Document:

f8k121208ex10iv_celsius.htm

    
      Exhibit
10.4

      CELSIUS
HOLDINGS, INC.

      

      CERTIFICATE
OF AMENDMENT TO

      CERTIFICATE
OF DESIGNATION OF

      SERIES
A CONVERTIBLE PREFERRED STOCK

      

      Celsius
Holdings, Inc., a Nevada corporation (the “Company”),
acting pursuant to Chapter 78 of the Nevada Revised Statutes, the General
Corporation Law of Nevada, does hereby submit the following Certificate of
Amendment to the Certificate of Designation of Series A Convertible Preferred
Stock filed on August 20, 2008 (the “Certificate of
Designation”).

      

      FIRST:  The
name of the Company is Celsius Holdings, Inc.

      

      SECOND:  By
unanimous consent of the Board of Directors of the Company (the “Board of
Directors”), the following resolutions were duly adopted:

      

      WHEREAS
it is the desire of the Board of Directors to amend the certificate of
designation issued August 8, 2008;

      

      NOW,
THEREFORE, BE IT RESOLVED that the Certificate of Designation authorizing is
3,000 shares of Series A Convertible Preferred Stock of the Company (the “Series A
Preferred Stock”) is hereby amended as follows:

      

      “Conversion
Price” means (A) until and including December 31, 2010 $0.08 (eight
cents) and (B) after December 31, 2010 the greater of (i) 90% of the Market
Price on the conversion date and (ii) $0.08 (eight cents) as appropriately
adjusted for stock splits, stock dividends and similar events.

      

      IN
WITNESS WHEREOF, the Company has caused this Certificate to be executed by its
President and attested to by its Secretary this 12th day of December,
2008.

      

      CELSIUS
HOLDINGS, INC.

      

      By:                
/s/ Stephen C.
Haley                                                                

      Name:
Stephen C. Haley

      Title:  Chief
Executive Officer

      

      ATTEST:

      

      /s/ Jan A.
Norelid                                           

      Name:  Jan
A Norelid

      Title:  Secretaryf8k121008ex4i_advancegrow.htm

     

     

    Exhibit
4.1

     

    
      NOTE
PURCHASE AGREEMENT

       

      THIS NOTE PURCHASE AGREEMENT
(this “Agreement”),
dated as of December 10, 2008, is by and between ADVANCED GROWING SYSTEMS, INC.,
a Nevada corporation, (the “Company”),
and CCM PARTNERS FUND,
LP, a Cayman Islands Exempted Limited Partnership (the “Investor”).  The
Company and the Investor hereby agree as follows:

      

      1. Authorization
and Purchase and Sale of Notes.

       

      a. Authorization
of Notes.  The Company has authorized the issue and sale of
US$250,000 aggregate principal amount 18% Subordinated Secured Notes due June
10, 2009 (the “Notes”),
in the form attached hereto as Exhibit “A”.

       

      b. Purchase
of Notes.  Subject to the terms and conditions of this
Agreement, on the applicable Closing Date (as defined below), the Company shall
issue and sell to the Investor and the Investor shall purchase from the Company
such principal amount of Notes as is set forth immediately below the Investor’s
name on the signature pages hereto.

       

      c. Form of
Payment.  On the Closing Date, (i) the Investor shall pay the
purchase price (the “Purchase
Price”) for the Notes to be issued and sold to it at the Closing (as
defined below), against delivery of the Notes in the principal amount equal to
the Purchase Price, and (ii) the Company shall deliver such Notes duly executed
on behalf of the Company, to the Investor, against delivery of such Purchase
Price.

       

      d. Closing
Date.  The date and time of the issuance and sale of the Notes
pursuant to Section 1(b) of this Agreement (the “Closing
Date”) shall be simultaneous with the execution and delivery of this
Agreement by the parties hereto.  The closing of the transactions
contemplated by Section 1(b) of this Agreement (the “Closing”)
shall occur on the Closing Date at such location as may be agreed to by the
parties.

       

      e. Closing
Deliverables.

       

      (i) At the
Closing, the Company shall deliver to the Investor:

       

      (A) This
Agreement fully executed by a duly authorized officer of the
Company;

       

      (B) A
Security Agreement, in the form attached hereto as Exhibit “B” (the “Security
Agreement”) fully executed by a duly authorized officer of the Company
pursuant to which the Company has agreed to grant a first priority security
interest in all of the personal property of the Company to secure the
obligations of the Company to the Investor under this Agreement and the
Notes;

       

      (C) A
Guaranty of each majority-owned or wholly-owned Subsidiary (as defined herein)
of the Company, in the form attached hereto as Exhibit “C” (the “Guaranty”),
fully executed by a duly authorized officer of each such Subsidiary,
guaranteeing the obligations of the Company to the Investor;

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

       

      (D) A
Security Agreement, in the form attached hereto as Exhibit “D” (the “Subsidiary
Security Agreement”) fully executed by a duly authorized officer of each
such Subsidiary, pursuant to which each such Subsidiary has agreed to grant a
first priority security interest in all of the assets of such Subsidiary to
secure the obligations of such Subsidiary to the Investor under such
Subsidiary’s Guaranty;

       

      (E) A
Mortgage, in the form attached hereto as Exhibit “E” (the “Mortgage”)
fully executed by a duly authorized officer of the Company, pursuant to which
the Company has agreed to grant a junior security interest in that certain real
property located at 792 Ferguson Mill Road, Monticello, Mississippi, 39654 to
secure the obligations of the Company to the Investor under the Agreement and
the Notes;

       

      (F) The
Escrow Agreement, in the form attached hereto as Exhibit “F” (the “Escrow
Agreement”) fully executed by a duly authorized officer of the Company
and the Escrow Agent, pursuant to which the Company has agreed to issue to the
Investor the Additional Consideration Shares, as defined in Section 1.f.
herein;

       

      (G) A
certificate or certificates, countersigned by the Company’s transfer agent,
issued in the name of the Investor, evidencing an aggregate of Forty-Four
Thousand (44,000) shares (the “Initial
Consideration Shares”) of the Company’s common stock, $0.001 par value
per share, (the “Common
Stock”), which such Initial Consideration Shares are and shall be free
and clear of any liens, claims, encumbrances or restrictions, except that such
Consideration Shares shall be “restricted securities” as such term is defined
under Rule 144 promulgated under the Securities Act (as defined herein) or a
successor rule (“Rule
144”); and

       

      (H) A
certificate or certificates executed by the Secretary of each of the Company and
each Subsidiary, dated as of the Closing Date, certifying as to the Company’s
and the Subsidiary’s certificate of incorporation, by-laws, good standing in the
states of incorporation and states where qualified to do business, and
resolutions of Boards of Directors relating to the transactions contemplated
hereby.

       

      (ii) At the
Closing, the Investor shall deliver to the Company, the Purchase Price by wire
transfer of immediately available funds to the Company, in accordance with the
Company’s written wiring instructions.

       

      (iii) The
Notes, the Security Agreement, the Guaranty, the Subsidiary Security Agreements,
the Mortgage and the Escrow Agreement are collectively referred to here in as
the “Transaction
Documents”.

       

      f. Additional
Consideration Shares.

       

      (i) At the
Closing, the Company shall deposit stock certificates, countersigned by the
Company’s transfer agent, issued in the name of the Investor, evidencing Two
Hundred and Sixty Four Thousand (264,000) shares (the “Additional
Consideration Shares”) of Common Stock in increments of Forty-Four
Thousand (44,000) Additional Consideration Shares for each
certificate.  The Additional Consideration Shares are and shall be
free and clear of Encumbrances, except that such Additional Consideration Shares
shall be “restricted securities” as such term is defined under Rule
144.

       

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      (ii) On the
first Trading Day of each calendar month, commencing in January 2009, if any
amounts are outstanding under the Notes or there is otherwise any amount
currently owing or owing in the future under the Note Purchase Agreement or any
of the Transaction Documents, the Escrow Agent shall cause to be delivered to
the Investor, or its counsel, a certificate or certificates evidencing
Forty-Four Thousand (44,000) Additional Consideration Shares.

       

      (iii) The
Investor may sell the Initial Consideration Shares and the Additional
Consideration Shares (collectively the “Consideration
Shares”) pursuant to Rule 144 after such shares become available for
resale pursuant to Rule 144, provided, however, the Investor shall be allowed
sell (A) no more than 10,000 shares of Common Stock per Trading Day, or (B) an
unlimited number of shares of Common Stock per Trading Day if during such
Trading Day, the Common Stock has already traded at least Fifty-Five Thousand
shares of Common Stock.  Except as set forth herein, the Investor
shall not directly or indirectly, (w) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend or otherwise transfer
or dispose of, directly or indirectly, the Consideration Shares (the “Restricted
Amount”) or (x) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of Restricted Amount, whether any such transaction described in clause (w) or
(y) above is to be settled by delivery of Restricted Amount, in cash or
otherwise (any such transaction, whether or not for consideration, being
referred to herein as a “Transfer”
and each Person to whom a Transfer is made, regardless of the method of
Transfer, is referred as a “Transferee”).  No
Transfer by the Investor shall be effective unless the Transferee shall have
executed and delivered to the Company an appropriate document in form and
substance reasonably satisfactory to the Company confirming that the Transferee
takes such Shares subject to all the terms and conditions of this Agreement to
the same extent as its transferor was bound by such
provisions.  Transfers by such Transferees shall be subject to the
terms of this Agreement.

       

      (iv) References
to any number of shares of Common Stock under this Section 1.f. shall be
appropriately adjusted for each and every stock split, stock dividend,
reorganization, restructuring or any similar transaction by the Company
affecting the number of outstanding and type of shares of Common
Stock.

       

      (v) The term
“Trading
Day” shall mean any day on which the Common Stock is traded for any
period on the principal securities exchange or other securities market on which
the Common Stock is then being traded, ort if such Common Stock is not so
traded, then any day on which the New York Stock Exchange is open for
trading.

       

      2. Representations
and Warranties of the Investor.  The Investor represents and
warrants to the Company that:

       

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      a. Investment
Purpose.  The Investor is purchasing the Notes and the
Consideration Shares (collectively, the “Securities”)
for its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the Securities Act of 1933, as amended, (the “Securities
Act”); provided,
however, that by making the representations herein, the Investor does not
agree to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.

       

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

       

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

       

      d. Information.  The
Investor and its advisors, if any, have had the opportunity to ask questions of
management of the Company and have been furnished with all information relating
to the business, finances and operations of the Company and information relating
to the offer and sale of the Securities which have been requested by the
Investor or its advisors.  Neither such inquiries nor any other due
diligence investigation conducted by the Investor or any of its advisors or
representatives shall modify, amend or affect the Investor’s right to rely on
the Company’s representations and warranties contained in Section 3
below.  The Investor understands that its investment in the Securities
involves a significant degree of risk.  The Investor further
represents to the Company that the Investor’s decision to enter into this
Agreement has been based solely on the independent evaluation by the Investor
and its representatives.

       

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

       

      f. Transfer
or Re-sale.  The Investor understands that the sale or
re-sale of the Securities has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Securities may
not be transferred unless (i) the Securities are sold pursuant to an
effective registration statement under the Securities Act, (ii) the
Investor shall have delivered to the Company an opinion of counsel that shall be
in form, substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration,
(iii) the Securities are sold or transferred to an “affiliate” (as defined
in Rule 144) of the Investor who agrees to sell or otherwise transfer the
Securities only in accordance with this Section 2.f. and who is an Accredited
Investor, (iv) the Securities are sold pursuant to Rule 144, or
(v) the Securities are sold pursuant to Regulation S under the Securities
Act (or a successor rule) (“Regulation
S”).  Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona
fide margin account or other lending arrangement.

       

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      g. Legend.  The
Investor understands that, until such time as the resale of the Consideration
Shares have been registered under the Securities Act or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Consideration Shares may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates evidencing such Securities):

       

      “Neither
the offer nor sale of the securities represented by this certificate has been
registered under the Securities Act of 1933, as amended, (the
“Act”).  The securities may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities under the
Act, or an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that registration is not
required under the Act or unless sold pursuant to Rule 144 or Regulation S under
the Act.”

       

      3. Representations
and Warranties of the Company.  Except as set forth in the
Disclosure Schedule
annexed hereto, the Company represents and warrants to the Investor
that:

       

      a. Organization
and Qualification.

       

      (i) The
Company and each of the Subsidiaries is a corporation or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, with full power and
authority (corporate and other) to own, lease, use and operate its properties
and to carry on its business as and where now owned, leased, used, operated and
conducted.  The Company and each of the Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.

       

      (ii) “Material Adverse
Effect” means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company and the Subsidiaries,
individually and taken as a whole, or on the transactions contemplated hereby or
by the agreements or instruments to be entered into in connection
herewith.

       

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      b. Subsidiaries.  The
Disclosure Schedule
contains a complete and correct list of the Subsidiaries, showing as to the
Subsidiary, the correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of capital stock or similar equity
interests outstanding owned by the Company.  “Subsidiary”
means except for Advanced Nurseries, Inc., a Georgia Corporation, any
“significant subsidiary” or “subsidiary” (as such terms are defined in the SEC’s
Rule 1-02 of Regulation S-X) of the Company.  All of the outstanding
shares of capital stock or similar equity interests of the Subsidiary shown in
the Disclosure Schedule
as being owned by the Company have been validly issued, fully paid and
nonassessable and are owned by the Company free and clear of any lien, claim,
mortgage, charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or encumbrance
or any other right or adverse interest (“Liens”).

       

      c. Authorization;
Enforcement.

       

      (i) The
Company has all requisite corporate power and authority to enter into and
perform this Agreement and the Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof.  The
execution and delivery of this Agreement and the Transaction Documents by the
Company to which it is a party and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Notes and the issuance of the Consideration Shares) have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required.  This Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
the true and official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the Company
accordingly.  This Agreement constitutes, and upon execution and
delivery by the Company of the Transaction Documents to which the Company is a
party, each such Transaction Document shall constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.

       

      (ii) Each
Subsidiary has all requisite corporate power and authority to enter into and
perform the Transaction Documents to which it is a party and to consummate the
transactions contemplated thereby.  The execution and delivery of the
Transaction Documents by such Subsidiary to which it is a party and the
consummation by it of the transactions contemplated thereby have been duly
authorized by such Subsidiary’s Board of Directors and no further consent or
authorization of such Subsidiary, its Board of Directors, or its shareholders is
required.  Upon execution and delivery by such Subsidiary of the
Transaction Documents to which such Subsidiary is a party, each such Transaction
Document shall constitute a legal, valid and binding obligation of such
Subsidiary enforceable against such Subsidiary in accordance with its
terms.

       

      d. Issuance
of Shares.  The Consideration Shares are duly authorized and
reserved for issuance and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and free from
all taxes and Liens with respect to the issue thereof and shall not be subject
to preemptive rights or other similar rights of shareholders of the Company and
will not impose personal liability upon the holder thereof.

       

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

       

       

      e. No
Conflicts.

       

      (i) The
execution, delivery and performance by the Company of this Agreement and the
Transaction Documents to which the Company is a party, and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Consideration Shares), and the
execution, delivery and performance by the Subsidiary of the Transaction
Documents to which such Subsidiary is a party, and the consummation by each such
Subsidiary of the transactions contemplated thereby, will not

       

      (A) conflict
with or result in a violation of any provision of the certificate of
incorporation of the Company or any of the Subsidiaries or the by-laws of the
Company or any of the Subsidiaries, or

       

      (B) violate
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement or instrument to which the
Company or any of the Subsidiaries is a party or is otherwise bound or is a
beneficiary, or

       

      (C) result in
a violation of any law, rule, regulation, order, judgment or decree (including
federal, state and foreign securities laws and regulations and regulations of
any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of the Subsidiaries or by which any
property or asset of the Company or any of the Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect).

       

      (ii) Neither
the Company nor any of the Subsidiaries is in violation of its certificate of
incorporation, by-laws or other organizational documents and neither the Company
nor any of the Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of the Subsidiaries
in default) under, and neither the Company nor any of the Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of the Subsidiaries is a
party or by which any property or assets of the Company or any of the
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.

       

      (iii) The
businesses of the Company and the Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any governmental entity
material to the business of the Company and the Subsidiaries.

       

      (iv) Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, neither the Company nor any
Subsidiary is required to obtain any consent, authorization or order of, or make
any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party, in
order for the Company to execute, deliver or perform any of its obligations
under this Agreement or any of the Transaction Documents in accordance with the
terms hereof or thereof or to issue and sell the Notes and the Consideration
Shares in accordance with the terms hereof.  All consents,
authorizations, orders, filings and registrations which any of the Company or
any of the Subsidiaries is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof.

       

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

      f. SEC
Reports; Financial Statements. The Company has filed with the U.S
Securities and Exchange Commission (“SEC”) true and complete copies
of all annual, quarterly and periodic reports, proxy and information statements,
and other reports and filings required to be filed by it since January 1, 2006,
under the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”) (as such documents have been amended since the time of their
filing, collectively, the “SEC
Documents”).  As of their respective dates, or if amended, as
of the date of the last such amendment, the SEC Documents, including any
financial statements or schedules included therein (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (ii)
complied in all material respects with the applicable requirements of the
Exchange Act and the applicable rules and regulations of the SEC
thereunder.  Each of the consolidated financial statements included in
the SEC Documents (the “Company Financial
Statements”) (i) has been prepared from, and is in accordance with, the
books and records of the Company and its consolidated subsidiaries, (ii)
complies in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, (iii)
has been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”)  applied
on a consistent basis during the periods involved (except as may be permitted by
the rules of the SEC or indicated therein or in the notes thereto and subject,
in the case of unaudited statements, to normal year-end audit adjustments) and
(iv) fairly presents the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its consolidated subsidiaries as of the times and for the
periods referred to therein.

       

      g. Absence
of Certain Changes.  Since the date of the Company’s most
recent Form 10-Q or Form 10-K filed with the SEC, whichever is later, there has
been no material adverse change in the assets, liabilities, business,
properties, operations, financial condition, results of operations or prospects
of the Company or any of the Subsidiaries.

       

      h. Absence
of Litigation.  There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of any
executive officer of the Company or any of the Subsidiaries, threatened against
or affecting the Company or any of the Subsidiaries, or their officers or
directors in their capacity as such, that could have a Material Adverse
Effect.  No executive officer of the Company or any of the
Subsidiaries has knowledge of any facts or circumstances which might give rise
to any of the foregoing.

       

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      i. Patents,
Copyrights, Trademarks.

       

      (i) The
Company and each of the Subsidiaries owns or possesses the requisite licenses or
rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights (“Intellectual
Property”) necessary to enable it to conduct its business as now operated
(and, to the Company’s knowledge, as presently contemplated to be operated in
the future)

       

      (ii) There is
no claim or action by any Person pertaining to, or proceeding pending, or to the
knowledge of any executive officer of the Company or any of the Subsidiaries
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, to the knowledge of any executive officer of the
Company or any of the Subsidiaries, as presently contemplated to be operated in
the future).

       

      (iii) To the
knowledge of any executive officer of the Company or any of the Subsidiaries,
neither the Company’s nor the Subsidiaries’ current and intended products,
services and processes infringe on any Intellectual Property or other rights
held by any Person; and no executive officer of the Company or any of the
Subsidiaries has knowledge of any facts or circumstances which might give rise
to any of the foregoing.

       

      j. Tax
Status.  The Company and each of the Subsidiaries has made or
filed all federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of the Subsidiaries has set aside
on the Company Financial Statements provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on the Company Financial
Statements provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and none of the executive
officers of the Company or any of the Subsidiaries know of any basis for any
such claim.  Neither the Company nor any of the Subsidiaries has
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax.  None of the Company’s tax returns is presently being audited by
any taxing authority.

       

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

       

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      l. Permits;
Compliance.  The Company and each of the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Company
Permits”), and there is no action pending or, to the knowledge of any
executive officer of the Company or any of the Subsidiaries, threatened
regarding suspension or cancellation of any of the Company
Permits.  Neither the Company nor any of the Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect.  Since the date of the Company’s most recent Form 10-Q or Form
10-K filed with the SEC, whichever is later, neither the Company nor any of the
Subsidiaries has received any notification with respect to possible conflicts,
defaults or violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts, defaults or
violations would not have a Material Adverse Effect.

       

      m. Environmental
Matters.  There are, with respect to the Company and the
Subsidiaries, no past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and neither the Company nor any
of the Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the knowledge of any executive
officer of the Company or any of the Subsidiaries, threatened in connection with
any of the foregoing.  The term “Environmental
Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.  Other than those that
are or were stored, used or disposed of in compliance with applicable law, no
Hazardous Materials are contained on or about any real property currently owned,
leased or used by the Company or any of the Subsidiaries, and no Hazardous
Materials were released on or about any real property previously owned, leased
or used by the Company or any of the Subsidiaries during the period the property
was owned, leased or used by the Company or any of the Subsidiaries, except in
the normal course of the Company’s or any of the Subsidiaries’
business.  There are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of the Subsidiaries that
are not in compliance with applicable law.

       

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

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

       

      o. Insurance.  The
Company and each of the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks, including casualty and
liability insurance, and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company and the
Subsidiaries are engaged, which such policies are set forth on the Disclosure
Schedule.  No executive officer of the Company or any of the
Subsidiaries has any reason to believe that the Company and the Subsidiaries
will not be able to renew their existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue such businesses at a cost that would not have a Material
Adverse Effect.

       

      p. Internal
Control Over Financial Reporting.  The Company and each of the
Subsidiaries has adopted and implemented and currently maintains internal
control over financial reporting as required by Section 404 of the
Sarbanes-Oxley Act and the rules and regulations thereunder, sufficient, in the
judgment of the Company’s board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

       

      q. Foreign
Corrupt Practices; Foreign Assets Control Regulations.  Neither
the Company, nor any of the Subsidiaries, nor any current director or officer,
nor, to the knowledge of any executive officer of the Company or any of the
Subsidiaries, any past director, past officer, agent, employee or other Person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company or any of the Subsidiaries, (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or
employee.  Neither the sale of the Securities by the Company hereunder
nor its use of the proceeds thereof will violate the trading with the Enemy Act,
as amended, or any foreign assets control regulations of the United States
Treasury Department (31 CFR Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating therefrom.  Neither the
Company nor any Subsidiary nor any director or senior officer of the Company or
any Subsidiary is a Person named on the U.S. Treasury Department’s Office of
Foreign Assets Control (“OFAC”) list, nor is a Person
prohibited under the OFAC programs.

       

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

      r. Solvency.  The
Company and the Subsidiary (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair
market value in excess of the amount required to pay its probable liabilities on
its existing debts as they become absolute and matured).  The Company
and the Subsidiary (after giving effect to the transactions contemplated by this
Agreement) has the ability to pay its debts from time to time incurred in
connection therewith as such debts mature.

       

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

       

      t. Acknowledgment
Regarding Investor’s Purchase of Securities.  The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby.  The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by the Investor or any of its
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Investor’s purchase of the Securities.  The Company
further represents to the Investor that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
Company and its representatives.

       

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

       

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

       

      w. General
Solicitation.  Neither the Company nor any other Person or
entity authorized by the Company to act on its behalf has engaged in a general
solicitation or general advertising (within the meaning of Regulation D
promulgated under the Securities Act) of investors with respect to offers or
sales of the Securities.

       

      x. Disclosure.  All
information relating to or concerning the Company or any of the Subsidiaries set
forth in this Agreement and provided to the Investor in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading.  No event or circumstance has
occurred or exists with respect to the Company or any of the Subsidiaries or its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

       

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

       

      4. Information.

       

      a. Financial
Information.  For so long as any of the Notes are outstanding,
the Company shall send the following reports to each holder of the Notes the
following:

       

      (i) At any
time that the Company has a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act or is filing reports with the SEC as required under
Section 15(d) of the Exchange Act, then within three (3) days after the filing
with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on
Form 10-Q and any Current Reports on Form 8-K, provided, however, if any
such document is available on the SEC’s EDGAR Filing System then the Company
need not deliver a hard copy of such document;

       

      (ii) At any
time that the Company does not have a class of securities registered under
Section 12(b) or 12(g) of the Exchange Act and is not required to file reports
with the SEC as required under Section 15(d) of the Exchange Act (“Non-Reporting
Company”), then (A) within ninety (90) days after the end of each of the
Company’s fiscal years a consolidated audited balance sheet for such fiscal year
and the immediately preceding fiscal year, a consolidated income statement for
such fiscal year and the immediately preceding two fiscal years, a consolidated
cash flow statement for such fiscal year and the immediately preceding two
fiscals year and a consolidated shareholders’ equity statement for such fiscal
year and the immediately preceding two fiscals year, (B) within forty-five (45)
days after the end of each of the Company’s fiscal quarters (other than a fiscal
quarter which is also the end of the Company’s fiscal year) a consolidated
unaudited balance sheet for such fiscal quarter, a consolidated income statement
for such fiscal quarter and a consolidated cash flow statement for such fiscal
quarter, in each case all in accordance with GAAP, and each certified by the
Chief Executive Officer and Chief Financial Officer as fairly presenting, in all
material respects, the financial condition of the companies being reported on
and their results of operations, subject to, in the case of unaudited financial
statements, changes resulting from normal audit adjustments; and

       

      (iii) promptly
upon their becoming available, one copy of (A) each report, notice or proxy
statement sent by the Company or any Subsidiary to securities holders generally,
and (B) each registration statement, and each prospectus and all amendments
thereto filed by the Company or any Subsidiary with the SEC, provided, however, if any
such document is available on the SEC’s EDGAR Filing System then the Company
need not deliver a hard copy of such document.

       

      b. Notice of
Default or Event of Default.  Promptly, and in any event within
three (3) Business Days after the Company becomes aware of the existence of any
Default or Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has given
notice or taken any action with respect to a claimed default of the type
referred to in Section 7(f), the Company shall deliver to each holder of the
Notes a written notice specifying the nature and period of existence thereof and
what action the Company is taking or proposes to take with respect
thereto.  The term “Person”
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.  The term “Business
Day” shall mean any day except Sunday, Saturday and any day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.

       

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

       

      c. Notices
from Governmental Authorities.  Promptly, and in any event
within three (3) Business Days of receipt thereof, the Company shall deliver to
each holder of the Notes copies of any notice to the Company or any Subsidiary
from any Federal, State, local or foreign governmental authority alleging a
violation of any order, ruling, statute or other law or regulation that could
reasonably be expected to have a Material Adverse Effect.

       

      d. Requested
Information.  With reasonable promptness, the Company shall
deliver to each holder of the Notes such other data and information relating to
the business, operations, affairs, financial condition, assets or properties of
the Company or any of the Subsidiaries or relating to the ability of the Company
to perform its obligations hereunder and under the Notes as from time to time
may be reasonably requested by any such holder of Notes.

       

      e. Inspection.  The
Company will permit the representatives of each holder of Notes, at the expense
of the Company, to visit and inspect any of the offices or properties of the
Company or any Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances, and accounts with their respective
officers and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts of the
Company and the Subsidiaries), all at such times and as often as may be
requested.

       

      f. Officers’
Certificate.  On the first Business Day of each month, the
Chief Executive Officer or Chief Financial Officer of the Company shall deliver
to each holder of the Notes a certificate setting forth:

       

      (i) that the
Company was in compliance with the requirements of the covenants contained in
Sections 5 and 6 herein during the calendar monthly period immediately preceding
the certificate then being furnished; and

       

      (ii) a
statement that such officer has reviewed the relevant terms hereof and has made,
or caused to be made, under his or her supervision, a review of the transactions
and conditions of the Company and the Subsidiaries from the beginning of the
monthly, quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not have
disclosed the existence during such period of any condition or event that
constitutes an Event of Default or, if any such condition or event existed or
exists specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

       

       

      5. Affirmative
Covenants.  The Company covenants that so long as any of the
Notes are outstanding, unless holders of a majority of the then-outstanding
principal amount of the Notes consents in writing otherwise:

       

      a. Compliance
with Law.  The Company will, and will cause the Subsidiary to,
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

       

      b. Insurance.  The
Company will, and will cause the Subsidiary to, maintain, with financially sound
and reputable insurers, insurance with respect to their respective properties
and businesses against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations engaged in the same
or a similar business and similarly situated, and notify the holders of the
Notes of any additions and changes to such insurance.

       

      c. Maintenance
of Properties.  The Company will, and will cause the Subsidiary
to, maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times.

       

      d. Payment
of Taxes and Claims.  The Company will, and will cause the
Subsidiary to, file all income tax or similar tax returns required to be filed
in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Subsidiary, provided that neither the Company nor any Subsidiary
need pay any such tax or assessment or claims if the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or such Subsidiary.

       

      e. Corporate
Existence, Etc.  The Company will at all times preserve and
keep in full force and effect its corporate existence. The Company will at all
times preserve and keep in full force and effect the corporate existence of the
Subsidiary and all rights and franchises of the Company and the
Subsidiaries.

       

      f. Use of
Proceeds.  The Company shall use the proceeds from the sale of
the Notes as set forth in the Disclosure
Schedule.  The Company shall not, directly or indirectly, use
the proceeds from the sale of the Notes for any loan to or investment, directly
or indirectly, in any other corporation, partnership, enterprise or other Person
(except in connection with the Subsidiaries).

       

       

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

       

       

      g. Regulation “U”. 
The Company expressly understands and acknowledges that this loan is not for the
purpose of, and the proceeds of this loan shall not be used for the purpose of
purchasing or carrying Margin Stock.  The term “Margin
Stock” is defined in Regulation U (12 CFR 221) and includes, principally:
(i) stocks that are registered on a national securities exchange; (ii) debt
securities (bonds) that are convertible into margin stocks; (iii) any
over-the-counter security designated as qualified for trading in the National
Market System under a designation plan approved by the Securities and Exchange
Commission (NMS security); and (iv) shares of most mutual funds, unless 95 per
cent of the assets of the fund are continuously invested in U.S. government,
agency, state, or municipal obligations.

       

      6. Negative
Covenants.  The Company covenants that so long as any of the
Notes are outstanding, unless holders of a majority of the then-outstanding
principal amount of the Notes consents in writing otherwise:

       

      a. Liens.  The
Company will not, and will not permit any Subsidiary to, and cause such
Subsidiary not to, permit to exist, create, assume or incur, directly or
indirectly, any Lien on its properties or assets, whether now owned or hereafter
acquired, except:

       

      (i) Liens
existing on property or assets of the Company or any Subsidiary as of the date
of this Agreement;

       

      (ii) Liens for
taxes, assessments or governmental charges not then due and
delinquent;

       

      (iii) encumbrances
in the nature of leases, subleases, zoning restrictions, easements, rights of
way, minor survey exceptions and other rights and restrictions of record on the
use of real property and defects in title arising or incurred in the ordinary
course of business, which, individually and in the aggregate, do not materially
impair the use or value of the property or assets subject thereto or which
relate only to assets that in the aggregate are not material;

       

      (iv) Liens
incidental to the conduct of business or the ownership of properties and assets
(including landlords’, lessors’, carriers’, warehousemen’s, mechanics’,
materialmen’s and other similar liens) and Liens to secure the performance of
bids, tenders, leases or trade contracts, or to secure statutory obligations
(including obligations under workers compensation, unemployment insurance and
other social security legislation), surety or appeal bonds or other Liens of
like general nature incurred in the ordinary course of business and not in
connection with the borrowing of money; or

       

      (v) any
attachment or judgment Lien, unless the judgment it secures has not, within
sixty (60) days after the entry thereof, been discharged or execution thereof
stayed pending appeal, or has not been discharged within sixty (60) days after
the expiration of any such stay.

       

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

       

       

      b. Mergers,
Consolidations, Etc.  The Company will not, and will not permit
any Subsidiary to, and cause such Subsidiary not to, consolidate with or merge
with any other Person or convey, transfer, sell or lease all or substantially
all of its assets in a single transaction or series of transactions to any
Person.

       

      c. Sale of
Assets.  The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, sell, lease, transfer or
otherwise dispose of, including by way of merger (collectively a “Disposition”),
any assets, including capital stock of any Subsidiary, in one or a series of
transactions, to any Person, other than Dispositions in the ordinary course of
business.

       

      d. Nature of
Business.  The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, engage in any business if, as a
result, the general nature of the business in which the Company and the
Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Company and the
Subsidiaries, taken as a whole, are engaged on the date of this
Agreement.

       

      e. Transactions
with Affiliates.  The Company will not, and will not permit any
Subsidiary to, and cause such Subsidiary not to, enter into directly or
indirectly any transaction or material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than the Company
or another Subsidiary), except upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.

       

      f. Restriction
on Distributions and Stock Repurchases.  The Company will
not, and will not permit any Subsidiary to, and cause such Subsidiary not to,
redeem, repurchase or otherwise acquire (whether for cash or in exchange for
property or other securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Company or any
Subsidiary or any warrants, rights or options to purchase or acquire any such
shares.  The Company will not and will not permit any Subsidiary to
make any distribution or dividend of cash or other property with respect to its
capital stock.

       

      g. Investments.  The
Company will not, and will not permit any Subsidiary to, and cause such
Subsidiary not to, make any loan or advance to any Person or entity, or purchase
or otherwise acquire any capital stock, assets, obligations, or other securities
of, make any capital contribution to, or otherwise invest in or acquire any
interest in any Person or entity, except direct obligations of the United States
or any agency thereof, bonds, and certificates of deposit in commercial or
savings banks of recognized standing.

       

      h. Additional
Subsidiary Capital.  The Company will not permit any Subsidiary
to, and cause such Subsidiary not to, issue to third parties any of its capital
stock or options, warrants or other similar rights to acquire its capital
stock.

       

      7. Events of
Default.  An “Event of
Default” shall exist if any of the following conditions or events shall
occur and be continuing:

       

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

       

      a. the
Company defaults in the payment within one (1) Business Day of when due of any
principal on any Note when the same becomes due and payable, whether at maturity
or otherwise; or

       

      b. the
Company defaults in the payment of any interest on any Note when the same
becomes due and payable and such default shall continue for more than five (5) Business
Days; or

       

      c. the
Company defaults in the performance of or compliance with any term contained in
or Sections 5(a) through 6(h), and such default has not been cured for twenty
(20) Business Days after the earlier of (i) an executive officer of the Company
or any Subsidiary obtaining actual knowledge of such default and (ii) the
holders of the majority of the principal amount of the Notes then outstanding
delivering written notice to the Company of such default; or

       

      d. the
Company defaults in the performance of or compliance with any term, agreement or
covenant contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this Section 7) and such default is not remedied within twenty (20)
Business Days after the earlier of (i) an executive officer of the Company or
any Subsidiary obtaining actual knowledge of such default and (ii) the holders
of the majority of the principal amount of the Notes then outstanding delivering
written notice to the Company of such default; or

       

      e. any
representation or warranty made by or on behalf of the Company or any Subsidiary
or by any officer of the Company or a Subsidiary in this Agreement or any
Transaction Document, proves to have been false or incorrect in any material
respect on the date as of which made, and such condition has not been cured for
twenty (20) Business Days after the earlier of (i) an executive officer of the
Company or any Subsidiary obtaining actual knowledge of such condition and (ii)
the holders of the majority of the principal amount of the Notes then
outstanding delivering written notice to the Company of such condition;
or

       

      f. (i) the
Company or any Subsidiary is in default (as principal or as guarantor or other
surety) in the payment of any principal of or premium or make-whole amount or
interest on any indebtedness that is outstanding beyond any period of grace
provided with respect thereto, or (ii) the Company or any Subsidiary is in
default in the performance of or compliance with any term of any evidence of any
indebtedness that is outstanding or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a consequence
of such default or condition such indebtedness has become, or has been declared
(or one or more Persons are entitled to declare such indebtedness to be), due
and payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of the holder of
indebtedness to convert such indebtedness into equity interests), (A) the
Company or any Subsidiary has become obligated to purchase or repay indebtedness
before its regular maturity or before its regularly scheduled dates of payment,
or (B) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such indebtedness; provided, that any of the
foregoing, if curable, has not been cured within twenty  (20) Business
Days after the earlier of (i) an executive officer of the Company or any
Subsidiary obtaining actual knowledge of such default and (ii) the holders of
the majority of the principal amount of the Notes then outstanding delivering
written notice to the Company of such default; or

       

       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

       

      g. the
Company or any Subsidiary (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

       

      h. a court
or governmental authority of competent jurisdiction enters an order appointing,
without consent by the Company or any Subsidiary, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any Subsidiary, or any such petition shall be
filed against the Company or any Subsidiary and such petition shall not be
dismissed within sixty (60) days; or

       

      i. a final
judgment or judgments for the payment of money, in excess of the $250,000 are
rendered against one or more of the Company and the Subsidiaries, which
judgments are not, within sixty (60) days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; or

       

      j. the
Company or any Subsidiary defaults in the performance of or compliance with any
term or covenant contained in any Transaction Document or any Transaction
Document ceases to be in full force and effect as a result of acts taken by the
Company or any Subsidiary, or is declared to be null and void in whole or in
material part by a court or other governmental or regulatory authority having
jurisdiction or the validity or enforceability thereof shall be contested by any
of the Company or any Subsidiary or any of them renounces any of the same or
denies that it has any or further liability thereunder; provided, that any of the
foregoing, if curable, has not been cured within twenty (20) Business Days after
the earlier of (i) an executive officer of the Company or any Subsidiary
obtaining actual knowledge of such default and (ii) the holders of the majority
of the principal amount of the Notes then outstanding delivering written notice
to the Company of such default.

       

      8. Remedies
on Default, Etc.

       

      a. Acceleration.

       

      (i) If an
Event of Default with respect to the Company described in paragraph (g) or (h)
of Section 7 (other than an Event of Default described in clause (i) of
paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact
that such clause encompasses clause (i) of paragraph (g)) has occurred, all the
Notes then outstanding shall automatically become immediately due and
payable.

       

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

       

      (ii) If any
other Event of Default has occurred and is continuing, holders of a majority or
more in principal amount of the Notes at the time outstanding may at any time at
its or their option, by notice or notices to the Company, declare all the Notes
then outstanding to be immediately due and payable.

       

      (iii) If any
Event of Default described in paragraph (a) or (b) of Section 7 has occurred and
is continuing, any holder or holders of Notes at the time outstanding affected
by such Event of Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.

       

      Upon any
Notes becoming due and payable under this Section 8(a), whether automatically or
by declaration (a “Default”),
such Notes will forthwith mature and the entire unpaid principal amount of such
Notes, plus all accrued and unpaid interest thereon shall all be immediately due
and payable, in each and every case without presentment, demand, protest or
further notice, all of which are hereby waived.

      

      b. Other
Remedies.  If any Default or Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 8(a), the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.

       

      c. Rescission.  At
any time after any Notes have been declared due and payable pursuant to clause
(i) or (ii) of Section 8(a), the holders of a majority in principal amount of
the Notes then outstanding, by written notice to the Company, may rescind and
annul any such declaration and its consequences if (i) the Company has paid all
overdue interest on the Notes and all principal of any Notes that are due and
payable and are unpaid other than by reason of such declaration, (ii) all Events
of Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 12, and (iii) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 8(c) will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.

       

      d. No
Waivers or Election of Remedies, Expenses, Etc.  No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies.  No right, power or remedy
conferred by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or
otherwise.

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

       

       

      e. Default
Interest.  During any period a Default or an Event of Default
has occurred and is continuing, any amount of principal on the Notes then
outstanding shall bear interest (the “Default
Interest”), in addition to the non-default interest that accrues on the
Notes in accordance with the Notes, and the Company shall pay to the holder
thereof in cash as liquidated damages and not as a penalty, at the rate equal to
seven percent (7.00%) per annum (the “Default
Rate”), after such Default or Event of Default has occurred, until the
earlier of (i) the Notes, including accrued but unpaid interest thereon, are
paid in full and (ii) such Default or Event of Default, if curable under the
terms of this Agreement, has been cured.  Such Default Interest shall
be paid to the holders of such Notes by the fifth (5th) day of
the month following the month in which it has accrued or, if not so paid, shall
be added to the principal amount of such holder’s Notes, in which event interest
shall accrue thereon in accordance with the terms of the Notes.

       

      9. Registration;
Exchange; Substitution of Notes.

       

      a. Registration
of Notes.  The Company shall keep at its principal executive
office a register for the registration and registration of transfers of Notes.
The name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof, and the
Company shall not be affected by any notice or knowledge to the
contrary.

       

      b. Transfer
and Exchange of Notes.  Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit “A.”  Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon.  Notes shall not be transferred in denominations of less
than $50,000, provided that if necessary to enable the registration of transfer
by a holder of its entire holding of Notes, one Note may be in a denomination of
less than $50,000.

       

      c. Replacement
of Notes.  Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be notice from such holder of such
ownership and such loss, theft, destruction or mutilation), and (i) in the case
of loss, theft or destruction, of indemnity reasonably satisfactory to it
(provided that if the holder of such Note is, or is a nominee for, (A) the
Investor, or (B) other Person with a minimum net worth of at least the
then-outstanding principal amount of the Notes so lost, stolen, destroyed or
mutilated, then such Investor’s or other Person’s own unsecured agreement of
indemnity shall be deemed to be satisfactory), or (ii) in the case of
mutilation, upon surrender and cancellation thereof, the Company at its own
expense shall execute and deliver, in lieu thereof, a new Note dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid
thereon.

       

       

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

       

      10. Payment.

       

      a. Payment
on the Notes.  The Company will pay all sums becoming due on the
Notes for principal and interest in U.S. Dollars and by the method and at the
address specified for such purpose outside of the United States and its
possessions as the Investor may instruct the Company in writing, or by such
other method or at such other address as the Investor shall have from time to
time specified to the Company in writing provided it is outside of the United
States and its possessions, for such purpose, without the presentation or
surrender of the Note or the making of any notation thereon, except that upon
written request of the Company made concurrently with or reasonably promptly
after payment or prepayment in full of the Note, the Investor shall surrender
the Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company.

       

      b. Allocation
of Prepayment.  In the case of each partial prepayment of the
Notes, the principal amount of the Notes to be prepaid shall be allocated among
all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.

       

      11. Indemnification.

       

      a. Survival.  All
representations, warranties and covenants in this Agreement and the Disclosure Schedule will
survive the Closing until June 10, 2009.  The right to
indemnification, payment of Damages (as defined below) or other remedy based on
such representations, warranties and covenants will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty or
covenant.  The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant, shall not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties and
covenants.

       

      b. Indemnification.  The Company will
indemnify and hold harmless the Investor, each of its officers, partners,
managers, and all Persons who control (as such term is defined under the
Securities Act or the Exchange Act) the Investor (each an “Indemnified
Party” and collectively the “Indemnified
Parties”), and will pay to the Indemnified Parties the amount of, any
loss, liability, claim, damage, expense, including costs of investigation and
defense and reasonable attorneys’ fees, (collectively, “Damages”)
arising, directly or indirectly, from or in connection with (i) any breach of
any representation or warranty made by the Company or any Subsidiary in this
Agreement or the Disclosure
Schedule or any of the Transaction Documents, or (ii) any breach by the
Company or any Subsidiary of any covenant or obligation of the Company or such
Subsidiary in this Agreement or any of the Transaction Documents.

       

       

      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

       

      c. Procedure
for Indemnification.  If a claim is to be made against the
Company under Section 11(b), the Indemnified Party shall give notice to the
Company of such claim.  In the event that the Company objects in
writing to any claim for Damages, the Indemnified Party and the Company shall
attempt in good faith to resolve the dispute.  The remedies provided
in this Section 11 will not be exclusive of or limit any other remedies that may
be available to the Investor.  When determining Damages under this
Section 11, all materiality qualifiers will be disregarded.

       

      12. Amendment
and Waiver.

       

      a. Requirements.  This
Agreement and each of the Transaction Documents may be amended, and the
observance of any term hereof or thereof may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
holders of a majority of the then-outstanding principal amount of the
Notes.

       

      b. Binding
Effect, Etc.  Any amendment or waiver consented to as provided
in this Section 12 applies equally to all holders of Notes and is binding upon
them and upon each future holder of any Note and upon the Company without regard
to whether such Note has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note or any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term “this Agreement” or “the Agreement” and references thereto
shall mean this Agreement as it may from time to time be amended or
supplemented.

       

      13. Expenses.

       

      a. Current
Expenses.  The Company shall reimburse, or pay directly, at the
Closing up to $7,500 in the aggregate, $4,000 of which is acknowledged as
received by the Investor, (i) counsel’s fees of one firm designated by the
Investor incurred in connection with the negotiation, preparation, and closing
of this Agreement and the other agreements to be executed in connection herewith
(the “Documents”),
(ii) such counsel’s reasonable out of pocket expenses and (iii) other
out-of-pocket expenses incurred by the Investor in connection with the
negotiation of the terms of the transactions contemplated herein and due
diligence of the Company and the Subsidiaries and their respective
management.  When requested by the Investor, the Company shall pay
these fees directly; otherwise the Company must make immediate payment for
reimbursement to the Investor for such fees and expenses immediately upon
written notice by the Investor or the submission of an invoice by the
Investor.  If the Company fails to reimburse the Investor in full
within three (3) Business Days of the written notice or submission of invoice by
the Investor, the Company shall pay interest on the total amount of fees to be
reimbursed at a rate of twenty-five percent (25.00%) per
annum.  Unless otherwise provided in this Agreement, each party shall
bear its own expenses in performing this Agreement.

       

       

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

       

      b. Expenses
in Dispute.  In the event of any dispute regarding the subject
matter hereunder, the non-prevailing party in any dispute shall be required to
fully reimburse the prevailing party in any dispute for all of its documented
attorneys’ fees, costs and expenses incurred in connection with such dispute,
the outcome of which shall have been determined by a court of competent
jurisdiction.

       

      c. Expenses
for Amendments.  If the Investor shall employ counsel for
advice or other representation or shall incur legal or other costs and expenses
in connection with any amendment or modification of this Agreement or any of the
other Documents, then, and in any such event, the reasonable counsel fees
arising from such services and all expenses, costs, charges and other reasonable
fees of such counsel incurred in connection with or related to any of the events
or actions described above shall be payable by the Company.

       

      d. Costs of
Collection.  In the event of a Default or an Event of Default,
in addition to any other sums payable by the Company hereunder, the Company
shall pay the Investor’s and any other holders’ of the Notes costs of
collection, including reasonable attorneys’ fees, including post-judgment costs
of collection, incurred by the Investor’s or any other holders’ of the Notes in
the collection of the obligations of the Company and each of the Subsidiaries to
the Investor and any other holders of the Notes whether under this Agreement or
the other Transaction Documents, and in the enforcement of any provision hereof
and thereof, whether suit be brought or not.

       

      14. Rule
144.

       

      a. Exchange
Act Filings.  For so long as the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file the reports required to be filed by it under Section 13 or 15(d) of
the Exchange Act and the rules and regulations adopted by the Commission
thereunder.  If the Company ceases to be so required to file such
reports, the Company will upon the reasonable request of the Investor (i) make
publicly available such information as is necessary to permit sales pursuant to
Rule 144 under the Securities Act and (ii) take such further action that is
reasonable in the circumstances, in each case, to the extent required from time
to time to enable the Investor to sell the Consideration Shares without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rules or regulations hereafter adopted by
the Commission.

       

      b. Opinion.  The
Company hereby irrevocably authorizes the Company’s transfer agent, as such
entity may then be serving as the transfer agent for the Company’s Common Stock
from time to time, to accept opinion of counsel for purposes of Rule 144 from
the law firm Tarter Krinsky & Drogin LLP or such other counsel as the
Investor may designate provided such counsel is lawfully authorized to give such
opinions (the “Opining
Counsel”).

       

      c. Shell
Company.  The Company hereby represents and warrants to the
Investor and the Opining Counsel that:

       

       

      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

       

      (i) the
Company was not as of the Closing Date nor any time prior to the Closing Date an
issuer with no or nominal operations and no or nominal non-cash assets;
and

       

      (ii) if the
Company had been an issuer described in paragraph (i) but has ceased to be an
issuer described in paragraph (i) prior to the Closing Date, that the Company
(A) is currently subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act; (B) has filed all reports and other materials required to be
filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the
twelve (12) months prior to the Closing Date, other than Form 8-K reports; and
(C) filed at least one (1) year prior to the Closing Date current “Form 10
information” with the Commission (as such term is defined under Rule 144(i)(3)
under the Securities Act, as such rule may be amended from time to
time).

       

      15. Governing Law; Jury
Trial.

       

      a. Governing
Law.  The validity and interpretation of this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of New York.  Each of the parties hereto and their assigns
hereby consents to the exclusive jurisdiction and venue of the Courts of the
State of New York, located in the City and County of New York and the United
States District Court, Southern District, for the State of New York with respect
to any matter relating to this Agreement and performance of the parties’
obligations hereunder, the documents and instruments executed and delivered
concurrently herewith or pursuant hereto and performance of the parties’
obligations thereunder and each of the parties hereto hereby consents to the
personal jurisdiction of such courts and shall subject itself to such personal
jurisdiction.  Any action, suit or proceeding relating to such matters
shall be commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts.  The parties irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or
proceeding.  Service of process in any action, suit or proceeding
relating to such matters may be made and served within or outside the State of
New York by registered or certified mail to the parties and their
representatives at their respective addresses specified in Section 16 hereof,
provided that a reasonable time, not less than thirty (30) days, is allowed for
response.  Service of process may also be made in such other manner as
may be permissible under the applicable court rules.

       

      b. Waiver of Jury
Trial.  Each party hereto hereby agrees to waive its respective
rights to a jury trial of any claim or cause of action based upon or arising out
of this Agreement.  The scope of this waiver is intended to be all
encompassing of any disputes that may be filed in any court and that relate to
the subject mater of this Agreement, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims.  Each party hereto acknowledges that this waiver is
a material inducement for each party to enter into a business relationship, that
each party has relied on this waiver in entering into this Agreement and that
each party will continue to rely on this waiver in their related future
dealings.  Each party further warrants and represents that it has
reviewed this waiver with its legal counsel, and that such party has knowingly
and voluntarily waives its rights to a jury trial following such
consultation.  This waiver is irrevocable, meaning that,
notwithstanding anything herein to the contrary, it may not be modified either
orally or in writing, and this waiver shall apply to any subsequent amendments,
renewals and supplements or modifications to this agreement.  In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

       

       

      16. Miscellaneous.

       

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

       

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

       

      c. Entire
Agreement; Amendments.  This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein.  No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

       

      d. Notices.  Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party.  The addresses for
such communications shall be:

       

      If to the
Company:

       

      Advanced
Growing Systems, Inc.

      3050
Royal Boulevard South, Suite 135

      Alpharetta,
GA 30022

      Attn:
Christopher J. Nichols

      Telephone:
(800) 747-0720

      Facsimile:
(678) 387-5065

       

      with
copies to (which shall not constitute notice):

      

      Anslow
& Jaclin LLP

      195 Route
9 South

      Manalapan,
NJ 07726

      Attn:
Joseph M. Lucosky, Esq.

      Telephone:
(732) 409-1212

      Facsimile:
(732) 577-1188

       

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

       

      
 

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

       

      CCM
Partners Fund, LP

      c/o
Conative Capital Management, LLC

      424
Madison Avenue, Suite 800

      New York,
NY 10017

      Attn:
Louis Rabman

      Telephone:
(212) 838-0777

      Facsimile:
(212) 838-0753

      

      with
copies to:

      

      
        Tarter
Krinsky & Drogin LLP

        1350
Broadway, 11th
Floor

        New York,
New York 10018

        Attention:  James
G. Smith, Esq.

        Telephone:
(212) 216-8000

        Facsimile:
(212) 216-8001

      

       

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

       

      e. Successors
and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns.  Neither
the Company nor the Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
other.  Notwithstanding the foregoing, the Investor may assign its
rights hereunder to any Person that purchases any of the Securities in a private
transaction from the Investor or to any of its Affiliates without the consent of
the Company.

       

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

       

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

       

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

       

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

       

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

       

      j. Waiver of
Stay, Extension or Usury Laws.  The Company
covenants that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim, and shall resist any and all efforts to be compelled to take
the benefit or advantage of, any stay or extension law or any usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of or interest on the Notes as contemplated herein and therein,
wherever enacted, now or at any time hereafter in force, or which may effect the
covenants or the performance of this Agreement; and the Company hereby expressly
waives all benefit or advantage of any such law and covenants that it shall not
hinder, delay or impede the execution of power herein granted to the holders of
the Notes, but shall suffer and permit the execution of every such power as
though no such law had been enacted.  All agreements between the
Company and holders of the Notes, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no contingency, whether
by reason or demand or acceleration of the final maturity date of the Notes or
prepayment or otherwise, shall the interest contracted for (or any original
issue discount that would be determined to be interest), charged, received, paid
or agreed to be paid to holders exceed the maximum amount permissible under the
laws of the State
of Nevada (hereinafter the “Applicable
Law”).  If, from any circumstances whatsoever, interest (or any
original issue discount that would be determined to be interest) would otherwise
be payable to any holder of the Notes in excess of the maximum amount
permissible under Applicable Law, the interest payable to such holder shall be
reduced to the maximum amount permissible under Applicable Law, and if from any
circumstances such holder shall ever receive anything deemed interest by the
Applicable Law in excess of the maximum amount permissible under the Applicable
Law, an amount equal to the excessive interest shall be applied to the reduction
of the principal hereof and not to the payment of interest, or if such excessive
amount of interest exceeds the unpaid principal balance of principal hereof,
such excess shall be refunded to the Company as applicable.  All
interest paid or agreed to be paid to the holders of the Notes shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated and spread
throughout full period (including any renewal or extension) until payment in
full of the principal so that the interest hereon for such full period shall not
exceed the maximum amount permissible under the Applicable Law.

       

      k. Counterparts.  This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.

       

      l. Facsimile
Signature.  In the event that any signature is delivered by
facsimile transmission, PDF, electronic signature or other similar electronic
means, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof.

       

      [remainder of page intentionally left
blank]

       

       

      
        
          
          

        

        
          -28-

          
            

          

        

        
          
          

        

      

       

       

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

       

      COMPANY:

       

      ADVANCED
GROWING SYSTEMS, INC.

      

      

      By: /s/
Christopher J.
Nichols                      

      Name:
Christopher J. Nichols

      Title:
President/CEO

      

      

      ACKNOWLEDGEMENT

      

      STATE OF
________________________               )

       

      )  ss.:

       

      COUNTY OF
______________________               
)

       

      On the
___ day of __________________, 200__, before me, the undersigned, a notary
public in and for such state, personally appeared ________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity as an executive
officer on behalf of _________________________, and that by his signature on the
instrument, he executed the instrument, and that he made such appearance before
the undersigned.

       

       

      __________________________________

       

      Notary Public

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

       

      ADDITIONAL
SIGNATURE PAGES TO NOTE PURCHASE AGREEMENT

      

      INVESTOR:

      

      CCM
PARTNERS FUND, LP

      

      

      

      By: /s/
Louis
Rabman                                                       

      Name:  Louis
Rabman  

      Title:  

      

      

      

      AGGREGATE
SUBSCRIPTION AMOUNT:

      

      Purchase
Price: $______________

      

      Principal
Amount of Notes: $______________

      

      Number of
Consideration Shares: ______________

      

      

      
 

      

      

      -30-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]