends.
        The
        holders of said shares of Series A Senior Preferred shall not be entitled
        to
        receive any dividends thereon.

      

      3.
        Priority.
        The
        Series A Senior Preferred shall with respect to liquidation rights rank prior
        to
        all classes and series of Common Stock and preferred stock.

      

      4.
        Voting.
        Except
        as required by the CBCL and as provided in Section (7) below, the holders
        of
        said shares of Series A Senior Preferred shall not be entitled to any voting
        rights.

      

      5.
        Cancellation.
        Shares
        of Series A Senior Preferred which have been issued and reacquired in any
        manner, including shares purchased or converted into Common Stock, exchanged
        or
        redeemed, shall be canceled on the books of the Corporation and shall not
        be
        considered outstanding for any purpose.

      

      6.
        Liquidation.
        In the
        event of any liquidation, dissolution, or winding up of the affairs of the
        Corporation, whether voluntary or otherwise, after payment or provision for
        payment of the debts and other liabilities of the Corporation, the holders
        of
        the Series A Senior Preferred shall be entitled to receive, out of the remaining
        net assets of the Corporation, the amount of ten ($10.00) Dollars for each
        share
        of Series A Senior Preferred (the “Liquidation Price”) held of record by such
        holder, payable in cash or in shares of stock, securities or other
        consideration, the value of which stock, securities or other consideration
        shall
        be fixed by the Board of Directors, provided, however, that such remaining
        net
        assets are sufficient to cover all the before mentioned payments, before
        any
        distribution shall be made to the holders of Common Stock of the Corporation.
        In
        case such remaining net assets are insufficient to cover all such payments
        to
        holders of Series A Senior Preferred, the holders of this series shall receive
        payments on a pro rata basis.

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

       

      7.
        Conversion.
        Each
        share of Series A Senior Preferred shall be convertible at any time, at the
        holder’s option, into shares of Common Stock of the Corporation on the basis of
        ten (10) shares of Common Stock for 1 share of Series A Senior Preferred.
        The
        holder of any shares of Series A Senior Preferred who elects to convert his
        or
        her Series A Senior Preferred into Common Stock of the Corporation shall
        surrender, at the principal office of the Corporation or at such other office
        or
        agency maintained by the Corporation for that purpose, the certificate or
        certificates representing the shares of Series A Senior Preferred to be
        converted, together with a written affidavit informing the Corporation of
        his or
        her election to convert such shares, whereby the date of receipt by the
        Corporation of such certificates and affidavit shall constitute the “Conversion
        Date”. As promptly as practicable, and in any event within ten business days
        after surrender of such certificates, the Corporation shall deliver or cause
        to
        be delivered certificates representing the number of validly issued, fully
        paid
        and non-assessable shares of Common Stock of the Corporation to which such
        holder of Series A Senior Preferred so converted shall be entitled. Such
        conversion shall be deemed to have been made at the close of business on
        the
        Conversion Date, so that the rights of the holders of the Series A Senior
        Preferred shall thereafter cease except for the right to receive Common Stock
        of
        the Corporation in accordance herewith, and such converting holder of Series
        A
        Senior Preferred shall be treated for all purposes as having become the record
        holder of such Common Stock of the Corporation at such time.

      

      8.
        Share
        Adjustments.
        In the
        event that, prior to the conversion of the Series A Senior Preferred Stock
        by
        the holder thereof into Common Stock of the Corporation, there shall occur
        any
        change in the outstanding shares of Common Stock of the Corporation by reason
        of
        the declaration of stock dividends, or through a recapitalization resulting
        from
        stock splits or combinations, without the receipt by the Corporation of fair
        consideration therefor in the form of cash, services or property, the conversion
        ratio of the Series A Senior Preferred Stock into Common Stock of the
        Corporation provided for in Section (7) above shall be adjusted such that
        any
        holder of Series A Senior Preferred Stock converting such stock into Common
        Stock subsequent to such change in the outstanding shares of Common Stock
        of the
        Corporation shall be entitled to receive, upon such conversion, a number
        of
        shares of Common Stock of the Corporation representing the same percentage
        of
        common shares outstanding as represented by the shares that he would have
        received had he converted his Series A Senior Preferred Stock to Common Stock
        prior to such change in the outstanding shares of Common Stock of the
        Corporation.

      

      

      IN
        WITNESS WHEREOF, we, the undersigned, have executed and subscribed this
        certificate on August 22, 2007 .

      
        	 	 	 
	 	 
	 
 	 
 	 
 
	
              	  	/s/
                Michael Cavaleri
	 	
                
Michael
                Cavaleri, President
	 	 

      

       

      ATTEST:

      

      

      /s/Antelo
        Luca 

      Angelo
        Luca, Secretary

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

      EXHIBIT
        H

      DOWNSIDE
        UP, INC.

      FINANCIAL
        STATEMENTS

       

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

       

      EXHIBIT
        I

      DOWNSIDE
        UP, INC.

      MATERIAL
        CONTRACTS

      

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

       

      EXHIBIT
        J

      LIABILITIES
        OF ESP RESOURCES, INC.

      TO
        BE ASSUMED BY

      DOWNSIDE
        UP, INC.

      

      
        
           

        

        
          29

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