Document:

EXHIBIT
      10.5

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of May 3, 2006, among Sweetskinz Holdings, Inc., a Delaware corporation
      (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”)
      and Rule 506 promulgated thereunder, the Company desires to issue and sell
      to
      each Purchaser, and each Purchaser, severally and not jointly, desires to
      purchase from the Company, securities of the Company as more fully described
      in
      this Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1 Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 144 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

    “Closing
      Price”
means
      on any particular date (a) the last reported closing bid price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time)), or (b) if there is no such price on such date,
      then
      the closing bid price on the Trading Market on the date nearest preceding
      such

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    date
      (as
      reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c)  if the
      Common Stock is not then listed or quoted on the Trading Market and if prices
      for the Common Stock are then reported in the “pink sheets” published by the
      National Quotation Bureau Incorporated (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported, or (d) if the shares of Common Stock
      are not then publicly traded the fair market value of a share of Common Stock
      as
      determined by an appraiser selected in good faith by the Purchasers of a
      majority in interest of the Debentures then outstanding.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $.001 per share, and any other class
      of securities into which such securities may hereafter have been reclassified
      or
      changed into. 

     

    “Common
      Stock Equivalents”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including, without limitation,
      any
      debt, preferred stock, rights, options, warrants or other instrument that is
      at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Company
      Counsel”
means
      Rubin, Bailin, Ortoli, LLP.

     

    “Conversion
      Price”
shall
      have the meaning ascribed to such term in the Debentures.

     

    “Debentures”
means,
      the 5% Secured Convertible Debentures due, subject to the terms therein, 5
      years
      from their date of issuance, issued by the Company to the Purchasers hereunder,
      in the form of Exhibit
      A
      hereto.

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.

     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Escrow
      Agent”
shall
      mean Signature Bank.

     

    “Escrow
      Agreement”
shall
      mean the Escrow Agreement of even date herewith among the Company, Oceana
      Partners LLC and the Escrow Agent.

     

    “Evaluation
      Date”
shall
      have the meaning ascribed to such term in Section 3.1(r). 

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

     

    
      
         

      

      
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    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      by a
      majority of the non-employee members of the Board of Directors of the Company
      or
      a majority of the members of a committee of non-employee directors established
      for such purpose, (b) securities upon the exercise or exchange of or conversion
      of any Securities issued hereunder and/or securities exercisable or exchangeable
      for or convertible into shares of Common Stock issued and outstanding on the
      date of this Agreement, provided that such securities have not been amended
      since the date of this Agreement to increase the number of such securities
      or to
      decrease the exercise, exchange or conversion price of any such securities,
      (c)
      securities issued pursuant to acquisitions or strategic transactions approved
      by
      a majority of the disinterested directors, provided any such issuance shall
      only
      be to a Person which is, itself or through its subsidiaries, an operating
      company in a business synergistic with the business of the Company and in which
      the Company receives benefits in addition to the investment of funds, but shall
      not include a transaction in which the Company is issuing securities primarily
      for the purpose of raising capital or to an entity whose primary business is
      investing in securities and (d) for purposes of Sections 4.14 and 4.15 only,
      up
      to $750,000 in equity financing with Accredited Investors in the form of shares
      of Common Stock at a per share purchase price not less than $1.00 per share
      (subject to forward and reverse stock splits, recapitalizations and the like
      after the date hereof) and 100% warrant coverage (which warrants shall have
      an
      exercise price of not less than $1.15 (subject to forward and reverse stock
      splits, recapitalizations and the like after the date hereof) and have terms
      no
      more favorable than the Warrants issued hereunder, provided that investors
      shall
      execute definitive agreements for the purchase of such securities and such
      transactions shall have closed on or before May 14, 2006.

    

    “FW”
means
      Feldman Weinstein LLP with offices located at 420 Lexington Avenue, Suite 2620,
      New York, New York 10170-0002.

     

    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Intellectual
      Property Rights”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Legend
      Removal Date”
shall
      have the meaning ascribed to such term in Section 4.1(c). 

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

     

    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

     

    “Maximum
      Rate”
shall
      have the meaning ascribed to such term in Section 5.17.

     

    
      
         

      

      
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    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.14. 

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “PPM”
shall
      have the meaning ascribed to such term in Section 3.1(x).

     

    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.14. 

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.11.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, in the form of
Exhibit
      B
      attached
      hereto, the terms and conditions of which are incorporated herein by reference
      and deemed a part hereof.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Underlying
      Shares. 

     

    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon exercise or conversion
      in full of all Warrants and Debentures (including Underlying Shares issuable
      as
      payment of interest), ignoring any conversion or exercise limits set forth
      therein, and assuming that the Conversion Price is at all times on and after
      the
      date of determination 75% of the then Conversion Price on the Trading Day
      immediately prior to the date of determination.

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule. 

     

    “Securities”
means
      the Debentures, the Warrants and the Underlying Shares.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

     

    “Security
      Agreement”
means
      the Security Agreement, dated the date hereof, among the Company and the
      Purchasers, in the form of Exhibit
      F
      attached
      hereto.

     

    
      
         

      

      
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    “Security
      Documents”
shall
      mean the Security Agreement, the Subsidiary Guarantees and any other documents
      and filing required thereunder in order to grant the Purchasers a first priority
      security interest in the assets of the Company as provided in the Security
      Agreement, including all UCC-1 filing receipts.

     

    “Short
      Sales”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act (but
      shall not be deemed to include the location and/or reservation of borrowable
      shares of Common Stock). 

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Debentures and
      Warrants purchased hereunder as specified below such Purchaser’s name on the
      signature page of this Agreement and next to the heading “Subscription Amount”,
      in United States Dollars and in immediately available funds.

     

    “Subsequent
      Financing”
shall
      have the meaning ascribed to such term in Section 4.14.

     

    “Subsequent
      Financing Notice”
shall
      have the meaning ascribed to such term in Section 4.14. 

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

     

    “Subsidiary
      Guarantee”
means
      the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in favor
      of
      the Purchasers, in the form of Exhibit
      G
      attached
      hereto. 

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange, the Nasdaq National Market, the
      OTC
      Bulletin Board or the Pink Sheets.

     

    “Transaction
      Documents”
means
      this Agreement, the Escrow Agreement, the Warrants, the Debentures, the Security
      Agreement, the Security Documents and the Registration Rights Agreement and
      any
      other documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issued and issuable upon conversion or redemption
      of
      the Debentures and upon exercise of the Warrants and issued and issuable in
      lieu
      of the cash payment of interest on the Debentures in accordance with the terms
      of the Debentures. 

     

    “Warrants”
means
      collectively the Common Stock purchase warrants, in the form of Exhibit
      C
      delivered to the Purchasers at the Closing in accordance with Section
      2.2(a)

     

    
      
         

      

      
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    hereof,
      which Warrants shall be exercisable immediately and have a term of exercise
      equal to 3 years.

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of the Warrants.

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, concurrent with the execution and delivery of this Agreement by the
      parties hereto, the Company agrees to sell, and each Purchaser agrees to
      purchase in the aggregate, severally and not jointly, up to $6,000,000 of
      Debentures and Warrants, with a minimum aggregate Subscription Amount of
      $3,000,000. Notwithstanding the foregoing, in lieu of paying for the Debentures
      and Warrants in cash, the Purchasers listed on Schedule 2.1 shall pay for such
      securities by exchanging the promissory notes of Sweetskinz, Inc., a
      wholly-owned subsidiary of the Company held by such Purchaser on the date
      hereof, in the amounts set forth on Schedule 2.1. Each Purchaser shall deliver
      to the Escrow Agent via wire transfer or a certified check immediately available
      funds equal to their Subscription Amount and the Company shall deliver to each
      Purchaser their respective Debentures and Warrants as determined pursuant to
      Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
      Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and
      2.3,
      the Closing shall occur at the offices of FW, or such other location as the
      parties shall mutually agree.

     

    2.2 Deliveries

     

    (a) On
      or
      prior to the Closing Date, the Company shall deliver or cause to be delivered
      to
      each Purchaser the following:

     

    (i) this
      Agreement duly executed by the Company;

     

    (ii) a
      legal
      opinion of Company Counsel, in the form of Exhibit
      D
      attached
      hereto; 

     

    (iii) a
      Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
      registered in the name of such Purchaser;

     

    (iv) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by
      $1.00, with an exercise price equal to $1.15, subject to adjustment therein;
      

     

    (v) the
      Security Agreement, duly executed by the Company and its Subsidiaries, along
      with all the Security Documents, including the Subsidiary
      Guarantees;

     

    
      
         

      

      
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    (vi) a
      lock-up
      agreement, in substantially the form attached hereto as Exhibit
      E,
      duly
      executed by Yann Mellet and Andrew Boyland (provided,
      however,
      the
“Restriction Period” in the lock-up agreement executed by Mr. Boyland shall only
      be for a period of one year following the Closing);

     

    (vii) a
      lock-up
      agreement, in form and substance reasonably satisfactory to the Company, duly
      executed by (i) the holders of at least 85% of the total options held by
      unaffiliated option-holders and (ii) the former holders of at least 95% of
      the
      aggregate original face value of those certain convertible promissory notes
      of
      Sweetskinz, Inc. issued in the original aggregate principal amount of
      $3,353,852.85; and

     

    (viii) the
      Registration Rights Agreement duly executed by the Company.

     

    (b) On
      or
      prior to the Closing Date, each Purchaser shall deliver or cause to be delivered
      to the Company (except as noted) the following:

     

    (i) this
      Agreement duly executed by such Purchaser (execution of which shall also
      constitute execution of the Registration Rights Agreement and Security
      Agreement); and

     

    (ii) such
      Purchaser’s Subscription Amount (cash Subscription Amounts to be delivered to
      the Escrow Agent). 

     

    2.3 Closing
      Conditions. 

     

    (a) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    (i) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Purchasers contained herein; 

     

    (ii) all
      obligations, covenants and agreements of the Purchasers required to be performed
      at or prior to the Closing Date shall have been performed;
      and

     

    (iii) the
      delivery by the Purchasers of the items set forth in Section 2.2(b) of this
      Agreement.

     

    (b) The
      respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions being met:

     

    (i) the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein;

     

    (ii) all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed; 

     

    
      
         

      

      
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    (iii) the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement; 

     

    (iv) there
      shall have been no Material Adverse Effect with respect to the Company since
      the
      date hereof; 

     

    (v) the
      merger transaction by and among the Company, a newly formed, wholly-owned
      subsidiary of the Company and Sweetskinz, Inc., a Pennsylvania corporation
      (the
“Reverse Merger”) shall have been consummated on terms and conditions reasonably
      satisfactory to the Purchasers and the Company shall have delivered the
      Purchasers evidence thereof; and

     

    (vi) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg Financial Markets shall not have been suspended or limited, or minimum
      prices shall not have been established on securities whose trades are reported
      by such service, or on any Trading Market, nor shall a banking moratorium have
      been declared either by the United States or New York State authorities nor
      shall there have occurred any material outbreak or escalation of hostilities
      or
      other national or international calamity of such magnitude in its effect on,
      or
      any material adverse change in, any financial market which, in each case, in
      the
      reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to
      purchase the Debentures at the Closing.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 Representations
      and Warranties of the Company. Except
      as
      set forth under the corresponding section of the Disclosure Schedules which
      Disclosure Schedules shall be deemed a part hereof, the Company and Sweetskinz,
      Inc., a wholly owned Subsidiary of the Company, hereby jointly and severally
      make the representations and warranties set forth below to each
      Purchaser:

     

    (a) Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar rights to
      subscribe for or purchase securities. If the Company has no subsidiaries, then
      references in the Transaction Documents to the Subsidiaries will be
      disregarded.

     

    
      
         

      

      
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    (b) Organization
      and Qualification.
      The
      Company and each of the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
      Adverse Effect”)
      and no
      Proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing or seeking to revoke, limit or curtail such power and authority
      or
      qualification.

     

    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations hereunder and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company, its board of directors or its stockholders
      in
      connection therewith other than in connection with the Required Approvals.
      Each
      Transaction Document has been (or upon delivery will have been) duly executed
      by
      the Company and, when delivered in accordance with the terms hereof and thereof,
      will constitute the valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms except (i) as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights generally and
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the issuance and sale of the Securities and the consummation by the Company
      of
      the other transactions contemplated hereby and thereby do not and will not
      (i)
      conflict with or violate any provision of the Company’s or any Subsidiary’s
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents, or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, result
      in the creation of any Lien upon any of the properties or assets of the Company
      or any Subsidiary, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other understanding
      to
      which the Company or any Subsidiary is a party or by which any property or
      asset
      of the Company or any Subsidiary is bound or affected, or (iii) subject to
      the
      Required Approvals, conflict with or result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company or a Subsidiary is subject
      (including federal and state securities laws and regulations), or by which
      any
      property or asset of the Company or a Subsidiary is bound or affected; except
      in
      the case of each of clauses (ii) and (iii), such as could not have or reasonably
      be expected to result in a Material Adverse Effect.

     

    (e) Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.6
      of this Agreement, (ii) the filing with the Commission of the Registration
      Statement, (iii) application(s) to each applicable Trading Market for the
      listing of the Underlying Shares for trading thereon in the time and manner
      required thereby, and (iv) the filing of Form D with the Commission and such
      filings as are required to be made under applicable state securities laws
      (collectively, the “Required
      Approvals”).

     

    (f) Issuance
      of the Securities.
      The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be duly and validly issued, fully
      paid and nonassessable, free and clear of all Liens imposed by the Company
      other
      than restrictions on transfer provided for in the Transaction Documents. The
      Underlying Shares, when issued in accordance with the terms of the Transaction
      Documents, will be validly issued, fully paid and nonassessable, free and clear
      of all Liens imposed by the Company. The Company has reserved from its duly
      authorized capital stock a number of shares of Common Stock for issuance of
      the
      Underlying Shares at least equal to the Required Minimum on the date hereof.
      

     

    (g) Capitalization.
      The
      issued and outstanding capitalization of the Company immediately prior to the
      Closing and following the consummation of the Reverse Merger is as set forth
      on
Schedule
      3.1(g).
      The
      Company has not issued any capital stock other than as set forth on Schedule
      3.1(g). No Person has any right of first refusal, preemptive right, right of
      participation, or any similar right to participate in the transactions
      contemplated by the Transaction Documents. Except as a result of the purchase
      and sale of the Securities, there are no outstanding options, warrants, script
      rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities, rights or obligations convertible into or
      exercisable or exchangeable for, or giving any Person any right to subscribe
      for
      or acquire, any shares of Common Stock, or contracts, commitments,
      understandings or arrangements by which the Company or any Subsidiary is or
      may
      become bound to issue additional shares of Common Stock or Common Stock
      Equivalents. The issuance and sale of the Securities will not obligate the
      Company to issue shares of Common Stock or other securities to any Person (other
      than the Purchasers) and will not result in a right of any holder of Company
      securities to adjust the

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    exercise,
      conversion, exchange or reset price under such securities. All of the
      outstanding shares of capital stock of the Company are validly issued, fully
      paid and nonassessable, have been issued in compliance with all federal and
      state securities laws, and none of such outstanding shares was issued in
      violation of any preemptive rights or similar rights to subscribe for or
      purchase securities. No further approval or authorization of any stockholder,
      the Board of Directors of the Company or others is required for the issuance
      and
      sale of the Securities. There are no stockholders agreements, voting agreements
      or other similar agreements with respect to the Company’s capital stock to which
      the Company is a party or, to the knowledge of the Company, between or among
      any
      of the Company’s stockholders.
      A
      complete list of stockholders of record, with their shareholdings immediately
      prior to the Closing, is included in Schedule
      3.1(g).

     

    (h) Financial
      Statements.
      The
      audited financial statements of the Company and its Subsidiairies (including
      Sweetskinz, Inc.) for the past two fiscal years are attached hereto as Schedule
      3.1(h). Such financial statements comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect on the date hereof. Such financial
      statements have been prepared in accordance with United States generally
      accepted accounting principles applied on a consistent basis during the periods
      involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

    (i) Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements attached hereto as Schedule
      3.1(h), except as specifically disclosed therein, (i) there has been no event,
      occurrence or development that has had or that could reasonably be expected
      to
      result in a Material Adverse Effect, (ii) the Company has not incurred any
      liabilities (contingent or otherwise) other than (A) trade payables and accrued
      expenses incurred in the ordinary course of business consistent with past
      practice and (B) liabilities not required to be reflected in the Company’s
      financial statements pursuant to GAAP or required to be disclosed in filings
      made with the Commission, (iii) the Company has not altered its method of
      accounting, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its capital
      stock and (v) the Company has not issued any equity securities to any officer,
      director or Affiliate, except pursuant to existing Company stock option plans.
      The Company does not have pending before the Commission any request for
      confidential treatment of information. Except for the issuance of the Securities
      contemplated by this Agreement, no event, liability or development has occurred
      or exists with respect to the Company or its Subsidiaries or their respective
      business, properties, operations or financial condition, that would be required
      to be disclosed by the Company under applicable securities laws at the time
      this
      representation is made that has not been publicly disclosed 1 Trading Day prior
      to the date that this representation is made. 

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (j) Litigation.
      There
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, any Subsidiary or any of their respective properties before or by
      any
      court, arbitrator, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) (collectively, an “Action”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of the Transaction Documents or the Securities or (ii) could, if there
      were
      an unfavorable decision, have or reasonably be expected to result in a Material
      Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
      officer thereof, is or has been the subject of any Action involving a claim
      of
      violation of or liability under federal or state securities laws or a claim
      of
      breach of fiduciary duty. There has not been, and to the knowledge of the
      Company, there is not pending or contemplated, any investigation by the
      Commission involving the Company or any current or former director or officer
      of
      the Company. The Commission has not issued any stop order or other order
      suspending the effectiveness of any registration statement filed by the Company
      or any Subsidiary under the Exchange Act or the Securities Act. None of the
      Company’s or its Subsidiaries’ employees is a member of a union that relates to
      such employee’s relationship with the Company, and neither the Company or any of
      its Subsidiaries is a party to a collective bargaining agreement, and the
      Company and its Subsidiaries believe that their relationships with their
      employees are good. No executive officer, to the knowledge of the Company,
      is,
      or is now expected to be, in violation of any material term of any employment
      contract, confidentiality, disclosure or proprietary information agreement
      or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer does
      not
      subject the Company or any of its Subsidiaries to any liability with respect
      to
      any of the foregoing matters. The Company and its Subsidiaries are in compliance
      with all U.S. federal, state, local and foreign laws and regulations relating
      to
      employment and employment practices, terms and conditions of employment and
      wages and hours, except where the failure to be in compliance could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    (k) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a Material Adverse Effect.

     

    (l) Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws applicable to its business
      and all such laws that affect the environment, except in each case as could
      not
      have a Material Adverse Effect.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    (m) Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      PPM, except where the failure to possess such permits could not have or
      reasonably be expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    (n) Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries and good and marketable title in all personal property owned
      by
      them that is material to the business of the Company and the Subsidiaries,
      in
      each case free and clear of all Liens, except for Liens as do not materially
      affect the value of such property and do not materially interfere with the
      use
      made and proposed to be made of such property by the Company and the
      Subsidiaries and Liens for the payment of federal, state or other taxes, the
      payment of which is neither delinquent nor subject to penalties. Any real
      property and facilities held under lease by the Company and the Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases of which the Company
      and the Subsidiaries are in compliance.

     

    (o) Intellectual
      Property.
      

     

    (i) The
      term
“Intellectual
      Property Rights”
      includes:

     

    
      	 	
              1.

            	
              the
                name of the Company, all fictional business names, trading names,
                registered and unregistered trademarks, service marks, and applications
                (collectively, “Marks'');

            

    

     

    
      	 	
              2.

            	
              all
                patents, patent applications, and inventions and discoveries that
                may be
                patentable (collectively, “Patents'');

            

    

     

    
      	 	
              3.

            	
              all
                copyrights in both published works and published works (collectively,
                “Copyrights”);
                and

            

    

     

    
      	 	
              4.

            	
              all
                know-how, trade secrets, confidential information, customer lists,
                software, technical information, data, process technology, plans,
                drawings, and blue prints (collectively, “Trade
                Secrets'');
                owned, used, or licensed by the Company as licensee or
                licensor.

            

    

     

    (ii) Agreements.
      Neither
      the Company nor its Subsidiaries has paid or received any royalties. Further,
      neither the Company nor its Subsidiaries has any contracts relating to the
      Intellectual Property Rights to which the Company or any Subsidiary is a party
      or by which the Company or any Subsidiary is bound, except for any license
      implied by the sale of a product and perpetual, paid-up licenses for commonly
      available software programs with a value of less than $5,000 under which the
      Company or any Subsidiary is the licensee. 

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (iii) Know-How
      Necessary for the Business.
      The
      Intellectual Property Rights are all those necessary for the operation of the
      Company’s businesses as it is currently conducted or as reflected in the
      business plan given to the Purchaser. The Company is the owner of all right,
      title, and interest in and to each of the Intellectual Property Rights, free
      and
      clear of all liens, security interests, charges, encumbrances, equities, and
      other adverse claims, and has the right to use without payment to a third party
      all of the Intellectual Property Rights. Neither the Company nor any Subsidiary
      has received a written notice that the Intellectual Property Rights used by
      the
      Company or any Subsidiary violates or infringes upon the rights of any Person.
      Except as set forth in Schedule
      3.1(o),
      all
      former and current employees of the Company have executed written contracts
      with
      the Company that assign to the Company all rights to any inventions,
      improvements, discoveries, or information relating to the business of the
      Company. No employee of the Company has entered into any contract that restricts
      or limits in any way the scope or type of work in which the employee may be
      engaged or requires the employee to transfer, assign, or disclose information
      concerning his work to anyone other than of the Company.

     

    (iv) Know-How
      Necessary for the Business.
      Schedule
      3.1(o)
      contains
      a complete and accurate list and summary description of all Patents. The Company
      is the owner of all right, title and interest in and to each of the Patents,
      free and clear of all liens, security interests, charges, encumbrances,
      entities, and other adverse claims. All of the issued Patents are currently
      in
      compliance with formal legal requirements (including payment of filing,
      examination, and maintenance fees and proofs of working or use), are valid
      and
      enforceable, and are not subject to any maintenance fees or taxes or actions
      falling due within ninety days after the Closing Date. No patent has been or
      is
      now involved in any interference, reissue, reexamination, or opposition
      proceeding. To the Company’s knowledge, there is no potentially interfering
      patent or patent application of any third party. To the Company’s knowledge, no
      Patent is infringed. No Patent has been challenged or threatened in any way.
      To
      the Company’s knowledge, none of the products manufactured and sold, nor any
      process or know-how used, by the Company infringes or is alleged to infringe
      any
      patent or other proprietary right of any other Person. All products made, used,
      or sold under the Patents have been marked with the proper patent
      notice.

     

    (v) Trademarks.
      Schedule
      3.1(o)
      contains
      a complete and accurate list and summary description of all Marks. The Company
      is the owner of all right, title, and interest in and to each of the Marks,
      free
      and clear of all liens, security interests, charges, encumbrances, equities,
      and
      other adverse claims. All Marks that have been registered with the United States
      Patent and Trademark Office are currently in compliance with all formal legal
      requirements (including the timely post-registration tiling of

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    affidavits
      of use and incontestability and renewal applications), are valid and
      enforceable, and are not subject to any maintenance fees or taxes or actions
      falling due within ninety days after the Closing Date. No Mark has been or
      is
      now involved in any opposition, invalidation, or cancellation and, to the
      Company’s knowledge, no such action is threatened with the respect to any of the
      Marks. To the Company’s knowledge, there is no potentially interfering trademark
      or trademark application of any third party. To the Company’s knowledge, no Mark
      is infringed or has been challenged or threatened in any way. To the Company’s
      knowledge, none of the Marks used by the Company infringes or is alleged to
      infringe any trade name, trademark, or service mark of any third party. All
      products and materials containing a Mark bear the proper federal registration
      notice where permitted by law.

     

    (vi) Copyrights.
      Schedule
      3.1(o)
      contains
      a complete and accurate list and summary description of all Copyrights. The
      Company is the owner of all right, title, and interest in and to each of the
      Copyrights, free and clear of all liens, security interests, charges,
      encumbrances, equities, and other adverse claims. All the Copyrights have been
      registered and are currently in compliance with formal requirements, are valid
      and enforceable, and are not subject to any maintenance fees or taxes or actions
      falling due within ninety days after the date of Closing. To the Company’s
      knowledge, no Copyright is infringed or has been challenged or threatened in
      any
      way. To the Company’s knowledge, none of the subject matter of any of the
      Copyrights infringes or is alleged to infringe any copyright of any third party
      or is a derivative work based on the work of a third party. All works
      encompassed by the Copyrights have been marked with the proper copyright
      notice.

     

    (i) Trade
      Secrets.
      With
      respect to each Trade Secret, the documentation relating to such Trade Secret
      is
      current, accurate, and sufficient in detail and content to identify and explain
      it and to allow its full and proper use without reliance on the knowledge or
      memory of any individual. The Company has taken all reasonable precautions
      to
      protect the secrecy, confidentiality, and value of its Trade Secrets. The
      Company has good title and an absolute (but not necessarily exclusive) right
      to
      use the Trade Secrets. The Trade Secrets are not part of the public knowledge
      or
      literature, and, to the Company’s knowledge, have not been used, divulged, or
      appropriated either for the benefit of any Person (other the Company) or to
      the
      detriment of the Company. No Trade Secret is subject to any adverse claim or
      has
      been challenged or threatened in any way.

     

    (p) Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers liability
      insurance coverage at least equal to the aggregate Subscription Amount. To
      the
      best knowledge of

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    the
      Company, such insurance contracts and policies are accurate and complete.
      Neither the Company nor any Subsidiary has any reason to believe that it will
      not be able to renew its existing insurance coverage as and when such coverage
      expires or to obtain similar coverage from similar insurers as may be necessary
      to continue its business without a significant increase in cost.

     

    (q) Transactions
      With Affiliates and Employees.
      Except
      as set forth on Schedule 3.1(q), none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $60,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company. 

     

    (r) Sarbanes-Oxley;
      Internal Accounting Controls.
      The
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 which are applicable to it as of the Closing Date. The
      Company and the Subsidiaries maintain a system of internal accounting controls
      sufficient 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 GAAP 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. By the filing date of the Registration
      Statement, the Company shall have established disclosure controls and procedures
      (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
      and
      designed such disclosure controls and procedures to ensure that material
      information relating to the Company, including its Subsidiaries, is made known
      to the certifying officers by others within those entities.

     

    (s) Certain
      Fees.
      Except
      as set forth on Schedule 3.1(s), no brokerage or finder’s fees or commissions
      are or will be payable by the Company to any broker, financial advisor or
      consultant, finder, placement agent, investment banker, bank or other Person
      with respect to the transactions contemplated by the Transaction Documents.
      The
      Purchasers shall have no obligation with respect to any fees or with respect
      to
      any claims made by or on behalf of other Persons for fees of a type contemplated
      in this Section that may be due in connection with the transactions contemplated
      by the Transaction Documents.

     

    (t) Private
      Placement.
      Assuming the accuracy of the Purchasers representations and warranties set
      forth
      in Section 3.2, no registration under the Securities

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

    Act
      is
      required for the offer and sale of the Securities by the Company to the
      Purchasers as contemplated hereby. The issuance and sale of the Securities
      hereunder does not contravene the rules and regulations of the Trading
      Market.

     

    (u) Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an Affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as amended.
      The Company shall conduct its business in a manner so that it will not become
      subject to the Investment Company Act.

     

    (v) Registration
      Rights.
      Other
      than each of the Purchasers, no Person has any right to cause the Company to
      effect the registration under the Securities Act of any securities of the
      Company.

     

    (w) Application
      of Takeover Protections.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a result
      of the Purchasers and the Company fulfilling their obligations or exercising
      their rights under the Transaction Documents, including without limitation
      as a
      result of the Company’s issuance of the Securities and the Purchasers’ ownership
      of the Securities.

     

    (x) Disclosure.
      The
      Company confirms that, neither it nor any other Person acting on its behalf
      has
      provided any of the Purchasers or their agents or counsel with any information
      that constitutes or might constitute material, non-public information. The
      Company understands and confirms that the Purchasers will rely on the foregoing
      representations and covenants in effecting transactions in securities of the
      Company. Attached hereto as Schedule 3.1(x) is a copy of a Company’s private
      placement memorandum dated April 6, 2006 (which document contains, among other
      information, risk factors concerning the Company and financial statements
      required to be filed therewith) (the “PPM”). All disclosure provided to the
      Purchasers regarding the Company, its business and the transactions contemplated
      hereby, including the Disclosure Schedules to this Agreement, furnished by
      or on
      behalf of the Company with respect to the representations and warranties made
      herein are true and correct with respect to such representations and warranties
      and do not contain any untrue statement of a material fact or omit to state
      any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were made, not misleading. The Company
      acknowledges and agrees that no Purchaser makes or has made any representations
      or warranties with respect to the transactions contemplated hereby other than
      those specifically set forth in Section 3.2 hereof.

     

    (y) No
      Integrated Offering.
      Assuming
      the accuracy of the Purchasers’ representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any offers
      or
      sales of any security or solicited any offers to buy any security,
      under

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    circumstances
      that would cause this offering of the Securities to be integrated with prior
      offerings by the Company for purposes of the Securities Act or any applicable
      shareholder approval provisions, including, without limitation, under the rules
      and regulations of any Trading Market on which any of the securities of the
      Company are listed or designated. 

     

    (z) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the
      Securities hereunder, (i) the Company’s fair saleable value of its assets
      exceeds the amount that will be required to be paid on or in respect of the
      Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature; (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debt when such amounts
      are
      required to be paid. The Company does not intend to incur debts beyond its
      ability to pay such debts as they mature (taking into account the timing and
      amounts of cash to be payable on or in respect of its debt). The Company has
      no
      knowledge of any facts or circumstances which lead it to believe that it will
      file for reorganization or liquidation under the bankruptcy or reorganization
      laws of any jurisdiction within one year from the Closing Date. As of the date
      hereof, neither the Company nor any Subsidiary has any outstanding secured
      or
      unsecured Indebtedness. For the purposes of this Agreement, “Indebtedness”
shall
      mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (b) all guaranties, endorsements and other contingent obligations in respect
      of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Neither
      the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

     

    (aa) Tax
      Status.
      Except
      as set forth on Schedule
      3.1(aa)
      and for
      matters that would not, individually or in the aggregate, have or reasonably
      be
      expected to result in a Material Adverse Effect, the Company and each Subsidiary
      has filed all necessary federal, state and foreign income and franchise tax
      returns and has paid or accrued all taxes shown as due thereon, and the Company
      has no knowledge of a tax deficiency which has been asserted or threatened
      against the Company or any Subsidiary.

     

    (bb) No
      General Solicitation.
      Neither
      the Company nor any person acting on behalf of the Company has offered or sold
      any of the Securities by any form of general solicitation or general
      advertising. The Company has offered the Securities for sale only

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

     

    to
      the
      Purchasers and certain other “accredited investors” within the meaning of Rule
      501 under the Securities Act.

     

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

     

    (dd) Accountants.
      The
      Company’s accountants are set forth on Schedule
      3.1(dd) of
      the
      Disclosure Schedule. To the knowledge of the Company, such accountants, who
      the
      Company expects will express their opinion with respect to the financial
      statements to be included in the Company’s filing of the Registration Statement,
      are a registered public accounting firm as required by the Securities
      Act.

     

    (ee) Acknowledgment
      Regarding Purchasers’ Purchase of Securities.
      The
      Company acknowledges and agrees that each of the Purchasers is acting solely
      in
      the capacity of an arm’s length purchaser with respect to the Transaction
      Documents and the transactions contemplated hereby. The Company further
      acknowledges that no Purchaser is acting as a financial advisor or fiduciary
      of
      the Company (or in any similar capacity) with respect to this Agreement and
      the
      transactions contemplated hereby and any advice given by any Purchaser or any
      of
      their respective representatives or agents in connection with this Agreement
      and
      the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each Purchaser
      that the Company’s decision to enter into this Agreement has been based solely
      on the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

     

    (ff) Seniority.
      As of
      the Closing Date, no Indebtedness or other claim against the Company is senior
      to the Debentures in right of payment, whether with respect to interest or
      upon
      liquidation or dissolution, or otherwise, other than indebtedness secured by
      purchase money security interests (which is senior only as to underlying assets
      covered thereby) and capital lease obligations (which is senior only as to
      the
      property covered thereby).

     

    (gg) Acknowledgement
      Regarding Purchasers’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding
      (except for Section 4.16 hereof), it is understood and agreed by the Company
      (i)
      that none of the Purchasers have been asked to agree, nor has any Purchaser
      agreed, to desist from purchasing or selling, long and/or short, securities
      of
      the Company, or “derivative” securities based on securities issued by the
      Company or to hold the Securities for any specified term; (ii) that past or
      future open market or other transactions by any Purchaser, including Short
      Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions,

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

     

    before
      or
      after the closing of this or future private placement transactions, may
      negatively impact the market price of the Company’s publicly-traded securities;
      (iii) that any Purchaser, and counter parties in “derivative” transactions to
      which any such Purchaser is a party, directly or indirectly, presently may
      have
      a “short” position in the Common Stock, and (iv) that each Purchaser shall not
      be deemed to have any affiliation with or control over any arm’s length
      counter-party in any “derivative” transaction. The
      Company further understands and acknowledges that (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Underlying Shares deliverable with respect to Securities
      are being determined and (b) such hedging activities (if any) could reduce
      the
      value of the existing stockholders' equity interests in the Company at and
      after
      the time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents.

     

    (hh) Manipulation
      of Price. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities (other than for the placement agent’s placement of the Securities),
      or (iii) paid or agreed to pay to any person any compensation for soliciting
      another to purchase any other securities of the Company.

     

    (ii) Manufacturing
      and Marketing Rights.
      The
      Company has not granted rights to manufacture, produce, assemble, license,
      market, or sell its products to any other Person and is not bound by any
      agreement that affects the Company’s exclusive right to develop, manufacture,
      assemble, distribute, market or sell its products.

     

    (jj) Employees.
      The
      Company has no collective bargaining agreements with any of its employees.
      There
      is no labor union organizing activity pending or, to the Company’s knowledge,
      threatened with respect to the Company. Except as set forth on Schedule
      3.1(jj),
      the
      Company is not a party to or bound by any currently effective employment
      contract, deferred compensation arrangement, bonus plan, incentive plan, profit
      sharing plan, retirement agreement or other employee compensation plan or
      agreement. To the Company’s knowledge, no employee of the Company, nor any
      consultant with whom the Company has contracted, is in violation of any term
      of
      any employment contract, proprietary information agreement or any other
      agreement relating to the right of any such individual to be employed by, or
      to
      contract with, the Company because of the nature of the business to be conducted
      by the Company; and to the Company’s knowledge the continued employment by the
      Company of its present employees, and the performance of the Company’s contracts
      with its independent contractors, will not result in any such violation. The
      Company has not received any notice alleging that any such violation has
      occurred. No employee of the Company has been granted the right to continued
      employment by the Company or to any material compensation following termination
      of employment with the Company. The Company is not aware that any officer,
      key
      employee or group of employees intends to terminate his,

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

     

    her
      or
      their employment with the Company nor does the Company have a present intention
      to terminate the employment of any officer, key employee or group of
      employees.

     

    (kk) Obligations
      of Management.
      Each
      officer and key employee of the Company is currently devoting substantially
      all
      of his or her business time to the conduct of business of the Company. The
      Company is not aware that any officer or key employee of the Company is planning
      to work less than full time at the Company in the future. No officer or key
      employee is the currently working or, to the Company’s knowledge, plans to work
      for a competitive enterprise, whether or not such officer of key employee is
      or
      will be compensated by such enterprise.

     

    (ll) Environmental
      and Safety Laws.
      

     

    (i) The
      Company is, and at all times has been, in full compliance with, and has not
      been
      and is not in violation of or liable under, any Environmental Law. The Company
      has no basis to expect, nor has it or any other Person for whose conduct it
      is
      or may be held to be responsible received, any actual or threatened order,
      notice, or other communication from (i) any governmental body or private citizen
      acting in the public interest, or (ii) the current or prior owner or operator
      of
      any facilities, of any actual or potential violation or failure to comply with
      any Environmental Law, or of any actual or threatened obligation to undertake
      or
      bear the cost of any environmental, health, and safety liabilities with respect
      to any of the facilities or any other properties or assets (whether real,
      personal, or mixed) in which the Company has had an interest, or with respect
      to
      any property or facility at or to which Hazardous Materials were generated,
      manufactured, refined, transferred, imported, used, or processed by the Company,
      or any other Person for whose conduct it are or may be held responsible, or
      from
      which Hazardous Materials have been transported, treated, stored, handled,
      transferred, disposed, recycled, or received. 

     

    (ii) There
      are
      no pending or, to the knowledge of the Company, threatened claims, encumbrances,
      or other restrictions of any nature, resulting from any environmental, health,
      and safety liabilities or arising under or pursuant to any Environmental Law,
      with respect to or affecting any of the facilities or any other properties
      and
      assets (whether real, personal, or mixed) in which the Company has or had an
      interest. 

     

    (iii) The
      Company has no knowledge of any basis to expect, nor has it or any other Person
      for whose conduct it is or may be held responsible, received, any citation,
      directive, inquiry, notice, order, summons, warning, or other communication
      that
      relates to Hazardous Materials, or any alleged, actual, or potential violation
      or failure to comply with any Environmental Law, or of any alleged, actual,
      or
      potential obligation to undertake or bear the cost of any environmental, health,
      and safety

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

     

    liabilities
      with respect to any of the facilities or any other properties or assets (whether
      real, personal, or mixed) in which the Company had an interest, or with respect
      to any property or facility to which Hazardous Materials generated,
      manufactured, refined, transferred, imported, used, or processed by the Company,
      or any other Person for whose conduct it is or may be held responsible, have
      been transported, treated, stored, handled, transferred, disposed, recycled,
      or
      received.

     

    (iv) Neither
      the Company nor any other Person for whose conduct it is or may be held
      responsible, had any environmental, health, and safety liabilities with respect
      to the facilities or, to the knowledge of the Company, with respect to any
      other
      properties and assets (whether real, personal, or mixed) in which the Company
      (or any predecessor), has or had an interest, or at any property geologically
      or
      hydrologically adjoining the facilities or any such other property or
      assets.

     

    (v) There
      are
      no Hazardous Materials present on or in the environment at the facilities or
      at
      any geologically or hydrologically adjoining property, including any Hazardous
      Materials contained in barrels, above or underground storage tanks, landfills,
      land deposits, dumps, equipment (whether moveable or fixed) or other containers,
      either temporary or permanent, and deposited or located in land, water, sumps,
      or any other part of the facilities or such adjoining property, or incorporated
      into any structure therein or thereon. Neither the Company nor any other Person
      for whose conduct it is or may be held responsible, or to the knowledge of
      the
      Company, any other Person, has permitted or conducted, or is aware of, any
      hazardous activity conducted with respect to the facilities or any other
      properties or assets (whether real, personal, or mixed) in which the Company
      has
      or had an interest except in full compliance with all applicable Environmental
      Laws. 

     

    (vi) There
      has
      been no release or, to the knowledge of the Company, threat of release, of
      any
      Hazardous Materials at or from the facilities or at any other locations where
      any Hazardous Materials were generated, manufactured, refined, transferred,
      produced, imported, used, or processed from or by the facilities, or from or
      by
      any other properties and assets (whether real, personal, or mixed) in which
      the
      Company has or had an interest, or to the knowledge of the Company any
      geologically or hydrologically adjoining property, whether by the Company,
      or
      any other Person.

     

    (vii) The
      Company has delivered to the Purchasers true and complete copies and results
      of
      any reports, studies, analyses, tests, or monitoring possessed or initiated
      by
      the Company pertaining to Hazardous Materials in, on, or under the facilities,
      or concerning compliance by the Company, or any other Person for whose conduct
      they are or may be held responsible, with Environmental Laws.

     

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

     

    (viii) For
      the
      purpose of this Section, Hazardous Material shall mean (i) materials which
      are
      listed or otherwise defined as “hazardous” or “toxic” under any applicable
      federal, local or stated and/or foreign laws and regulations that govern the
      existence and/or remedy of contamination on property, the protection of the
      environment from contamination, the control of the hazardous wastes, or other
      activities involving hazardous substances, including building materials or
      (b)
      petroleum products or nuclear materials.

     

    (ix) For
      the
      purpose of this Section 3.1(ll), “Environmental Law” shall have the following
      meaning:

     

    
      	 	
              1.

            	
              advising
                appropriate authorities, employees, and the public intended or actual
                releases of pollutants or hazardous substances or material, violations
                of
                discharge limits, or other prohibitions and of the commencements
                of
                activities, such as resource extraction or construction, that could
                have
                significant impact on the
                environment;

            

    

     

    
      	 	
              2.

            	
              preventing
                or reducing to acceptable levels the release of pollutants or hazardous
                substances or materials into the
                environment;

            

    

     

    
      	 	
              3.

            	
              reducing
                the quantities, preventing the release, or minimizing the hazardous
                characteristic of waste that are
                generated;

            

    

     

    
      	 	
              4.

            	
              assuring
                that products are designed, formulated, packaged, and used so that
                they do
                not present unreasonable risks to human health or the environment
                when
                used or disposed of;

            

    

     

    
      	 	
              5.

            	
              protecting
                resources, species or ecological
                amenities;

            

    

     

    
      	 	
              6.

            	
              reducing
                to acceptable levels the risk inherent in the transportation of hazardous
                substances, pollutants, oil or other potentially harmful
                substances;

            

    

     

    
      	 	
              7.

            	
              cleaning
                up pollutants that have been released, preventing the threat of release
                or
                paying the costs of such clean up or prevention;
                or

            

    

     

    
      	 	
              8.

            	
              making
                responsible parties pay private parties, or groups of them, for damages
                done to their health or to the environment, or permitting self appointed
                representatives of the public interest to recover for injuries done
                to
                public assets.

            

    

     

    (mm) Minute
      Books.
      The
      minute books of the Company made available to the Purchasers contain a complete
      summary of all meetings of directors and stockholders since the time of
      incorporation.

     

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

     

    (nn) Elections.
      To the
      Company’s knowledge, all elections and notices permitted by Section 83(b) of the
      Code and any analogous provisions of applicable state tax laws have been timely
      filed by all employees who have purchased shares of the Common Stock under
      agreements that provide for the vesting of such shares of Common
      Stock.

     

    (oo) Accounts
      Receivable.
      Neither
      the Company nor any Subsidiary has any material accounts
      receivable.

     

    (pp) Inventory.
      All
      inventory of the Company and the Subsidiaries, whether or not reflected in
      the
      balance sheet or interim balance sheet, consists of a quality and quantity
      usable and salable in the ordinary course of business, except for obsolete
      items
      and items of below standard quality, all of which have been written off or
      written down to net realizable value in the balance sheet or interim balance
      sheet or on the accounting records of the Company and the Subsidiaries as of
      the
      Closing Date, as the case may be. All inventories not written off have been
      priced at the lower of cost or market on the last in, first out basis. The
      quantities of each item of inventory (whether raw materials, work-in-process,
      or
      finished goods) are not excessive, but are reasonable in the present
      circumstances of the Company and the Subsidiaries.

     

    (qq) Employee
      Benefits.

     

    (i) Definitions.
      As used
      in this Section, the following terms shall have the meanings set forth
      below.

     

    “Company
      Other Benefit Obligation”
means
      an Other Benefit Obligation owed, adopted, or followed by the Company or an
      ERISA Affiliate of the Company.

     

    “Company
      Plan”
means
      all Plans of which the Company or an ERISA Affiliate. If the Company is or
      was a
      Plan Sponsor, or to which the Company or an ERISA Affiliate of the Company
      otherwise contributes or has contributed, or in which the Company or an ERISA
      Affiliate of the Company otherwise participates or as participated. All
      references to Plans are to Company Plans unless the context requires there
      wise.

     

    “Company
      VEDA”
means
      a
      VEDA whose members include employees of the Company or any ERISA Affiliate
      of
      the Company.

     

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974 or any successor law, and
      regulations and rules issued pursuant to that Act or any successor
      law.

     

    “ERISA
      Affiliate”
means,
      with respect to the Company, any other person that, together with the Company,
      would be treated as a single employer under the Internal Revenue Code Section
      414.

     

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

     

    “Multi-Employer
      Plan”
has
      the
      meaning given in ERISA § 3(37)(A).

     

    “Other
      Benefit Obligations”
means
      all obligations, arrangements, or customary practices, whether or not legally
      enforceable, to provide benefits, other than salary, as compensation for
      services rendered, to present or former directors, employees, or agents, other
      than obligations, arrangements, and practices that are Plans. Other Benefit
      Obligations include consulting agreements under which the compensation paid
      does
      not depend upon the amount of service rendered, sabbatical policies, severance
      payment policies, and fringe benefits within the meaning of the Internal Revenue
      Code Section 132.

     

    “Plan
      Sponsor”
has
      the
      meaning given in ERISA § 3(16)(B).

     

    “PBGC”
means
      the Pension Benefit Guaranty Corporation or any successor thereto.

     

    “Pension
      Plan”
has
      the
      meaning given in ERISA § 3(2)(A).

     

    “Plan”
has
      the
      meaning given in ERISA § 3(3).

     

    “Qualified
      Plan”
means
      any Plan that meets or purports to meet the requirements of the Internal Revenue
      Code Section 40l(a).

     

    “Title
      IV Plans”
means.
      all pension Plans that are subject to Title IV of ERISA, 29 U.S.C. § 1301 et
      seq., other than Multi-Employer Plans. 

     

    “VEBA”
means
      a
      voluntary employees' beneficiary association under the Internal Revenue Code
      Section 501(c)(9).

     

    “Welfare
      Plan”
has
      the
      meaning given in ERISA § 3(1).

     

    (ii) Disclosure
      Schedules.
      Schedule
      3.1(qq)
      contains
      a complete and accurate list of all outstanding options as well as the
      following:

     

    
      	 	
              1.

            	
              all
                Company Plans, Company Other Benefit Obligations, and Company VEBAs,
                and
                identifies as such all Company Plans that are (A) defined benefit
                Pension
                Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer
                Plans;

            

    

     

    
      	 	
              2.

            	
              (A)
                all ERISA Affiliates of the Company, and (B) all Plans of which any
                such
                ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA
                Affiliate participates or has participated, or to which any such
                ERISA
                Affiliate contributes or has
                contributed;

            

    

     

    
      	 	
              3.

            	
              for
                each Multiemployer Plan, as of its last valuation date,
                the

            

    

     

     

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

     

    amount
      of
      potential withdrawal liability of the Company and the Company’s other ERISA
      Affiliates, calculated according to information made available pursuant to
      ERISA
§ 4221(e);

     

    
      	 	
              4.

            	
              a
                calculation of the liability of the Company for post-retirement benefits
                other than pensions, made in accordance with Financial. Accounting
                Statement 106 of the Financial Accounting Standards Board, regardless
                of
                whether the Company is required by this Statement to disclose such
                information; and

            

    

     

    
      	 	
              5.

            	
              the
                financial cost of all obligations owed under any Company Plan or
                Company
                Other Benefit Obligation that is not subject to the disclosure and
                reporting requirements of ERISA.

            

    

     

    (iii) Deliverables
      under ERISA.
      The
      Company has delivered to the Purchasers, or will deliver to the Purchasers
      within ten days of the date of this Agreement:

     

    
      	 	
              1.

            	
              all
                documents that set forth the terms of each Company Plan, Company
                Other
                Benefit Obligation, or Company VEBA and of any related trust, including
                (A) all plan descriptions and summary plan descriptions of Company
                Plans
                for which the Company are required to prepare, file, and distribute
                plan
                descriptions and summary plan descriptions, and (B) all summaries
                and
                descriptions furnished to. participants and beneficiaries regarding
                Company Plans, Company Other Benefit Obligations, and Company VEBAs
                for
                which a plan description or summary plan description is not
                required;

            

    

     

    
      	 	
              2.

            	
              all
                personnel, payroll, and employee manuals and
                policies;

            

    

     

    
      	 	
              3.

            	
              all
                collective bargaining agreements pursuant to which contributions
                have been
                made or obligations incurred (including both pension and welfare
                benefits)
                by the Company and the ERISA Affiliates of the Company, and all collective
                bargaining agreements pursuant to which contributions are being made
                or
                obligations are owed by such
                entities;

            

    

     

    
      	 	
              4.

            	
              a
                written description of any Company Plan or Company Other Benefit
                Obligation that is not otherwise in
                writing;

            

    

     

    
      	 	
              5.

            	
              all
                registration statements filed with respect to any Company
                Plan;

            

    

     

    
      	 	
              6.

            	
              all
                insurance policies purchased by or to provide benefits under the
                Company
                Plan;

            

    

     

    
      	 	
              7.

            	
              all
                contracts with third party administrators, actuaries, investment
                managers,
                consultants, and other independent contractors
                that

            

    

     

     

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

     

    relate
      to
      any Company Plan, Company Other Benefit Obligation, or Company
      VEBA;

     

    
      	 	
              8.

            	
              all
                reports submitted within the four years preceding the date to this
                Agreement by a third party administrators, actuaries, investment
                managers,
                consultants, or other independent contractors with respect to any
                Company
                Plan, Company Other Benefit Obligation, or Company VEBA;
                

            

    

     

    
      	 	
              9.

            	
              all
                notifications to employees of their rights under ERISA § 601 et seq. and
                Section 4980B of the Internal Revenue
                Code;

            

    

     

    
      	 	
              10.

            	
              the
                Form 5500 filed in each of the most recent three plan years with
                respect
                to each Company Plan, including all schedules thereto and the opinions
                of
                independent accountants;

            

    

     

    
      	 	
              11.

            	
              all
                notices that were given by the Company or any ERISA Affiliate of
                the
                Company or any Company Plan to the Internal Revenue Service, the
                PBGC, or
                any participant or beneficiary, pursuant to statute, within the four
                years
                preceding the date of this Agreement, including notices that are
                expressly
                mentioned elsewhere in this
                Section;

            

    

     

    
      	 	
              12.

            	
              all
                notices that were given by the Internal Revenue Service, the PBGC,
                or the
                Department of Labor to the Company, any ERISA Affiliate of the Company,
                or
                any Company Plan within the four years preceding the date of this
                Agreement;

            

    

     

    
      	 	
              13.

            	
              with
                respect to Qualified Plans and VEBAs, the most recent determination
                letter
                for each Plan of the Company that is a Qualified Plan;
                and

            

    

     

    
      	 	
              14.

            	
              with
                respect to Title IV Plans the Form PBGC-l filed for each of the three
                most
                recent plan years.

            

    

     

    (iv) Representations.
      Except
      as set forth in Schedule
      3.1(qq):

     

    
      	 	
              1.

            	
              The
                Company has performed all of its respective obligations under all
                Company
                Plans, Company Other Benefit Obligations, and Company VEBAs. The
                Company
                has made appropriate entries in its financial records and statements
                for
                all obligations and liabilities under such Plans, VEBAs, and Obligations
                that have accrued but are not due.

            

    

     

    
      	 	
              2.

            	
              No
                statement, either written or oral, bas been made by the Company to
                any
                Person with regard to any Plan or Other Benefit Obligation that was
                not in
                accordance with the Plan or Other Benefit Obligation and that could
                have
                an adverse economic

            

    

     

     

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

    consequence
      to the Company or to Purchaser.

     

    
      	 	
              3.

            	
              The
                Company, with respect to all Company Plans, Company Other Benefits
                Obligations, and Company VEBAs, are, and each Company Plan, Company
                Other
                Benefit Obligation, and Company VEBA is, in full compliance with
                ERISA,
                the Internal Revenue Code, and other applicable law including the
                provisions of such law expressly mentioned in this Section, and with
                any
                applicable collective bargaining
                agreement.

            

    

     

    
      	 	
              a.

            	
              No
                transaction prohibited by ERISA § 406 and no “prohibited transaction”
                under the Internal Revenue Code Section 4975(c) have occurred with
                respect
                to any Company Plan.

            

    

     

    
      	 	
              b.

            	
              The
                Company has no liability to the Internal Revenue Service with respect
                to
                any Plan, including any liability imposed by Chapter 43 of the Internal
                Revenue Code.

            

    

     

    
      	 	
              c.

            	
              The
                Company has no any liability to the PBGC with respect to any Plan
                or has
                any liability under ERISA § 502 or
§4071.

            

    

     

    
      	 	
              d.

            	
              All
                filings required by ERISA and the Internal Revenue Code as to each
                Plan
                have been timely filed, and all notices and disclosures to participants
                required by either ERISA or the Internal Revenue Code have been timely
                provided.

            

    

     

    
      	 	
              e.

            	
              All
                contributions and payments made or accrued with respect to all Company
                Plans, Company Other Benefit Obligations and Company VEBAs are deductible
                under Sections § 162 or § 404 of the Internal Revenue Code. No amount, or
                any asset of any Company Plan or Company VEBA, is subject to tax
                as
                unrelated business taxable income.

            

    

     

    
      	 	
              4.

            	
              Each
                Company Plan can be terminated within 30 calendar days, without payment
                of
                any additional contribution or amount and without the vesting or
                acceleration 'of any benefits promised by such
                Plan.

            

    

     

    
      	 	
              5.

            	
              Since
                the formation of the Company, there has been no establishment or
                amendment
                of any Company Plan, Company VEBA, or Company Other Benefit
                Obligation.

            

    

     

    
      	 	
              6.

            	
              No
                event has occurred or circumstance exists that could result in
                a

            

    

     

     

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

     

    material
      increase in premium costs of Company Plans and Company Other Benefit Obligations
      that are insured, or a material increase in benefit costs of such Plans and
      Obligations that are self-insured.

     

    
      	 	
              7.

            	
              Other
                than claims for benefits submitted by participants or beneficiaries,
                no
                claim against or legal proceeding involving, any Company Plan, Company
                Other Benefit Obligation or Company VEBA is pending or, to the Company’s
                knowledge is threatened.

            

    

     

    
      	 	
              8.

            	
              No
                Company Plan is a stock bonus, pension, or profit-sharing plan within
                the
                meaning Section 401 (a) of the Internal Revenue
                Code.

            

    

     

    
      	 	
              9.

            	
              Each
                Qualified Plan of the Company is qualified in form and operation
                under
                Section 401(a) of the Internal Revenue Code; each trust for each
                such Plan
                is exempt from federal income tax under Section 501(a) of the Internal
                Revenue Code. Each Company VEBA is exempt from federal income tax.
                No
                event has occurred or circumstance exists that will or could give
                rise to
                disqualification or loss of tax-exempt status of any such Plan or
                trust.

            

    

     

    
      	 	
              10.

            	
              The
                Company and each ERISA Affiliate of the Company has met the minimum
                funding standard, and has made all contributions required, under
                ERISA §
                302 and Section 402 of the Internal Revenue
                Code.

            

    

     

    
      	 	
              11.

            	
              No
                Company Plan is subject to Title IV of
                ERISA

            

    

     

    
      	 	
              12.

            	
              The
                Company has paid all amounts due to the PBGC pursuant to ERISA §
                4007.

            

    

     

    
      	 	
              13.

            	
              Neither
                the Company nor any ERISA Affiliate of the Company has ceased operations
                at any facility or has withdrawn from any Title IV Plan in a manner
                that
                would subject to any entity or Company to liability under ERISA § 4062(
                e), § 4063, or § 4064.

            

    

     

    
      	 	
              14.

            	
              Neither
                the Company nor any ERISA Affiliate of the Company has filed a notice
                of
                intent to terminate any Plan or has adopted any amendment to treat
                a Plan
                as terminated. The PBGC has not instituted proceedings to treat any
                Company Plan as terminated. No event has occurred or circumstance
                exists
                that may constitute grounds under ERISA § 4042 for the termination of, or
                the appointment of a trustee to administer, any Company Plan.
                

            

    

     

    
      	 	
              15.

            	
              No
                amendment has been made, or is reasonably expected
                to

            

    

     

     

    
      
         

      

      
        -29-

        
          

        

      

      
         

      

    

     

    be
      made
      to any Plan that has required or could require the provision of security under
      ERISA § 307 or Section 401(a)(29) of the Internal Revenue Code.

     

    
      	 	
              16.

            	
              No
                accumulated funding deficiency, whether or not waived, exists with
                respect
                to any Company Plan; no event has occurred or circumstance exists
                that may
                result in an accumulated funding deficiency as of the last day of
                the
                current plan year of any such Plan.

            

    

     

    
      	 	
              17.

            	
              The
                actuarial report for each pension plan of the Company and each ERISA
                Affiliate of the Company fairly presents the financial condition
                and the
                results of operations of each such Plan in accordance with
                GAAP.

            

    

     

    
      	 	
              18.

            	
              Since
                the last valuation date for each pension plan of the Company and
                each
                ERISA Affiliate of the Company, no event has occurred or circumstance
                exists that would increase the amount of benefits under any such
                Plan or
                that would cause the excess of Plan assets over benefit liabilities
                (as
                defined in ERISA § 4001) to decrease, or the amount by which benefit
                liabilities exceed assets to
                increase.

            

    

     

    
      	 	
              19.

            	
              No
                reportable event (as defined in ERISA § 4043 and in regulations issued
                thereunder) has occurred.

            

    

     

    
      	 	
              20.

            	
              The
                Company does not have any knowledge of any facts or circumstances
                that may
                give rise to any liability of any Company or the Purchasers to the
                PBGC
                under Title IV of ERISA.

            

    

     

    
      	 	
              21.

            	
              Neither
                the Company nor any ERISA Affiliate of the Company has ever established,
                maintained, or contributed to or otherwise participated in, or had
                an
                obligation to maintain, contribute to, or otherwise participate in,
                any
                Multi-Employer Plan.

            

    

     

    
      	 	
              22.

            	
              Neither
                the Company nor any ERISA Affiliate of the Company has withdrawn
                from any
                Multi-Employer Plan with respect to which there is any outstanding
                liability as of the date of this Agreement. No event has occurred
                or
                circumstance exists that presents a risk of the occurrence of any
                withdrawal from, or the participation, termination, reorganization.
                or
                insolvency of, any Multi-Employer Plan that could result in any liability
                of either the Company or any purchaser to a Multi-Employer
                Plan.

            

    

     

    
      	 	
              23.

            	
              Neither
                the Company nor any ERISA Affiliate of the Company has received notice
                from any Multi-Employer Plan that it is in reorganization or is insolvent,
                that increased contributions

            

    

     

     

    
      
         

      

      
        -30-

        
          

        

      

      
         

      

    

     

    may
      be
      required to avoid a reduction in plan benefits or the imposition of any excise
      tax, or that such Plan intends to terminate or has terminated.

     

    
      	 	
              24.

            	
              No
                Multi-Employer Plan to which the Company or any ERISA Affiliate of
                the
                Company contributes or has contributed is a party to any pending
                merger or
                asset or liability transfer or is subject to any proceeding brought
                by the
                PBGC.

            

    

     

    
      	 	
              25.

            	
              Except
                to the extent required under ERISA § 601 et seq. and Section 4980B of the
                Internal Revenue Code, the Company does not provide health or welfare
                benefits for any retired or former employee or is obligated to provide
                health or welfare benefits to any active employee following such
                employee's retirement or other termination of
                service.

            

    

     

    
      	 	
              26.

            	
              The
                Company has the right to modify and terminate benefits to retirees
                (other
                than pensions) with respect to both retired and active
                employees.

            

    

     

    
      	 	
              27.

            	
              The
                Company has complied with the provisions of ERISA § 601 et seq. and
                Section 4980B of the Internal Revenue
                Code.

            

    

     

    
      	 	
              28.

            	
              No
                payment that is owed or may become due to any director, officer,
                employee,
                or agent of the Company will be non-deductible to the Company or
                subject
                to tax under Sections 2800 or 4999 of the Internal Revenue Code;
                nor will
                the Company be required to “gross up” or otherwise compensate any such
                person because of the imposition of any excise tax on a payment to
                such
                person.

            

    

     

    
      	 	
              29.

            	
              The
                consummation of the transaction contemplated under the Transaction
                Documents will not result in the payment, vesting, or acceleration
                of any
                benefit.

            

    

     

    (rr) Returns
      and Complaints.
      The
      Company has received no customer complaints concerning its products and/or
      services, nor has it had any of its products returned by a purchaser thereof,
      other than minor, nonrecurring warranty problems. 

     

    3.2 Representations
      and Warranties of the Purchasers.
      Each
      Purchaser hereby, for itself and for no other Purchaser, represents and warrants
      as of the date hereof and as of the Closing Date to the Company as
      follows:

     

    (a) Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution, delivery and
      performance by such Purchaser of the transactions contemplated by this Agreement
      have been duly authorized by all necessary corporate or similar action on the
      part of such Purchaser. Each Transaction Document to which it is a party has
      been duly executed by such Purchaser, and when delivered by such Purchaser
      in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of such Purchaser, enforceable against it in accordance with its
      terms, except (i) as limited by general equitable principles and applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights generally, (ii) as
      limited by laws relating to the availability of specific performance, injunctive
      relief or other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.

     

    
      
         

      

      
        -31-

        
          

        

      

      
         

      

    

     

    (b) Own
      Account.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities as principal for its own account and not
      with a view to or for distributing or reselling such Securities or any part
      thereof in violation of the Securities Act or any applicable state securities
      law, has no present intention of distributing any of such Securities in
      violation of the Securities Act or any applicable state securities law and
      has
      no arrangement or understanding with any other persons regarding the
      distribution of such Securities (this representation and warranty not limiting
      such Purchaser’s right to sell the Securities pursuant to the Registration
      Statement or otherwise in compliance with applicable federal and state
      securities laws) in violation of the Securities Act or any applicable state
      securities law. Such Purchaser is acquiring the Securities hereunder in the
      ordinary course of its business. Such Purchaser does not have any agreement
      or
      understanding, directly or indirectly, with any Person to distribute any of
      the
      Securities.

     

    (c) Purchaser
      Status.
      At the
      time such Purchaser was offered the Securities, it was, and at the date hereof
      it is, and on each date on which it exercises any Warrants or converts any
      Debentures it will be either: (i) an “accredited investor” as defined in Rule
      501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii)
      a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
      Act. Such Purchaser is not required to be registered as a broker-dealer under
      Section 15 of the Exchange Act. 

     

    (d) Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.

     

    (e) General
      Solicitation.
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or any other general solicitation or general
      advertisement.

     

    (f) Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than the transaction contemplated hereunder, such Purchaser has not directly
      or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with such Purchaser, executed any disposition, including Short
      Sales, in the securities of the Company during the period commencing
      from
      the time
      that such Purchaser first received a term sheet from the Company or any other
      Person setting forth the material terms of the transactions contemplated
      hereunder until the date hereof (“Discussion
      Time”).
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser's assets and the portfolio managers have
      no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such Purchaser's assets, the representation set
      forth
      above shall only apply with respect to the portion of assets managed by the
      portfolio manager that made the investment decision to purchase the Securities
      covered by this Agreement. Other than to other Persons party to this Agreement,
      such Purchaser has maintained the confidentiality of all disclosures made to
      it
      in connection with this transaction (including the existence and terms of this
      transaction).

     

    
      
         

      

      
        -32-

        
          

        

      

      
         

      

    

     

    The
      Company acknowledges and agrees that each Purchaser does not make or has not
      made any representations or warranties with respect to the transactions
      contemplated hereby other than those specifically set forth in this Section
      3.2.

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
      Restrictions. 

     

    (a) The
      Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of Securities other than
      pursuant to an effective registration statement or Rule 144, to the Company
      or
      to an affiliate of a Purchaser or in connection with a pledge as contemplated
      in
      Section 4.1(b), the Company may require the transferor thereof to provide to
      the
      Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in writing
      to
      be bound by the terms of this Agreement and shall have the rights of a Purchaser
      under this Agreement and the Registration Rights Agreement.

     

    (b) The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1(b), of a legend on any of the Securities in the following form:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    
      
         

      

      
        -33-

        
          

        

      

      
         

      

    

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties. Such a pledge or transfer would not be subject
      to
      approval of the Company and no legal opinion of legal counsel of the pledgee,
      secured party or pledgor shall be required in connection therewith. Further,
      no
      notice shall be required of such pledge. At the appropriate Purchaser’s expense,
      the Company will execute and deliver such reasonable documentation as a pledgee
      or secured party of Securities may reasonably request in connection with a
      pledge or transfer of the Securities, including, if the Securities are subject
      to registration pursuant to the Registration Rights Agreement, the preparation
      and filing of any required prospectus supplement under Rule 424(b)(3) under
      the
      Securities Act or other applicable provision of the Securities Act to
      appropriately amend the list of Selling Stockholders thereunder.

     

    (c) Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, or (ii) following any sale of such
      Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
      are
      eligible for sale under Rule 144(k), or (iv) if such legend is not required
      under applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      The
      Company shall cause its counsel to issue a legal opinion to the Company’s
      transfer agent promptly after the Effective Date if required by the Company’s
      transfer agent to effect the removal of the legend hereunder. If all or any
      portion of a Debenture or Warrant is converted or exercised (as applicable)
      at a
      time when there is an effective registration statement to cover the resale
      of
      the Underlying Shares, or if such Underlying Shares may be sold under Rule
      144(k) or if such legend is not otherwise required under applicable requirements
      of the Securities Act (including judicial interpretations and pronouncements
      issued by the staff of the Commission) then such Underlying Shares shall be
      issued free of all legends. The Company agrees that following the Effective
      Date
      or at such time as such legend is no longer required under this Section 4.1(c),
      it will, no later than three Trading Days following the delivery by a Purchaser
      to the Company or the Company’s transfer agent of a certificate representing
      Underlying Shares, as applicable, issued with a restrictive legend (such third
      Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section. Certificates for Underlying Shares subject to legend removal hereunder
      shall be transmitted by the transfer agent of the Company to the Purchasers
      by
      crediting the account of the Purchaser’s prime broker with the Depository Trust
      Company System.

     

    
      
         

      

      
        -34-

        
          

        

      

      
         

      

    

    

    (d) In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the Closing Price of the Common
      Stock
      on the date such Securities are submitted to the Company’s transfer agent)
      delivered for removal of the restrictive legend and subject to Section 4.1(c),
      $10 per Trading Day (increasing to $20 per Trading Day 5 Trading Days after
      such
      damages have begun to accrue) for each Trading Day after the second Trading
      Day
      following the Legend Removal Date until such certificate is delivered without
      a
      legend. Nothing herein shall limit such Purchaser’s right to pursue actual
      damages for the Company’s failure to deliver certificates representing any
      Securities as required by the Transaction Documents, and such Purchaser shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    (e) Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 4.1 is predicated upon the Company’s reliance that the
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom.

     

    (f) Until
      the
      one year anniversary of the Effective Date, the Company shall not undertake
      a
      reverse or forward stock split or reclassification of the Common Stock without
      the prior written consent of the Purchasers holding a majority in interest
      of
      the Debentures.

     

    4.2 Acknowledgment
      of Dilution. The Company acknowledges that the issuance of the Securities
      may result in dilution of the outstanding shares of Common Stock, which dilution
      may be substantial under certain market conditions. The Company further
      acknowledges that its obligations under the Transaction Documents, including
      without limitation its obligation to issue the Underlying Shares pursuant to
      the
      Transaction Documents, are unconditional and absolute and not subject to any
      right of set off, counterclaim, delay or reduction, regardless of the effect
      of
      any such dilution or any claim the Company may have against any Purchaser and
      regardless of the dilutive effect that such issuance may have on the ownership
      of the other stockholders of the Company.

     

    4.3 Furnishing
      of Information.
      As long
      as any Purchaser owns Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company once it is required
      to
      file reports pursuant to Exchange Act. Until such time and as long as any
      Purchaser owns Securities, if the Company is not required to file reports
      pursuant to the Exchange Act, it will prepare and furnish to the Purchasers
      and
      make publicly available in accordance with Rule 144(c) such information as
      is
      required for the Purchasers to sell the Securities under Rule 144. The Company
      further covenants that it will take such further action as any holder of
      Securities may reasonably request, all to the extent required from time to
      time
      to enable such Person to sell such Securities without registration under the
      Securities Act within the limitation of the exemptions provided by Rule
      144.

     

    
      
         

      

      
        -35-

        
          

        

      

      
         

      

    

     

    4.4 Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market such that it would require shareholder approval prior to the
      closing of such other transaction unless shareholder approval is obtained before
      the closing of such subsequent transaction.

     

    4.5 Conversion
      and Exercise Procedures. The form of Notice of Exercise included in the
      Warrants and the form of Notice of Conversion included in the
      Debentures set
      forth
      the totality of the procedures required of the Purchasers in order to exercise
      the Warrants or convert the Debentures. No additional legal opinion or other
      information or instructions shall be required of the Purchasers to exercise
      their Warrants or convert their Debentures. The Company shall honor exercises
      of
      the Warrants and conversions of the Debentures and shall deliver Underlying
      Shares in accordance with the terms, conditions and time periods set forth
      in
      the Transaction Documents.

     

    4.6 Securities
      Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. Eastern time on
      the Trading Day immediately following the date hereof, issue a press release
      reasonably acceptable to Oceana Partners, LLC disclosing the material terms
      of
      the transactions contemplated hereby. In addition, the Company shall attach
      all
      Transaction Documents to the Registration Statement or, if sooner filed, the
      first current or periodic report it files with the Commission. The Company
      and
      each Purchaser shall consult with each other in issuing any other press releases
      with respect to the transactions contemplated hereby, and neither the Company
      nor any Purchaser shall issue any such press release or otherwise make any
      such
      public statement without the prior consent of the Company, with respect to
      any
      press release of any Purchaser, or without the prior consent of each Purchaser
      specifically named in such press release, with respect to any press release
      of
      the Company, which consent shall not unreasonably be withheld, except if such
      disclosure is required by law, in which case the disclosing party shall promptly
      provide the other party with prior notice of such public statement or
      communication. Notwithstanding the foregoing, the Company shall not publicly
      disclose the name of any Purchaser, or include the name of any Purchaser in
      any
      filing with the Commission or any regulatory agency or Trading Market, without
      the prior written consent of such Purchaser, except (i) as required by federal
      securities law in connection with the registration statement contemplated by
      the
      Registration Rights Agreement and (ii) to the extent such disclosure is required
      by law or Trading Market regulations, in which case the Company shall provide
      the Purchasers with prior notice of such disclosure permitted under subclause
      (i) or (ii).

     

    
      
         

      

      
        -36-

        
          

        

      

      
         

      

    

     

    4.7 Shareholder
      Rights Plan. No claim will be made or enforced by the Company or, to the
      knowledge of the Company, any other Person that any Purchaser is an “Acquiring
      Person” under any shareholder rights plan or similar plan or arrangement in
      effect or hereafter adopted by the Company, or that any Purchaser could be
      deemed to trigger the provisions of any such plan or arrangement, by virtue
      of
      receiving Securities under the Transaction Documents or under any other
      agreement between the Company and the Purchasers. The Company shall conduct
      its
      business in a manner so that it will not become subject to the Investment
      Company Act.

     

    4.8 Non-Public
      Information. The Company covenants and agrees that neither it nor any other
      Person acting on its behalf will provide any Purchaser or its agents or counsel
      with any information that the Company believes constitutes material non-public
      information, unless prior thereto such Purchaser shall have executed a written
      agreement regarding the confidentiality and use of such information. The Company
      understands and confirms that each Purchaser shall be relying on the foregoing
      representations in effecting transactions in securities of the
      Company.

     

    4.9 Use
      of
      Proceeds. The Company shall use the net proceeds from the sale of the
      Securities hereunder for working capital purposes, and not for the satisfaction
      of any portion of the Company’s debt (other than payment of trade payables in
      the ordinary course of the Company’s business and prior practices), to redeem
      any Common Stock or Common Stock Equivalents or to settle any outstanding
      litigation.

     

    4.10 Reimbursement.
      If any Purchaser becomes involved in any capacity in any Proceeding by or
      against any Person who is a stockholder of the Company (except as a result
      of
      sales, pledges, margin sales and similar transactions by such Purchaser to
      or
      with any current stockholder), solely as a result of such Purchaser’s
      acquisition of the Securities under this Agreement, the Company will reimburse
      such Purchaser for its reasonable legal and other expenses (including the cost
      of any investigation preparation and travel in connection therewith) incurred
      in
      connection therewith, as such expenses are incurred. The reimbursement
      obligations of the Company under this paragraph shall be in addition to any
      liability which the Company may otherwise have, shall extend upon the same
      terms
      and conditions to any Affiliates of the Purchasers who are actually named in
      such action, proceeding or investigation, and partners, directors, agents,
      employees and controlling persons (if any), as the case may be, of the
      Purchasers and any such Affiliate, and shall be binding upon and inure to the
      benefit of any successors, assigns, heirs and personal representatives of the
      Company, the Purchasers and any such Affiliate and any such Person. The Company
      also agrees that neither the Purchasers nor any such Affiliates, partners,
      directors, agents, employees or controlling persons shall have any liability
      to
      the Company or any Person asserting claims on behalf of or in right of the
      Company solely as a result of acquiring the Securities under this Agreement,
      except if such claim arises primarily from a breach of such Purchaser’s
      representations, warranties or covenants under the Transaction Documents or
      any
      agreements or understandings such Purchaser may have with any such stockholder
      or any violations by the Purchaser of state or federal securities laws or any
      conduct by such Purchaser which constitutes fraud, gross negligence, willful
      misconduct or malfeasance.

     

    
      
         

      

      
        -37-

        
          

        

      

      
         

      

    

     

    4.11 Indemnification
      of Purchasers. Subject to the provisions of this Section 4.11, the Company
      will indemnify and hold each Purchaser and its directors, officers,
      shareholders, members, partners, employees and agents (and any other Persons
      with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, agents,
      members, partners or employees (and any other Persons with a functionally
      equivalent role of a Person holding such titles notwithstanding a lack of such
      title or any other title) of such controlling persons (each, a “Purchaser
      Party”) harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to (a) any breach of any of the representations, warranties,
      covenants or agreements made by the Company in this Agreement or in the other
      Transaction Documents or (b) any action instituted against a Purchaser, or
      any
      of them or their respective Affiliates, by any stockholder of the Company who
      is
      not an Affiliate of such Purchaser, with respect to any of the transactions
      contemplated by the Transaction Documents (unless such action is based upon
      a
      breach of such Purchaser’s representations, warranties or covenants under the
      Transaction Documents or any agreements or understandings such Purchaser may
      have with any such stockholder or any violations by the Purchaser of state
      or
      federal securities laws or any conduct by such Purchaser which constitutes
      fraud, gross negligence, willful misconduct or malfeasance). If any action
      shall
      be brought against any Purchaser Party in respect of which indemnity may be
      sought pursuant to this Agreement, such Purchaser Party shall promptly notify
      the Company in writing, and the Company shall have the right to assume the
      defense thereof with counsel of its own choosing. Any Purchaser Party shall
      have
      the right to employ separate counsel in any such action and participate in
      the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Purchaser Party. The Company
      will not be liable to any Purchaser Party under this Agreement (i) for any
      settlement by a Purchaser Party effected without the Company’s prior written
      consent, which shall not be unreasonably withheld or delayed; or (ii) to the
      extent, but only to the extent that a loss, claim, damage or liability is
      attributable to any Purchaser Party’s breach of any of the representations,
      warranties, covenants or agreements made by the Purchasers in this Agreement
      or
      in the other Transaction Documents.

     

    4.12 Reservation
      and Listing of Common Stock. 

     

    (a) The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction
      Documents.

     

    (b) If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than the Required Minimum on such date, then
      the
      Board of Directors of the Company shall use commercially reasonable efforts
      to
      amend the Company’s certificate or articles of incorporation to increase the
      number of authorized but unissued shares of Common Stock to at least the
      Required Minimum at such time, as soon as possible and in any event not later
      than the 75th day after such date.

     

    
      
         

      

      
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    (c) The
      Company hereby agrees to use best efforts to maintain the listing of the Common
      Stock on a Trading Market, and as soon as reasonably practicable following
      the
      Closing (but not later than the earlier of the Effective Date and the first
      anniversary of the Closing Date) to list a number of shares of Common Stock
      equal to at least the Required Minimum. The Company further agrees, if the
      Company applies to have the Common Stock traded on any other Trading Market,
      it
      will include in such application all of the Underlying Shares in an amount
      equal
      to at least the Required Minimum as of the date of such application, and will
      take such other action as is necessary to cause all of the Underlying Shares
      to
      be listed on such other Trading Market as promptly as possible. The Company
      will
      take all action reasonably necessary to continue the listing and trading of
      its
      Common Stock on a Trading Market and will comply in all respects with the
      Company’s reporting, filing and other obligations under the bylaws or rules of
      the Trading Market.

     

    4.13 Equal
      Treatment of Purchasers. No consideration shall be offered or paid to any
      person to amend or consent to a waiver or modification of any provision of
      any
      of the Transaction Documents unless the same consideration is also offered
      to
      all of the parties to the Transaction Documents. For clarification purposes,
      this provision constitutes a separate right granted to each Purchaser by the
      Company and negotiated separately by each Purchaser, and is intended to treat
      for the Company the Purchasers as a class and shall not in any way be construed
      as the Purchasers acting in concert or as a group with respect to the purchase,
      disposition or voting of Securities or otherwise.

     

    4.14 Participation
      in Future Financing. 

     

    (a) From
      the
      date hereof until the date that is the nine month anniversary of the Effective
      Date, upon any financing by the Company or any of its Subsidiaries of Common
      Stock or Common Stock Equivalents (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to 50% of the Subsequent Financing (the “Participation
      Maximum”). 

     

    (b) At
      least
      5 Trading Days prior to the closing of the Subsequent Financing, the Company
      shall deliver to each Purchaser a written notice of its intention to effect
      a
      Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Purchaser if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”). 
      Upon the request of a Purchaser, and only upon a request by such Purchaser,
      for
      a Subsequent Financing Notice, the Company shall promptly, but no later than
      1
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser.  The Subsequent Financing Notice shall describe in reasonable
      detail the proposed terms of such Subsequent Financing, the amount of proceeds
      intended to be raised thereunder, the Person with whom such Subsequent Financing
      is proposed to be effected, and attached to which shall be a term sheet or
      similar document relating thereto.   

     

    (c) Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice that the Purchaser
      is willing to participate in the Subsequent Financing, the amount of the
      Purchaser’s participation, and that the Purchaser has such funds ready, willing,
      and available for investment on the terms set forth in the Subsequent Financing
      Notice. If the Company receives no notice from a Purchaser as of such
      5th
      Trading
      Day, such Purchaser shall be deemed to have notified the Company that it does
      not elect to participate.

     

    
      
         

      

      
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    (d) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, notifications
      by
      the Purchasers of their willingness to participate in the Subsequent Financing
      (or to cause their designees to participate) is, in the aggregate, less than
      the
      total amount of the Subsequent Financing, then the Company may effect the
      remaining portion of such Subsequent Financing on the terms and to the Persons
      set forth in the Subsequent Financing Notice.  

     

    (e) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers seeking
      to
      purchase more than the aggregate amount of the Participation Maximum, each
      such
      Purchaser shall have the right to purchase the greater of (a) their Pro Rata
      Portion (as defined below) of the Participation Maximum and (b) the difference
      between the Participation Maximum and the aggregate amount of participation
      by
      all other Purchasers.  “Pro
      Rata Portion”
is
      the
      ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date
      by a Purchaser participating under this Section 4.14 and (y) the sum of the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.14.

     

    (f) The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.14, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

    (g) Notwithstanding
      the foregoing, this Section 4.14 shall not apply in respect of an Exempt
      Issuance.

     

    4.15 Subsequent
      Equity Sales. 

     

    (a) From
      the
      date hereof until the 4 month anniversary of the Effective Date, neither the
      Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
      Equivalents; provided, however, the 4 month period set forth in this Section
      4.15 shall be extended for the number of Trading Days during such period in
      which (i) trading in the Common Stock is suspended by any Trading Market, or
      (ii) following the Effective Date, the Registration Statement is not effective
      or the prospectus included in the Registration Statement may not be used by
      the
      Purchasers for the resale of the Underlying Shares.

     

    
      
         

      

      
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    (b) From
      the
      date hereof until the 24 month anniversary of the Effective Date, the Company
      shall be prohibited from effecting or entering into an agreement to effect
      any
      Subsequent Financing involving a “Variable Rate Transaction”. The term
“Variable
      Rate Transaction”
shall
      mean a transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock or
      (ii) enters into any agreement, including, but not limited to, an equity line
      of
      credit, whereby the Company may sell securities at a future determined price.
      Any Purchaser shall be entitled to obtain injunctive relief against the Company
      to preclude any such issuance, which remedy shall be in addition to any right
      to
      collect damages. 

     

    (c) Notwithstanding
      the foregoing, this Section 4.15 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

     

    4.16 Short
      Sales and Confidentiality After The Date Hereof. Each
      Purchaser severally and not jointly with the other Purchasers covenants that
      neither it nor any affiliates acting on its behalf or pursuant to any
      understanding with it will execute any Short Sales during the period after
      the
      Discussion Time and ending at the time that the transactions contemplated by
      this Agreement are first publicly announced as described
      in
      Section 4.6. Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      until such time as the transactions contemplated by this Agreement are publicly
      disclosed by the Company as described in Section 4.6, such Purchaser will
      maintain, the confidentiality of all disclosures made to it in connection with
      this transaction (including the existence and terms of this transaction). Each
      Purchaser understands and acknowledges, severally and not jointly with any
      other
      Purchaser, that the Commission currently takes the position that coverage of
      short sales of shares of the Common Stock “against the box” prior to the
      Effective Date of the Registration Statement with the Securities is a violation
      of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
      Section A, of the Manual of Publicly Available Telephone Interpretations, dated
      July 1997, compiled by the Office of Chief Counsel, Division of Corporation
      Finance. Notwithstanding
      the foregoing, no Purchaser makes any representation, warranty or covenant
      hereby that it will not engage in Short Sales in the securities of the Company
      after the time that the transactions contemplated by this Agreement are first
      publicly announced as described in Section 4.6. Notwithstanding
      the foregoing, in the case of a Purchaser that is a multi-managed investment
      vehicle whereby separate portfolio managers manage separate portions of such
      Purchaser's assets and the portfolio managers have no direct knowledge of the
      investment decisions made by the portfolio managers managing other portions
      of
      such Purchaser's assets, the covenant set forth above shall only apply with
      respect to the portion of assets managed by the portfolio manager that made
      the
      investment decision to purchase the Securities covered by this
      Agreement.

     

    
      
         

      

      
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    4.17 Delivery
      of Securities After Closing. The Company shall deliver, or cause to be
      delivered, the respective Securities purchased by each Purchaser to such
      Purchaser within 5 Trading Days of the Closing Date.

     

    4.18 Form
      D; Blue Sky Filings.         The
      Company agrees to timely file a Form D with respect to the Securities as
      required under Regulation D and to provide a copy thereof, promptly upon request
      of any Purchaser. The Company shall, on or before or after the Closing Date,
      take such action as the Company shall reasonably determine is necessary in
      order
      to obtain an exemption for, or to qualify the Securities for, sale to the
      Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of such actions promptly
      upon request of any Purchaser.

     

    4.19 Post-Closing
      Lock-Up Agreements. In the event that during the Restriction Period (as
      defined in the form of lock-up agreement attached hereto as Exhibit E), any
      officers or directors of the Company that did not deliver a lock up agreement
      hereunder, beneficially own more than 0.5% of the then outstanding Common Stock,
      the Company hereby agrees to cause such officer(s) or director(s) to execute
      a
      lock up agreement prohibiting the transfer of such securities during the
      Restriction Period and otherwise substantially similar to the form of the lock
      up agreement attached hereto as Exhibit E. The Company hereby agrees that it
      will not issue any Common Stock or Common Stock Equivalents to any officer
      and
      director that would beneficially own more than 0.5% of the outstanding Common
      Stock following such issuance unless and until such officer or director has
      executed and delivered each Purchaser a lock up agreement in accordance with
      this section 4.19.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before May 5, 2006;
      provided, however, that no such termination will affect the right of any party
      to sue for any breach by the other party (or parties).

     

    5.2 Fees
      and Expenses. At the Closing, the Company has agreed to reimburse Bushido
      Capital Master Fund LP (“Bushido”) the non-accountable sum of $30,000, for its
      actual, reasonable, out-of-pocket legal fees and expenses, $10,000 of which
      shall have been paid prior to the Closing. Except as expressly set forth in
      the
      Transaction Documents to the contrary, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement. The Company
      shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
      in connection with the delivery of any Securities.

     

    5.3 Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, contain the entire understanding of the parties with respect
      to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    
      
         

      

      
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    5.4 Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    5.5 Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in a
      written instrument signed, in the case of an amendment, by the Company and
      the
      Purchasers holding 66% or more in interest of the then outstanding Securities
      or, in the case of a waiver, by the party against whom enforcement of any such
      waiver is sought. No waiver of any default with respect to any provision,
      condition or requirement of this Agreement shall be deemed to be a continuing
      waiver in the future or a waiver of any subsequent default or a waiver of any
      other provision, condition or requirement hereof, nor shall any delay or
      omission of either party to exercise any right hereunder in any manner impair
      the exercise of any such right.

     

    5.6 Headings.
      The headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. 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.

     

    5.7 Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of the parties and their successors and permitted assigns. The Company may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser. Any Purchaser may assign any or all of its
      rights under this Agreement to any Person to whom such Purchaser assigns or
      transfers any Securities, provided such transferee agrees in writing to be
      bound, with respect to the transferred Securities, by the provisions hereof
      that
      apply to the “Purchasers”.

     

    5.8 No
      Third-Party Beneficiaries. This Agreement is intended for the benefit of the
      parties hereto and their respective successors and permitted assigns and is
      not
      for the benefit of, nor may any provision hereof be enforced by, any other
      Person, except as otherwise set forth in Section 4.11.

     

    5.9 Governing
      Law. All questions concerning the construction, validity, enforcement and
      interpretation of the Transaction Documents shall be governed by and construed
      and enforced in accordance with the internal laws of the State of New York,
      without regard to the principles of conflicts of law thereof. Each party agrees
      that all legal proceedings concerning the 

     

    
      
         

      

      
        -43-

        
          

        

      

      
         

      

    

     

    interpretations,
      enforcement and defense of the transactions contemplated by this Agreement
      and
      any other Transaction Documents (whether brought against a party hereto or
      its
      respective affiliates, directors, officers, shareholders, employees or agents)
      shall be commenced exclusively in the state and federal courts sitting in the
      City of New York. Each party hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the City of New York,
      borough of Manhattan for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or discussed
      herein (including with respect to the enforcement of any of the Transaction
      Documents), and hereby irrevocably waives, and agrees not to assert in any
      suit,
      action or proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is improper
      or inconvenient venue for such proceeding. Each party hereby irrevocably waives
      personal service of process and consents to process being served in any such
      suit, action or proceeding by mailing a copy thereof via registered or certified
      mail or overnight delivery (with evidence of delivery) to such party at the
      address in effect for notices to it under this Agreement and agrees that such
      service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any manner permitted by law. The parties hereby waive all
      rights to a trial by jury. If either party shall commence an action or
      proceeding to enforce any provisions of the Transaction Documents, then the
      prevailing party in such action or proceeding shall be reimbursed by the other
      party for its attorneys’ fees and other costs and expenses incurred with the
      investigation, preparation and prosecution of such action or
      proceeding.

     

    5.10 Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Securities.

     

    5.11 Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    5.12 Severability.
      If any provision of this Agreement is held to be invalid or unenforceable in
      any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    5.13 Rescission
      and Withdrawal Right. Notwithstanding anything to the contrary contained in
      (and without limiting any similar provisions of) the Transaction Documents,
      whenever any Purchaser exercises a right, election, demand or option under
      a
      Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then such Purchaser may rescind
      or withdraw, in its sole discretion from time to time upon written notice to
      the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.

     

    
      
         

      

      
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    5.14 Replacement
      of Securities. If any certificate or instrument evidencing any Securities is
      mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
      issued in exchange and substitution for and upon cancellation thereof, or in
      lieu of and substitution therefor, a new certificate or instrument, but only
      upon receipt of evidence reasonably satisfactory to the Company of such loss,
      theft or destruction and customary and reasonable indemnity, if requested.
      The
      applicants for a new certificate or instrument under such circumstances shall
      also pay any reasonable third-party costs associated with the issuance of such
      replacement Securities.

     

    5.15 Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers and the Company
      will be entitled to specific performance under the Transaction Documents. The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    5.16 Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser enforces or
      exercises its rights thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

     

    5.17 Usury.
      To the extent it may lawfully do so, the Company hereby agrees not to insist
      upon or plead or in any manner whatsoever claim, and will resist any and all
      efforts to be compelled to take the benefit or advantage of, usury laws wherever
      enacted, now or at any time hereafter in force, in connection with any claim,
      action or proceeding that may be brought by any Purchaser in order to enforce
      any right or remedy under any Transaction Document. Notwithstanding any
      provision to the contrary contained in any Transaction Document, it is expressly
      agreed and provided that the total liability of the Company under the
      Transaction Documents for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
      and, without limiting the foregoing, in no event shall any rate of interest
      or
      default interest, or both of them, when aggregated with any other sums in the
      nature of interest that the Company may be obligated to pay under the
      Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
      contract rate of interest allowed by law and applicable to the Transaction
      Documents is increased or decreased by statute or any official governmental
      action subsequent to the date hereof, the new maximum contract rate of interest
      allowed by law will be the Maximum Rate applicable to the Transaction Documents
      from the effective date forward, unless such application is precluded by
      applicable law. If under any circumstances whatsoever, interest in excess of
      the
      Maximum Rate is paid by the Company to any Purchaser with respect to
      indebtedness evidenced by the Transaction Documents, such excess shall be
      applied by such Purchaser to the unpaid principal balance of any such
      indebtedness or be refunded to the Company, the manner of handling such excess
      to be at such Purchaser’s election.

     

    
      
         

      

      
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    5.18 Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each
      Purchaser under any Transaction Document are several and not joint with the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance of the obligations of any other Purchaser under any
      Transaction Document. Nothing contained herein or in any Transaction Document,
      and no action taken by any Purchaser pursuant thereto, shall be deemed to
      constitute the Purchasers as a partnership, an association, a joint venture
      or
      any other kind of entity, or create a presumption that the Purchasers are in
      any
      way acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Documents. Each Purchaser shall
      be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Purchaser
      to
      be joined as an additional party in any proceeding for such purpose. Each
      Purchaser has been represented by its own separate legal counsel in their review
      and negotiation of the Transaction Documents. For reasons of administrative
      convenience only, Purchasers and their respective counsel have chosen to
      communicate with the Company through FW. FW does not represent all of the
      Purchasers but only Bushido. The Company has elected to provide all Purchasers
      with the same terms and Transaction Documents for the convenience of the Company
      and not because it was required or requested to do so by the
      Purchasers.

     

    5.19 Liquidated
      Damages. The Company’s obligations to pay any partial liquidated damages or
      other amounts owing under the Transaction Documents is a continuing obligation
      of the Company and shall not terminate until all unpaid partial liquidated
      damages and other amounts have been paid notwithstanding the fact that the
      instrument or security pursuant to which such partial liquidated damages or
      other amounts are due and payable shall have been canceled.

     

    5.20 Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    5.21 Registration
      Rights Agreement and Security Agreement. The parties acknowledge that the
      provisions of the Registration Rights Agreement and the Security Agreement
      in
      the forms attached hereto as Exhibit B and Exhibit F, respectively, are
      incorporated by reference and made a part hereof, and that each Purchaser's
      signature hereto will operate to be effective as such Purchaser's signature
      to
      the Registration Rights Agreement and Security Agreement.

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        -46-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    

    
      	
              SWEETSKINZ
                HOLDINGS, INC.

            	
              Address
                for Notice:

            
	 	 
	 	 
	
              By: 
                /s/ Christopher Bartle

              
                

              

              Name:
                Christopher H. Bartle

              Title:
                President

            	
              2311
                Wallace Street

              Philadelphia,
                PA 19130

            
	 	 
	
              SWEETSKINZ,
                INC.

               

               

              By: 
                /s/ Andrew Boyland

              
                

              

              Name:
                Andrew Boyland

              Title:
                Chief Executive Officer

               

               

              By: 
                /s/ Yann Mellet

              
                

              

              Name:
                Yann Mellet

              Title:
                Chief Technology Officer

            	
               

               

              2311
                Wallace Street

              Philadelphia,
                PA 19130

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

               

               

            	
              Rubin,
                Bailin, Ortoli LLP

              405
                Park Avenue

              New
                York, NY 10022

              Attn:
                William Rosenstadt

            

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
         

      

      
        -47-

        
          

        

      

      
         

      

    

    [PURCHASER
      SIGNATURE PAGES TO SKNZ SECURITIES PURCHASE AGREEMENT]

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
      to be duly executed by their respective authorized signatories as of the date
      first indicated above. EXECUTION
      OF THIS AGREEMENT BY ANY PURCHASER SHALL BE DEEMED TO CONSTITUTE EXECUTION
      OF
      THE REGISTRATION RIGHTS AGREEMENT ANNEXED HERETO AS EXHIBIT B AND THE SECURITY
      AGREEMENT ANNEXED HERETO AS EXHIBIT F BY SUCH PURCHASER.

     

    Name
      of
      Purchaser:
      _____________________________________________________________________________

    Signature
      of Authorized Signatory of Purchaser:
      ______________________________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________________________

    Email
      Address of
      Purchaser:_______________________________________________________________________

    

    Address
      for Notice of Purchaser:

    

    

    

    

    Address
      for Delivery of Securities for Purchaser (if not same as above):

    

    

    

    

    Subscription
      Amount:

    Warrant
      Shares:

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

     

    
      
         

      

        -48-EXHIBIT
      10.6

    EXHIBIT
      F

    

    SECURITY
      AGREEMENT

    

    SECURITY
      AGREEMENT, dated as of May 3, 2006 (this “Agreement”),
      among
      Sweetskinz Holdings, Inc., a Delaware corporation
      (the
      “Company”)
      and
      all of the Subsidiaries of the Company
      (such
      subsidiaries,
      the
“Guarantors”)
      (the
      Company and Guarantors are collectively
      referred to as the “Debtors”)
      and
      the holder or holders of the Company’s 5% Secured Convertible Debentures due May
      3, 2011 in the original aggregate principal amount of $3,912,500 (the
“Debentures”),
      signatory hereto, their endorsees, transferees and assigns (collectively
      referred to as, the “Secured
      Parties”).

    

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
      Parties have severally agreed to extend the loans to the Company evidenced
      by
      the Debentures; 

    

    WHEREAS,
      pursuant to a certain Subsidiary Guarantee dated as of the date hereof (the
      “Guaranty”),
      the
      Guarantors
      have
      jointly and severally agreed to guaranty and act as surety for payment of such
      loans; and

    

    WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
      this Agreement and to grant the Secured Parties, pari
      passu
      with
      each other Secured Party, a perfected security interest in certain property
      of
      such Debtor to secure the prompt payment, performance and discharge in full
      of
      all of the Company’s obligations under the Debentures and the other Debtor’s
      obligations under the Guaranty.

    

    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

     

    1.    Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
      tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
      intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
      the respective meanings given such terms in Article 9 of the UCC.

    

    (a)
       “Collateral”
means
      the collateral in which the Secured Parties are granted a security interest
      by
      this Agreement and which shall include the following personal property of the
      Debtors, whether presently owned or existing or hereafter acquired or coming
      into existence, wherever situated, and all

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    additions
      and accessions thereto and all substitutions and replacements thereof, and
      all
      proceeds, products and accounts thereof, including, without limitation, all
      proceeds from the sale or transfer of the Collateral and of insurance covering
      the same and of any tort claims in connection therewith,
      and all
      dividends, interest, cash, notes, securities, equity interest or other property
      at any time and from time to time acquired, receivable or otherwise distributed
      in respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):

    

    (i)
      All
      goods, including, without limitations, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    

    (ii)
       All
      contract rights and other general intangibles, including, without limitation,
      all partnership interests, membership interests, stock or other securities,
      rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by any Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, and income tax
      refunds; 

     

    (iii)
       All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    

    (iv)
       All
      documents, letter-of-credit rights, instruments and chattel paper;

    

    (v) All
      commercial tort claims;

    

    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    

    (vii) All
      investment property;

    

     (viii) All
      supporting obligations; and

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

    

    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    

    Without
      limiting the generality of the foregoing, the “Collateral”
shall
      include all investment property and general intangibles respecting ownership
      and/or other equity interests in each Guarantor, including, without limitation,
      the shares of capital stock and the other equity interests listed on
Schedule
      F
      hereto
      (as the same may be modified from time to time pursuant to the terms hereof),
      and any other shares of capital stock and/or other equity interests of any
      other
      direct or indirect subsidiary of any Debtor obtained in the future, and, in
      each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing (all of the foregoing being referred
      to herein as the “Pledged
      Securities”)
      and
      all rights arising under or in connection with the Pledged Securities,
      including, but not limited to, all dividends, interest and cash.

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided, however, that to the extent permitted by applicable law, this
      Agreement shall create a valid security interest in such asset and, to the
      extent permitted by applicable law, this Agreement shall create a valid security
      interest in the proceeds of such asset.

    

    (b)
       “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, (iii) all trademarks, trade
      names, corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source or
      business

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    identifiers,
      and all goodwill associated therewith, now existing or hereafter adopted or
      acquired, all registrations and recordings thereof, and all applications in
      connection therewith, whether in the United States Patent and Trademark Office
      or in any similar office or agency of the United States, any State thereof
      or
      any other country or any political subdivision thereof, or otherwise, and all
      common law rights related thereto, (iv) all trade secrets arising under the
      laws
      of the United States, any other country or any political subdivision thereof,
      (v) all rights to obtain any reissues, renewals or extensions of the foregoing,
      (vi) all licenses for any of the foregoing, and (vii) all causes of action
      for
      infringement of the foregoing.

    

    (c) “Majority
      in Interest”
shall
      mean, at any time of determination, the majority in interest (based on
      then-outstanding principal amounts of Debentures at the time of such
      determination) of the Secured Parties.

    

    (d) “Necessary
      Endorsement”
shall
      mean undated stock powers endorsed in blank or other proper instruments of
      assignment duly executed and such other instruments or documents as the Agent
      (as that term is defined below) may reasonably request.

    

    (e)
       “Obligations”
means
      all of the liabilities
      and obligations (primary, secondary, direct, contingent, sole, joint or several)
      due or to become due, or that are now or may be hereafter contracted or
      acquired, or owing to, of any Debtor to the Secured Parties, including, without
      limitation, all
      obligations under this Agreement, the Debentures, the Guaranty and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith, in each case, whether now or hereafter
      existing, voluntary or involuntary, direct or indirect, absolute or contingent,
      liquidated or unliquidated, whether or not jointly owed with others, and whether
      or not from time to time decreased or extinguished and later increased, created
      or incurred, and all or any portion of such obligations or liabilities that
      are
      paid, to the extent all or any part of such payment is avoided or recovered
      directly or indirectly from any of the Secured Parties as a preference,
      fraudulent transfer or otherwise as such obligations may be amended,
      supplemented, converted, extended or modified from time to time. Without
      limiting the generality of the foregoing, the term “Obligations” shall include,
      without limitation: (i) principal of, and interest on the Debentures and the
      loans extended pursuant thereto; (ii) any and all other fees, indemnities,
      costs, obligations and liabilities of the Debtors from time to time under or
      in
      connection with this Agreement, the Debentures, the Guaranty and any other
      instruments, agreements or other documents executed and/or delivered in
      connection herewith or therewith; and (iii) all amounts (including but not
      limited to post-petition interest) in respect of the foregoing that would be
      payable but for the fact that the obligations to pay such amounts are
      unenforceable or not allowable due to the existence of a bankruptcy,
      reorganization or similar proceeding involving any Debtor.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (f)
       “Organizational
      Documents”
means
      with respect to any Debtor, the documents by which such Debtor was organized
      (such as a certificate of incorporation, certificate of limited partnership
      or
      articles of organization, and including, without limitation, any certificates
      of
      designation for preferred stock or other forms of preferred equity) and which
      relate to the internal governance of such Debtor (such as bylaws, a partnership
      agreement or an operating, limited liability or members agreement).

    

    (g)
       “UCC”
means
      the Uniform Commercial Code of the State of New York and or any other applicable
      law of any state or states which has jurisdiction with respect to all, or any
      portion of, the Collateral or this Agreement, from time to time. It is the
      intent of the parties that defined terms in the UCC should be construed in
      their
      broadest sense so that the term “Collateral” will be construed in its broadest
      sense. Accordingly if there are, from time to time, changes to defined terms
      in
      the UCC that broaden the definitions, they are incorporated herein and if
      existing definitions in the UCC are broader than the amended definitions, the
      existing ones shall be controlling. 

    

    2.    Grant
      of Perfected First Priority Security Interest.
      As an
      inducement for the Secured Parties to extend the loans as evidenced by the
      Debentures and to secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the Obligations, each Debtor
      hereby unconditionally and irrevocably pledges, grants and hypothecates to
      the
      Secured Parties a continuing and perfected security interest in and to, a lien
      upon and a right of set-off against all of their respective right, title and
      interest of whatsoever kind and nature in and to, the Collateral (the
“Security
      Interest”).

    

    3.    Delivery
      of Certain Collateral.
      Contemporaneously or prior to the execution of this Agreement, each Debtor
      shall
      deliver or cause to be delivered to the Agent (a) any and all certificates
      and
      other instruments representing or evidencing the Pledged Securities, and (b)
      any
      and all certificates and other instruments or documents representing any of
      the
      other Collateral, in each case, together with all Necessary Endorsements. The
      Debtors are, contemporaneously with the execution hereof, delivering to Agent,
      or have previously delivered to Agent, a true and correct copy of each
      Organizational Document governing any of the Pledged Securities.

     

    4.    Representations,
      Warranties, Covenants and Agreements of the Debtors.
      Each
      Debtor represents and warrants to, and covenants and agrees with, the Secured
      Parties as follows:

    

    (a)
      Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor. This Agreement has been duly executed
      by

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of
      each Debtor, enforceable against each Debtor in accordance with its terms except
      as such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

    

    (b)
       The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule
      A
      attached
      hereto. The Debtors do not own any real property. The record owner of the real
      property where the Collateral is located is as set forth on Schedule 3.1(q)
      to
      the Purchase Agreement. Except as disclosed on Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    

    (c)
       Except
      for Permitted Liens (as defined in the Debentures) and except as set forth
      on
Schedule
      B
      attached
      hereto, the Debtors are the sole owner of the Collateral (except for
      non-exclusive licenses granted by any Debtor in the ordinary course of
      business), free and clear of any liens, security interests, encumbrances, rights
      or claims, and are fully authorized to grant the Security Interest. There is
      not
      on file in any governmental or regulatory authority, agency or recording office
      an effective financing statement, security agreement, license or transfer or
      any
      notice of any of the foregoing (other than those that will be filed in favor
      of
      the Secured Parties pursuant to this Agreement) covering or affecting any of
      the
      Collateral. So long as this Agreement shall be in effect, the Debtors shall
      not
      execute and shall not knowingly permit to be on file in any such office or
      agency any such financing statement or other document or instrument (except
      to
      the extent filed or recorded in favor of the Secured Parties pursuant to the
      terms of this Agreement).

    

    (d)
       No
      written claim has been received that any Collateral or Debtor's use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of any Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

    

    (e)
       Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Parties at least 30 days prior
      to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    other
      necessary documents have been filed and recorded and other steps have been
      taken
      to perfect the Security Interest to create in favor of the Secured Parties
      a
      valid, perfected and continuing perfected first priority lien in the
      Collateral.

    

    (f)
       This
      Agreement creates in favor of the Secured Parties a valid, security interest
      in
      the Collateral, subject only to Permitted Liens (as defined in the Debentures)
      securing the payment and performance of the Obligations. Upon making the filings
      described in the immediately following paragraph, all security interests created
      hereunder in any Collateral which may be perfected by filing Uniform Commercial
      Code financing statements shall have been duly perfected. Except for the filing
      of the Uniform Commercial Code financing statements referred to in the
      immediately following paragraph, the recordation of the Intellectual Property
      Security Agreement (as defined below) with respect to copyrights and copyright
      applications in the United States Copyright Office referred to in paragraph
      (m),
the
      execution and delivery of deposit account control agreements satisfying the
      requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
      account of the Debtors,
      and the
      delivery of the certificates and other instruments provided in Section
      3,
      no
      action is necessary to create, perfect or protect the security interests created
      hereunder. Without limiting the generality of the foregoing, except for the
      filing of said financing statements, the recordation of said Intellectual
      Property Security Agreement, and the execution and delivery of said deposit
      account control agreements, no consent of any third parties and no
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body is required for (i) the execution,
      delivery and performance of this Agreement, (ii) the creation or perfection
      of
      the Security Interests created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Secured Parties hereunder.

    

    (g)
       Each
      Debtor hereby authorizes the Secured Parties, or any of them, to file one or
      more financing statements under the UCC, with respect to the Security Interest
      with the proper filing and recording agencies in any jurisdiction deemed proper
      by them.

    

     (h)
       The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor's debt or otherwise) or other understanding
      to
      which any Debtor is a party or by which any property or asset of any Debtor
      is
      bound or affected. No consent (including, without limitation, from

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    stockholders
      or creditors of any Debtor) is required for any Debtor to enter into and perform
      its obligations hereunder.

    

     (i)
       The
      capital stock and other equity interests listed on Schedule
      F
      hereto
      represent all of the capital stock and other equity interests of the Guarantors,
      and represent all capital stock and other equity interests owned, directly
      or
      indirectly, by the Company. All of the Pledged Securities are validly issued,
      fully paid and nonassessable, and the Company is the legal and beneficial owner
      of the Pledged Securities, free and clear of any lien, security interest or
      other encumbrance except for the security interests created by this Agreement
      and other Permitted Liens (as defined in the Debenture). 

    

    (j)
       The
      ownership and other equity interests in partnerships and limited liability
      companies (if any)
      included
      in the Collateral
      (the
“Pledged
      Interests”)
      by
      their express terms do not provide that they are securities governed by Article
      8 of the UCC and are not held in a securities account or by any financial
      intermediary.

    

    (k)
       Each
      Debtor shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected first priority liens and security interests
      in
      the Collateral in favor of the Secured Parties until this Agreement and the
      Security Interest hereunder shall be terminated pursuant to Section 11 hereof.
      Each Debtor hereby agrees to defend the same against the claims of any and
      all
      persons and entities. Each Debtor shall safeguard and protect all Collateral
      for
      the account of the Secured Parties. At the request of the Secured Parties,
      each
      Debtor will sign and deliver to the Secured Parties at any time or from time
      to
      time one or more financing statements pursuant to the UCC in form reasonably
      satisfactory to the Secured Parties and will pay the cost of filing the same
      in
      all public offices wherever filing is, or is deemed by the Secured Parties
      to
      be, necessary or desirable to effect the rights and obligations provided for
      herein. Without limiting the generality of the foregoing, each Debtor shall
      pay
      all fees, taxes and other amounts necessary to maintain the Collateral and
      the
      Security Interest hereunder, and each Debtor shall obtain and furnish to the
      Secured Parties from time to time, upon demand, such releases and/or
      subordinations of claims and liens which may be required to maintain the
      priority of the Security Interest hereunder.

    

    (l)
       No
      Debtor
      will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose
      of any of the Collateral (except for non-exclusive licenses granted by a Debtor
      in its ordinary course of business and sales of inventory by a Debtor in its
      ordinary course of business) without the prior written consent of a Majority
      in Interest.

    

    (m) Each
      Debtor shall keep and preserve its equipment, inventory and other tangible
      Collateral in good condition, repair and order and shall not
      operate

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    or
      locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

    

    (n) Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral against loss or damage of the kinds and in the
      amounts customarily insured against by entities of established reputation having
      similar properties similarly situated and in such amounts as are customarily
      carried under similar circumstances by other such entities and otherwise as
      is
      prudent for entities engaged in similar businesses but in any event sufficient
      to cover the full replacement cost thereof. Each Debtor shall cause each
      insurance policy issued in connection herewith to provide, and the insurer
      issuing such policy to certify to the Agent that (a) the Agent will be named
      as
      lender loss payee and additional insured under each such insurance policy;
      (b)
      if such insurance be proposed to be cancelled or materially changed for any
      reason whatsoever, such insurer will promptly notify the Agent and such
      cancellation or change shall not be effective as to the Agent for at least
      thirty (30) days after receipt by the Agent of such notice, unless the effect
      of
      such change is to extend or increase coverage under the policy; and (c) the
      Agent will have the right (but no obligation) at its election to remedy any
      default in the payment of premiums within thirty (30) days of notice from the
      insurer of such default. If no Event of Default (as defined in the Debenture)
      exists and if the proceeds arising out of any claim or series of related claims
      do not exceed $100,000, loss payments in each instance will be applied by the
      applicable Debtor to the repair and/or replacement of property with respect
      to
      which the loss was incurred to the extent reasonably feasible, and any loss
      payments or the balance thereof remaining, to the extent not so applied, shall
      be payable to the applicable Debtor, provided, however, that payments received
      by any Debtor after an Event of Default occurs and is continuing or in excess
      of
      $100,000 for any occurrence or series of related occurrences shall be paid
      to
      the Agent and, if received by such Debtor, shall be held in trust for and
      immediately paid over to the Agent unless otherwise directed in writing by
      the
      Agent. Copies of such policies or the related certificates, in each case, naming
      the Agent as lender loss payee and additional insured shall be delivered to
      the
      Agent at least annually and at the time any new policy of insurance is
      issued.

    

    (o)
       Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
      Secured Parties promptly, in sufficient detail, of any substantial change in
      the
      Collateral, and of the occurrence of any event which would have a material
      adverse effect on the value of the Collateral or on the Secured Parties’
security interest therein.

    

    (p)
       Each
      Debtor shall promptly execute and deliver to the Secured Parties such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Parties may from time to time request and may in its
      sole
      discretion deem necessary to perfect, protect or enforce its

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    security
      interest in the Collateral including, without limitation, if applicable, the
      execution and delivery of a separate security agreement with respect to each
      Debtor’s Intellectual Property (“Intellectual
      Property Security Agreement”)
      in
      which the Secured Parties have been granted a security interest hereunder,
      substantially in a form acceptable to the Secured Parties, which Intellectual
      Property Security Agreement, other than as stated therein, shall be subject
      to
      all of the terms and conditions hereof.

    

    (q)
       Each
      Debtor shall permit the Secured Parties and their representatives and agents
      to
      inspect the Collateral at any time, and to make copies of records pertaining
      to
      the Collateral as may be requested by a Secured Party from time to
      time.

    

    (r)
       Each
      Debtor shall take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

    

    (s)
       Each
      Debtor shall promptly notify the Secured Parties in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by such
      Debtor that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Parties
      hereunder.

    

    (t)
       All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of any Debtor with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

    

    (u)
       The
      Debtors shall at all times preserve and keep in full force and effect their
      respective valid existence and good standing and any rights and franchises
      material to its business.

    

    (v)
       No
      Debtor
      will change its name, type of organization, jurisdiction of organization,
      organizational identification number (if it has one), legal or corporate
      structure, or identity, or add any new fictitious name unless it provides at
      least 30 days prior written notice to the Secured Parties of such change and,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue perfected the
      perfected security Interest granted and evidenced by this
      Agreement.

    

    (w) No
      Debtor
      may consign any of its Inventory or sell any of its Inventory on bill and hold,
      sale or return, sale on approval, or other conditional terms of sale without
      the
      consent of a Majority
      in Interest
      which
      shall not be unreasonably withheld, except to the extent such consignment or
      sale does not exceed 15% of the total value of all of the Company’s finished
      goods in Inventory.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (x)
       No
      Debtor
      may relocate its chief executive office to a new location without providing
      30
      days prior written notification thereof to the Secured Parties and so long
      as,
      at the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue perfected the
      perfected security Interest granted and evidenced by this
      Agreement.

    

    (y) Each
      Debtor was organized and remains organized solely under the laws of the state
      set forth next to such Debtor’s name in the first paragraph of this Agreement.
Schedule
      C
      attached
      hereto sets forth each Debtor’s organizational identification number or, if any
      Debtor does not have one, states that one does not exist.

    

    (z) 
      (i) The
      actual name of each Debtor is the name set forth in the preamble above; (ii)
      no
      Debtor has any trade names except as set forth on Schedule
      D
      attached
      hereto; (iii) no Debtor has used any name other than that stated in the preamble
      hereto or as set forth on Schedule
      D
      for the
      preceding five years; and (iv) no entity has merged into any Debtor or been
      acquired by any Debtor within the past five years except as set forth on
Schedule
      D.

    

    (aa) At
      any
      time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the
      secured party to perfect the security interest created hereby, the applicable
      Debtor shall deliver such Collateral to the Agent.

    

    (bb)
       Each
      Debtor, in its capacity as issuer, hereby agrees to comply with any and all
      orders and instructions of Agent regarding the Pledged Interests consistent
      with
      the terms of this Agreement without the further consent of any Debtor as
      contemplated by Section 8-106 (or any successor section) of the UCC. Further,
      each Debtor agrees that it shall not enter into a similar agreement (or one
      that
      would confer “control” within the meaning of Article 8 of the UCC) with any
      other person or entity.

     

    (cc) Each
      Debtor shall cause all tangible chattel paper constituting Collateral to be
      delivered to the Agent, or, if such delivery is not possible, then to cause
      such
      tangible chattel paper to contain a legend noting that it is subject to the
      security interest created by this Agreement. To the extent that any Collateral
      consists of electronic chattel paper, the applicable Debtor shall cause the
      underlying chattel paper to be “marked” within the meaning of Section 9-105 of
      the UCC (or successor section thereto).

    

    (dd) If
      there
      is any investment property or deposit account included as Collateral that can
      be
      perfected by “control” through an account control agreement, the applicable
      Debtor shall cause such an account control agreement, in form and substance
      in
      each case satisfactory to the Secured Parties, to be entered into and delivered
      to the Secured Parties.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (ee)
       To
      the
      extent that any Collateral consists of letter-of-credit rights, the applicable
      Debtor shall cause the issuer of each underlying letter of credit to consent
      to
      an assignment of the proceeds thereof to the Secured Parties.

    

    (ff)
       To
      the
      extent that any Collateral is in the possession of any third party, the
      applicable Debtor shall join with the Secured Parties in notifying such third
      party of the Secured Parties’ security interest in such Collateral and shall use
      its best efforts to obtain an acknowledgement and agreement from such third
      party with respect to the Collateral, in form and substance satisfactory to
      the
      Secured Parties.

    

    (gg) If
      any
      Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
      shall promptly notify the Secured Parties in a writing signed by such Debtor
      of
      the particulars thereof and grant to the Secured Parties in such writing a
      security interest therein and in the proceeds thereof, all upon the terms of
      this Agreement, with such writing to be in form and substance satisfactory
      to
      the Secured Parties.

    

    (hh)  Each
      Debtor shall immediately provide written notice to the Secured Parties of any
      and all accounts which arise out of contracts with any governmental authority
      and, to the extent necessary to perfect or continue the perfected status of
      the
      Security Interest in such accounts and proceeds thereof, shall execute and
      deliver to the Secured Parties an assignment of claims for such accounts and
      cooperate with the Secured Parties in taking any other steps required, in their
      judgment, under the Federal Assignment of Claims Act or any similar federal,
      state or local statute or rule to perfect or continue the perfected status
      of
      the Security Interest in such accounts and proceeds thereof.

    

    (ii) Each
      Debtor shall cause each subsidiary
      of such
      Debtor to immediately become a party hereto (an “Additional
      Debtor”),
      by
      executing and delivering an Additional Debtor Joinder in substantially the
      form
      of Annex A attached hereto and comply with the provisions hereof applicable
      to
      the Debtors. Concurrent therewith, the Additional Debtor shall deliver
      replacement schedules for, or supplements to all other Schedules to (or referred
      to in) this Agreement, as applicable, which replacement schedules shall
      supersede, or supplements shall modify, the Schedules then in effect. The
      Additional Debtor shall also deliver such opinions of counsel, authorizing
      resolutions, good standing certificates, incumbency certificates, organizational
      documents, financing statements and other information and documentation as
      the
      Secured Parties may reasonably request. Upon delivery of the foregoing to the
      Secured Parties, the Additional Debtor shall be and become a party to this
      Agreement with the same rights and obligations as the Debtors, for all purposes
      hereof as fully and to the same extent as if it were an original signatory
      hereto and shall be deemed to have made the representations, warranties and
      covenants set forth herein as of the date of execution and delivery of such
      Additional Debtor Joinder, and all references herein to the “Debtors” shall be
      deemed to include each Additional Debtor.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (jj)
       Each
      Debtor shall vote the Pledged Securities to comply with the covenants and
      agreements set forth herein and in the Debentures.

    

    (kk) Each
      Debtor shall register the pledge of the applicable Pledged Securities on the
      books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
      to register the pledge of the applicable Pledged Securities in the name of
      the
      Secured Parties on the books of such issuer. Further, except with respect to
      certificated securities delivered to the Agent, the applicable Debtor shall
      deliver to Agent an acknowledgement of pledge (which, where appropriate, shall
      comply with the requirements of the relevant UCC with respect to perfection
      by
      registration) signed by the issuer of the applicable Pledged Securities, which
      acknowledgement shall confirm that: (a) it has registered the pledge on its
      books and records; and (b) at any time directed by Agent during the continuation
      of an Event of Default, such issuer will transfer the record ownership of such
      Pledged Securities into the name of any designee of Agent, will take such steps
      as may be necessary to effect the transfer, and will comply with all other
      instructions of Agent regarding such Pledged Securities without the further
      consent of the applicable Debtor.

    

    (ll)
      In
      the
      event that, upon an occurrence of an Event of Default, Agent shall sell all
      or
      any of the Pledged Securities to another party or parties (herein called the
      “Transferee”)
      or
      shall purchase or retain all or any of the Pledged Securities, each Debtor
      shall, to the extent applicable: (i) deliver to Agent or the Transferee, as
      the
      case may be, the articles of incorporation, bylaws, minute books, stock
      certificate books, corporate seals, deeds, leases, indentures, agreements,
      evidences of indebtedness, books of account, financial records and all other
      Organizational Documents and records of the Debtors and their direct and
      indirect subsidiaries; (ii) use its best efforts to obtain resignations of
      the
      persons then serving as officers and directors of the Debtors and their direct
      and indirect subsidiaries, if so requested; and (iii) use its best efforts
      to
      obtain any approvals that are required by any governmental or regulatory body
      in
      order to permit the sale of the Pledged Securities to the Transferee or the
      purchase or retention of the Pledged Securities by Agent and allow the
      Transferee or Agent to continue the business of the Debtors and their direct
      and
      indirect subsidiaries.

     

    (mm) Without
      limiting the generality of the other obligations of the Debtors hereunder,
      each
      Debtor shall promptly (i) cause to be registered at the United States Copyright
      Office all of its material copyrights, (ii) cause the security interest
      contemplated hereby with respect to all Intellectual Property registered at
      the
      United States Copyright Office or United States Patent and Trademark Office
      to
      be duly recorded at the applicable office, and (iii) give the Agent notice
      whenever it acquires (whether absolutely or by license) or creates any
      additional material Intellectual Property.

    

    (nn) Each
      Debtor will from time to time, at the joint and several expense of the Debtors,
      promptly execute and deliver all such further instruments

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    and
      documents, and take all such further action as may be necessary or desirable,
      or
      as the Secured Parties may reasonably request, in order to perfect and protect
      any security interest granted or purported to be granted hereby or to enable
      the
      Secured Parties to exercise and enforce their rights and remedies hereunder
      and
      with respect to any Collateral or to otherwise carry out the purposes of this
      Agreement.

    

    (oo) Schedule
      E
      attached
      hereto lists all of the patents, patent applications, trademarks, trademark
      applications, registered copyrights, and domain names owned by any of the
      Debtors as of the date hereof. Schedule
      E
      lists
      all material licenses in favor of any Debtor for the use of any patents,
      trademarks, copyrights and domain names as of the date hereof. All material
      patents and trademarks of the Debtors have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtors
      have been duly recorded at the United States Copyright Office.

    

    (pp) None
      of
      the account debtors or other persons or entities obligated on any of the
      Collateral is a governmental authority covered by the Federal Assignment of
      Claims Act or any similar federal, state or local statute or rule in respect
      of
      such Collateral.

    

    5.    Effect
      of Pledge on Certain Rights. If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of Agent’s rights hereunder shall not be deemed to be the
      type of event which would trigger such conversion rights notwithstanding any
      provisions in the Organizational Documents or agreements to which any Debtor
      is
      subject or to which any Debtor is party.

    

    6.    Defaults.
      The
      following events shall be “Events
      of Default”:

    

    (a)
      The
      occurrence of an Event of Default (as defined in the Debenture) under the
      Debenture;

    

    (b)
      Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    

    (c)
      The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      five (5) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (d)
      If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    

     7.     Duty
      To Hold In Trust.

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income,
      dividend, interest
      or other
      sums subject to the Security Interest, whether payable pursuant to the Debenture
      or otherwise, or of any check, draft, note, trade acceptance or other instrument
      evidencing an obligation to pay any such sum, hold the same in trust for the
      Secured Parties and shall forthwith endorse and transfer any such sums or
      instruments, or both, to the Secured Parties, pro-rata in proportion to their
      initial purchases of Debentures for application to the satisfaction of the
      Obligations (and if any Debenture is not outstanding, pro-rata in proportion
      to
      the initial purchases of the remaining Debentures). 

    

    (b) If
      any
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of such Debtor or any of its direct
      or indirect subsidiaries) in respect of the Pledged Securities (whether as
      an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), such Debtor agrees to (i) accept the same as the agent of the
      Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
      of
      the Secured Parties; and (iii) to deliver any and all certificates or
      instruments evidencing the same to Agent on or before the close of business
      on
      the fifth business day following the receipt thereof by such Debtor, in the
      exact form received together with the Necessary Endorsements, to be held by
      Agent subject to the terms of this Agreement as Collateral.

    

     8.    Rights
      and Remedies Upon Default.
      

    

    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through any agent appointed by them for such purpose, shall
      have
      the right to exercise all of the remedies conferred hereunder and under the
      Debentures, and the Secured Parties shall have all the rights and remedies
      of a
      secured party under the UCC. Without limitation, the Secured Parties shall
      have
      the following rights and powers:

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (i)
      The
      Secured Parties shall have the right to take possession of the Collateral and,
      for that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and each Debtor shall assemble the Collateral and make it available to
      the
      Secured Parties at places which the Secured Parties shall reasonably select,
      whether at such Debtor's premises or elsewhere, and make available to the
      Secured Parties, without rent, all of such Debtor’s respective premises and
      facilities for the purpose of the Secured Parties taking possession of, removing
      or putting the Collateral in saleable or disposable form.

    

    (ii) Upon
      notice to the Debtors by Agent, all rights of each Debtor to exercise the voting
      and other consensual rights which it would otherwise be entitled to exercise
      and
      all rights of each Debtor to receive the dividends and interest which it would
      otherwise be authorized to receive and retain, shall cease. Upon such notice,
      Agent shall have the right to receive any interest, cash dividends or other
      payments on the Collateral and, at the option of Agent, to exercise in such
      Agent’s discretion all voting rights pertaining thereto. Without limiting the
      generality of the foregoing, Agent shall have the right (but not the obligation)
      to exercise all rights with respect to the Collateral as it were the sole and
      absolute owners thereof, including, without limitation, to vote and/or to
      exchange, at its sole discretion, any or all of the Collateral in connection
      with a merger, reorganization, consolidation, recapitalization or other
      readjustment concerning or involving the Collateral or any Debtor or any of
      its
      direct or indirect subsidiaries.

    

    (iii)
      The
      Secured Parties shall have the right to operate the business of each Debtor
      using the Collateral and shall have the right to assign, sell, lease or
      otherwise dispose of and deliver all or any part of the Collateral, at public
      or
      private sale or otherwise, either with or without special conditions or
      stipulations, for cash or on credit or for future delivery, in such parcel
      or
      parcels and at such time or times and at such place or places, and upon such
      terms and conditions as the Secured Parties may deem commercially reasonable,
      all without (except as shall be required by applicable statute and cannot be
      waived) advertisement or demand upon or notice to any Debtor or right of
      redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
      lease, assignment or other transfer of Collateral, the Secured Parties may,
      unless prohibited by applicable law which cannot be waived, purchase all or
      any
      part of the Collateral being sold, free from and discharged of all trusts,
      claims, right of redemption and equities of any Debtor, which are hereby waived
      and released.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (iv) The
      Secured Parties shall have the right (but not the obligation) to notify any
      account debtors and any obligors under instruments or accounts to make payments
      directly to the Secured Parties and to enforce the Debtors’ rights against such
      account debtors and obligors.

    

    (v) The
      Secured Parties may (but are not obligated to) direct any financial intermediary
      or any other person or entity holding any investment property to transfer the
      same to the Secured Parties or their designee.

    

    (vi) The
      Secured Parties may (but are not obligated to) transfer any or all Intellectual
      Property registered in the name of any Debtor at the United States Patent and
      Trademark Office and/or Copyright Office into the name of the Secured Parties
      or
      any designee or any purchaser of any Collateral.

    

    (b) The
      Agent
      may comply with any applicable law in connection with a disposition of
      Collateral and such compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral. The Agent may sell
      the
      Collateral without giving any warranties and may specifically disclaim such
      warranties. If the Agent sells any of the Collateral on credit, the Debtors
      will
      only be credited with payments actually made by the purchaser. In addition,
      each
      Debtor waives any and all rights that it may have to a judicial hearing in
      advance of the enforcement of any of the Agent’s rights and remedies hereunder,
      including, without limitation, its right following an Event of Default to take
      immediate possession of the Collateral and to exercise its rights and remedies
      with respect thereto.

     

    (c) For
      the
      purpose of enabling the Agent to further exercise rights and remedies under
      this
      Section 8 or elsewhere provided by agreement or applicable law, each Debtor
      hereby grants to the Agent, for the benefit of the Agent and the Secured
      Parties, an irrevocable, nonexclusive license (exercisable without payment
      of
      royalty or other compensation to such Debtor) to use, license or sublicense
      following an Event of Default, any Intellectual Property now owned or hereafter
      acquired by such Debtor, and wherever the same may be located, and including
      in
      such license access to all media in which any of the licensed items may be
      recorded or stored and to all computer software and programs used for the
      compilation or printout thereof.

    

     9.    Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
      Secured Parties in enforcing their rights hereunder and in connection with
      collecting, storing and disposing of the Collateral, and then to satisfaction
      of
      the Obligations pro rata among the

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Secured
      Parties (based on then-outstanding principal amounts of Debentures at the time
      of any such determination), and to the payment of any other amounts required
      by
      applicable law, after which the Secured Parties shall pay to the applicable
      Debtor any surplus proceeds. If, upon the sale, license or other disposition
      of
      the Collateral, the proceeds thereof are insufficient to pay all amounts to
      which the Secured Parties are legally entitled, the Debtors will be liable
      for
      the deficiency, together with interest thereon, at the rate of 10% per annum
      or
      the lesser amount permitted by applicable law (the “Default Rate”), and the
      reasonable fees of any attorneys employed by the Secured Parties to collect
      such
      deficiency. To the extent permitted by applicable law, each Debtor waives all
      claims, damages and demands against the Secured Parties arising out of the
      repossession, removal, retention or sale of the Collateral, unless due solely
      to
      the gross negligence or willful misconduct of the Secured Parties as determined
      by a final judgment (not subject to further appeal) of a court of competent
      jurisdiction.

    

    10.    Securities
      Law Provision.
      Each
      Debtor recognizes that Agent may be limited in its ability to effect a sale
      to
      the public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal or
      state securities laws (collectively, the “Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of
      purchasers who may be required to agree to acquire the Pledged Securities for
      their own account, for investment and not with a view to the distribution or
      resale thereof. Each Debtor agrees that sales so made may be at prices and
      on
      terms less favorable than if the Pledged Securities were sold to the public,
      and
      that Agent has no obligation to delay the sale of any Pledged Securities for
      the
      period of time necessary to register the Pledged Securities for sale to the
      public under the Securities Laws. Each Debtor shall cooperate with Agent in
      its
      attempt to satisfy any requirements under the Securities Laws (including,
      without limitation, registration thereunder if requested by Agent) applicable
      to
      the sale of the Pledged Securities by Agent.

     

    11.    Costs
      and Expenses.
      Each
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including without
      limitation, any financing statements pursuant to the UCC, continuation
      statements, partial releases and/or termination statements related thereto
      or
      any expenses of any searches reasonably required by the Secured Parties. The
      Debtors shall also pay all other claims and charges which in the reasonable
      opinion of the Secured Parties might prejudice, imperil or otherwise affect
      the
      Collateral or the Security Interest therein. The Debtors will also, upon demand,
      pay to the Secured Parties the amount of any and all reasonable expenses,
      including the reasonable fees and expenses of its counsel and of any experts
      and
      agents, which the Secured Parties may incur in connection with (i) the
      enforcement of this Agreement, (ii) the custody or preservation of, or the
      sale
      of, collection from, or other realization upon, any of the Collateral, or (iii)
      the exercise or enforcement of any of the rights of the Secured Parties under
      the Debentures. Until so paid, any fees payable hereunder shall be added to
      the
      principal amount of the Debentures and shall bear interest at the Default
      Rate.

     

    12.    Responsibility
      for Collateral.
      The
      Debtors assume all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    affected
      or diminished by reason of the loss, destruction, damage or theft of any of
      the
      Collateral or its unavailability for any reason. Without limiting the generality
      of the foregoing, (a) neither the Agent nor any Secured Party (i) has any duty
      (either before or after an Event of Default) to collect any amounts in respect
      of the Collateral or to preserve any rights relating to the Collateral, or
      (ii)
      has any obligation to clean-up or otherwise prepare the Collateral for sale,
      and
      (b) each Debtor shall remain obligated and liable under each contract or
      agreement included in the Collateral to be observed or performed by such Debtor
      thereunder. Neither the Agent nor any Secured Party shall have any obligation
      or
      liability under any such contract or agreement by reason of or arising out
      of
      this Agreement or the receipt by the Agent or any Secured Party of any payment
      relating to any of the Collateral, nor shall the Agent or any Secured Party
      be
      obligated in any manner to perform any of the obligations of any Debtor under
      or
      pursuant to any such contract or agreement, to make inquiry as to the nature
      or
      sufficiency of any payment received by the Agent or any Secured Party in respect
      of the Collateral or as to the sufficiency of any performance by any party
      under
      any such contract or agreement, to present or file any claim, to take any action
      to enforce any performance or to collect the payment of any amounts which may
      have been assigned to the Agent or to which the Agent or any Secured Party
      may
      be entitled at any time or times.

    

    13.    Security
      Interest Absolute.
      All
      rights of the Secured Parties and all obligations of the Debtors hereunder,
      shall be absolute and unconditional, irrespective of: (a) any lack of validity
      or enforceability of this Agreement, the Debentures or any agreement entered
      into in connection with the foregoing, or any portion hereof or thereof; (b)
      any
      change in the time, manner or place of payment or performance of, or in any
      other term of, all or any of the Obligations, or any other amendment or waiver
      of or any consent to any departure from the Debentures or any other agreement
      entered into in connection with the foregoing; (c) any exchange, release or
      nonperfection of any of the Collateral, or any release or amendment or waiver
      of
      or consent to departure from any other collateral for, or any guaranty, or
      any
      other security, for all or any of the Obligations; (d) any action by the Secured
      Parties to obtain, adjust, settle and cancel in its sole discretion any
      insurance claims or matters made or arising in connection with the Collateral;
      or (e) any other circumstance which might otherwise constitute any legal or
      equitable defense available to a Debtor, or a discharge of all or any part
      of
      the Security Interest granted hereby. Until the Obligations shall have been
      paid
      and performed in full, the rights of the Secured Parties shall continue even
      if
      the Obligations are barred for any reason, including, without limitation, the
      running of the statute of limitations or bankruptcy. Each Debtor expressly
      waives presentment, protest, notice of protest, demand, notice of nonpayment
      and
      demand for performance. In the event that at any time any transfer of any
      Collateral or any payment received by the Secured Parties hereunder shall be
      deemed by final order of a court of competent jurisdiction to have been a
      voidable preference or fraudulent conveyance under the bankruptcy or insolvency
      laws of the United States, or shall be deemed to be otherwise due to any party
      other than the Secured Parties, then, in any such event, each Debtor’s
      obligations hereunder shall survive cancellation of this Agreement, and shall
      not be discharged or satisfied by any prior payment thereof and/or cancellation
      of this Agreement, but shall remain a valid and

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    binding
      obligation enforceable in accordance with the terms and provisions hereof.
      Each
      Debtor waives all right to require the Secured Parties to proceed against any
      other person or entity
      or
to
      apply
      any Collateral which the Secured Parties may hold at any time, or to marshal
      assets, or to pursue any other remedy. Each Debtor waives any defense arising
      by
      reason of the application of the statute of limitations to any obligation
      secured hereby.

     

    14.    Term
      of Agreement.
      This
      Agreement and the Security Interest shall terminate on the date on which all
      payments under the Debentures have been indefeasibly paid in full and all other
      Obligations have been paid or discharged; provided, however, that all
      indemnities of the Debtors contained in this Agreement (including, without
      limitation, Annex B hereto) shall survive and remain operative and in full
      force
      and effect regardless of the termination of this Agreement.

    

    15.    Power
      of Attorney; Further Assurances.

    

    (a)
       Each
      Debtor authorizes the Secured Parties, and does hereby make, constitute and
      appoint the Secured Parties and their respective officers, agents, successors
      or
      assigns with full power of substitution, as such Debtor’s true and lawful
      attorney-in-fact, with power, in the name of the various Secured Parties or
      such
      Debtor, to, after the occurrence and during the continuance of an Event of
      Default, (i) endorse any note, checks, drafts, money orders or other instruments
      of payment (including payments payable under or in respect of any policy of
      insurance) in respect of the Collateral that may come into possession of the
      Secured Parties; (ii) to sign and endorse any financing statement pursuant
      to
      the UCC or any invoice, freight or express bill, bill of lading, storage or
      warehouse receipts, drafts against debtors, assignments, verifications and
      notices in connection with accounts, and other documents relating to the
      Collateral; (iii) to pay or discharge taxes, liens, security interests or other
      encumbrances at any time levied or placed on or threatened against the
      Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue
      for
      monies due in respect of the Collateral; (v) to transfer any Intellectual
      Property or provide licenses respecting any Intellectual Property; and (vi)
      generally, at the option of the Secured Parties, and at the expense of the
      Debtors, at any time, or from time to time, to execute and deliver any and
      all
      documents and instruments and to do all acts and things which the Secured
      Parties deem necessary to protect, preserve and realize upon the Collateral
      and
      the Security Interest granted therein in order to effect the intent of this
      Agreement and the Debentures all as fully and effectually as the Debtors might
      or could do; and each Debtor hereby ratifies all that said attorney shall
      lawfully do or cause to be done by virtue hereof. This power of attorney is
      coupled with an interest and shall be irrevocable for the term of this Agreement
      and thereafter as long as any of the Obligations shall be outstanding.
The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any Debtor is subject or to which any Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is
      specifically

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    authorized
      to execute and file any applications for or instruments of transfer and
      assignment of any patents, trademarks, copyrights or other Intellectual Property
      with the United States Patent and Trademark Office and the United States
      Copyright Office.

    

    (b)
       On
      a
      continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      deemed necessary or advisable, or as reasonably requested by the Secured
      Parties, to perfect the Security Interest granted hereunder and otherwise to
      carry out the intent and purposes of this Agreement, or for assuring and
      confirming to the Secured Parties the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

    

    (c)
       Each
      Debtor hereby irrevocably appoints the Secured Parties as such Debtor’s
      attorney-in-fact, with full authority in the place and instead of such Debtor
      and in the name of such Debtor, from time to time in the Secured Parties’
discretion, to take any action and to execute any instrument which the Secured
      Parties may deem necessary or advisable to accomplish the purposes of this
      Agreement, including the filing, in its sole discretion, of one or more
      financing or continuation statements and amendments thereto, relative to any
      of
      the Collateral without the signature of such Debtor where permitted by law,
      which financing statements may (but need not) describe the Collateral as “all
      assets” or “all personal property” or words of like import, and ratifies all
      such actions taken by the Secured Parties. This power of attorney is coupled
      with an interest and shall be irrevocable for the term of this Agreement and
      thereafter as long as any of the Obligations shall be outstanding.

     

    16.    Notices.
      All
      notices, requests, demands and other communications hereunder shall be subject
      to the notice provision of the Purchase Agreement (as such term is defined
      in
      the Debentures).

     

    17.    Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Parties shall have the
      right, in its sole discretion, to pursue, relinquish, subordinate, modify or
      take any other action with respect thereto, without in any way modifying or
      affecting any of the Secured Parties’ rights and remedies
      hereunder.

    

    18.    Appointment
      of Agent.
      The
      Secured Parties hereby appoint Oceana Partners, LLC (“Oceana”) to act as their
      agent (“Oceana”
or
      “Agent”)
      for
      purposes of exercising any and all rights and remedies of the Secured Parties
      hereunder. Such appointment shall continue until revoked in writing by a
Majority
      in Interest, at which time a Majority in Interest
      shall
      appoint a new Agent.
      The
      Agent
      shall have the rights, responsibilities and immunities set forth in Annex
      B
      hereto.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    19.    Miscellaneous.

    

    (a)
       No
      course
      of dealing between the Debtors and the Secured Parties, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Debentures shall operate as
      a
      waiver thereof; nor shall any single or partial exercise of any right, power
      or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    

    (b)
       All
      of
      the rights and remedies of the Secured Parties with respect to the Collateral,
      whether established hereby or by the Debentures or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    

    (c)
       This
      Agreement constitutes the entire agreement of the parties with respect to the
      subject matter hereof and is intended to supersede all prior negotiations,
      understandings and agreements with respect thereto. Except as specifically
      set
      forth in this Agreement, no provision of this Agreement may be modified or
      amended except by a written agreement specifically referring to this Agreement
      and signed by the parties hereto.

    

    (d)
       In
      the
      event any provision of this Agreement is held to be invalid, prohibited or
      unenforceable in any jurisdiction for any reason, unless such provision is
      narrowed by judicial construction, this Agreement shall, as to such
      jurisdiction, be construed as if such invalid, prohibited or unenforceable
      provision had been more narrowly drawn so as not to be invalid, prohibited
      or
      unenforceable. If, notwithstanding the foregoing, any provision of this
      Agreement is held to be invalid, prohibited or unenforceable in any
      jurisdiction, such provision, as to such jurisdiction, shall be ineffective
      to
      the extent of such invalidity, prohibition or unenforceability without
      invalidating the remaining portion of such provision or the other provisions
      of
      this Agreement and without affecting the validity or enforceability of such
      provision or the other provisions of this Agreement in any other
      jurisdiction.

    

    (e)
       No
      waiver
      of any breach or default or any right under this Agreement shall be considered
      valid unless in writing and signed by the party giving such waiver, and no
      such
      waiver shall be deemed a waiver of any subsequent breach or default or right,
      whether of the same or similar nature or otherwise.

    

    (f)
      This
      Agreement shall be binding upon and inure to the benefit of each party hereto
      and its successors and assigns.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (g)
       Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    

    (h)
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each Debtor agrees that all proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and the Debenture (whether brought against a
      party hereto or its respective affiliates, directors, officers, shareholders,
      partners, members, employees or agents) shall be commenced exclusively in the
      state and federal courts sitting in the City of New York, Borough of Manhattan.
      Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in the City of New York, Borough of Manhattan
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If any party shall commence a proceeding to enforce any
      provisions of this Agreement, then the prevailing party in such proceeding
      shall
      be reimbursed by the other party for its reasonable attorney’s fees and other
      costs and expenses incurred with the investigation, preparation and prosecution
      of such proceeding.

    

    (i)
       This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    (j) All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Parties hereunder.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    (k) Each
      Debtor shall indemnify, reimburse and hold harmless the Secured Parties and
      their respective partners, members, shareholders, officers, directors, employees
      and agents (collectively, “Indemnitees”)
      from
      and against any and all losses, claims, liabilities, damages, penalties, suits,
      costs and expenses, of any kind or nature, (including fees relating to the
      cost
      of investigating and defending any of the foregoing) imposed on, incurred by
      or
      asserted against such Indemnitee in any way related to or arising from or
      alleged to arise from this Agreement or the Collateral, except any such losses,
      claims, liabilities, damages, penalties, suits, costs and expenses which result
      from the gross negligence or willful misconduct of the Indemnitee as determined
      by a final, nonappealable decision of a court of competent jurisdiction. This
      indemnification provision is in addition to, and not in limitation of, any
      other
      indemnification provision in the Debentures, the Purchase Agreement (as such
      term is defined in the Debentures) or any other agreement, instrument or other
      document executed or delivered in connection herewith or therewith.

    

    (l) Nothing
      in this Agreement shall be construed to subject Agent or any Secured Party
      to
      liability as a partner in any Debtor or any if its direct or indirect
      subsidiaries that is a partnership or as a member in any Debtor or any of its
      direct or indirect subsidiaries that is a limited liability company, nor shall
      Agent or any Secured Party be deemed to have assumed any obligations under
      any
      partnership agreement or limited liability company agreement, as applicable,
      of
      any such Debtor or any if its direct or indirect subsidiaries or otherwise,
      unless and until any such Secured Party exercises its right to be substituted
      for such Debtor as a partner or member, as applicable, pursuant
      hereto.

    

    (m)
       To
      the
      extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of any Debtor or any direct or indirect
      subsidiary of any Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtors hereby grant such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

    

    [SIGNATURE
      PAGES FOLLOW]

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Security
      Agreement to be duly executed on the day and year first above
      written.

     

    
      	
              SWEETSKINZ
                HOLDINGS, INC.

            
	 
	 
	
              /s/ Christopher
                H. Bartle

              Name:
                Christopher H. Bartle

              Title:
                President

            
	 
	
              SWEETSKINZ,
                INC.

            
	 
	 
	
              /s/
                Andrew Boyland

              Name:
                Andrew Boyland

              Title:
                Chief Executive Officer

            

    

    

    The
      undersigned hereby acknowledges its acceptance of appointment as Agent in
      accordance with the terms hereof:

    

    OCEANA
      PARTNERS, LLC

     

     

    /s/
      Courtlandt Miller

    Name:
      Courtlandt Miller

    Title:
      Senior Managing Director

     

     

    ******THE
      TERMS AND CONDITIONS OF THIS SECURITY AGREEMENT HAVE BEEN INCORPORATED BY
      REFERENCE INTO THE PURCHASE AGREEMENT.  EXECUTION OF A PURCHASE AGREEMENT
      BY ANY PURCHASER SHALL BE DEEMED TO CONSTITUTE EXECUTION BY SUCH PURCHASER
      OF
      THIS SECURITY AGREEMENT AS OF THE EVEN DATE
      THEREWITH*******

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    SCHEDULE
      A

    

    

    Principal
      Place of Business of Debtors:

    

    2311
      Wallace Street, Philadelphia, PA 19130

     

    

    Locations
      Where Collateral is Located or Stored:

    

    2311
      Wallace Street, Philadelphia, PA 19130

    

    

    

    

    

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

SCHEDULE
      B

    

    
      	
              Institution

            	
              Amount

            
	
            	 
	
              Nissan
                Financial - 2004 Nissan Titan

            	
              25,353.00

            
	 	 
	
              Ford
                Motor Credit Co. - Ford F350

            	
              36,483.52

            

    

    
 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

     SCHEDULE
      C

    

    Organizational
      Identification Numbers

    
      	
            	 
	
              Sweetskinz
                Holdings, Inc. (a Delaware corporation)

            	
              2776734

            
	 	 
	
              Sweetskinz,
                Inc. (a Pennsylvania corporation)

            	
              2914099

            
	 	 
	
              Sweetskinz
                Merger Sub, Inc. (a Pennsylvania corporation)

            	 

    

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    SCHEDULE
      D

    

    Names;
      Mergers and Acquisitions

    

    Trade
      Names: Sweetskinz

    

    Mergers
      within the last 5 years : On March 31, 2006, Sweetskinz, Inc. merged with
      Sweetskinz Merger Sub, Inc., a Delaware corporation, with Sweetskinz, Inc.
      the
      surviving entity.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    SCHEDULE
      E

    

    Intellectual
      Property

    

     

    
      	
              Country

            	
              Application/Registration
                No.

            	
              Title

            	
              Status

            
	
              US

            	
              09/695,770

            	
              Cover
                Member and Method of Making Same

            	
              Abandoned

            
	
              PCT

            	
              PCT/US00/32784

            	
              Cover
                Member and Method of Making Same

            	
              Abandoned

            
	
              Taiwan

            	
              161610

            	
              Cover
                Member and Method of Making Same

            	
              Granted

            
	
              Thailand

            	
              062348

            	
              Cover
                Member and Method of Making Same

            	
              Pending

            
	
              US

            	
              60/325,523

            	
              Tire
                With Exo-Belt Skin

            	
              Expired

            
	
              US

            	
              10/253,837

            	
              Tire
                With Exo-Belt Skin

            	
              Pending

            
	
              PCT

            	
              PCT/US02/30466

            	
              Tire
                With Exo-Belt Skin

            	
              National
                Phase

            
	
              China

            	
              02819181.1

            	
              Tire
                With Exo-Belt Skin

            	
              Published

            
	
              Japan

            	
              2003-532280

            	
              Tire
                With Exo-Belt Skin

            	
              Pending

            
	
              Indonesia

            	
              2004-00571

            	
              Tire
                With Exo-Belt Skin

            	
              Pending

            
	
              India

            	
              557/2004

            	
              Tire
                With Exo-Belt Skin

            	
              Pending

            
	
              Europe

            	
              02800356.4

            	
              Tire
                With Exo-Belt Skin

            	
              Pending

            
	
              US

            	
              60/615,624

            	
              Bicycle
                Holder

            	
              Expired

            

    

    

    
      	
              Trademark

            	
              Application/
                Registration No.

            	
              Status

            
	
              Misc
                Design

            	
              76/204,384

            	
              Abandoned

            
	
              SWEETSKINZ

            	
              76/204,382

            	
              Abandoned

            
	
              SWEETSKINZ

            	
              78/632,570

            	
              Pending

            
	
              SZ
                & DESIGN

            	
              78/451,024

            	
              Pending

            
	
              SZ
                SWEETSKINZ

            	
              78/780,845

            	
              Pending

            

    

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    SCHEDULE
      F

    

    Pledged
      Securities

    

    One
      share
      of Sweetskinz, Inc., a Pennsylvania corporation.

     

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    

    FORM
      OF ADDITIONAL DEBTOR JOINDER

    

    Security
      Agreement dated as of May 3, 2006 made by

    Sweetskinz
      Holdings, Inc.

    and
      its
      subsidiaries party thereto from time to time, as Debtors

    to
      and in
      favor of

    the
      Secured Parties identified therein (the “Security
      Agreement”)

    

    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    

    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    

    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    

    An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Parties.

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    

    [Name
      of
      Additional Debtor]

     

    By:__________________________________

    Name:

    Title:

     

    Address:

    

    

    

    

    

    Dated:   

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    ANNEX
      B

    to

    SECURITY

    AGREEMENT

    

    THE
      AGENT

    

    1.
      Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Security Agreement to which
      this Annex B is attached (the "Agreement")),
      by
      their acceptance of the benefits of the Agreement, hereby designate Oceana
      Partners, LLC (“Oceana”
or
      “Agent”)
      as the
      Agent to act as specified herein and in the Agreement. Each Secured Party shall
      be deemed irrevocably to authorize the Agent to take such action on its behalf
      under the provisions of the Agreement and any other Transaction Document (as
      such term is defined in the Debentures) and to exercise such powers and to
      perform such duties hereunder and thereunder as are specifically delegated
      to or
      required of the Agent by the terms hereof and thereof and such other powers
      as
      are reasonably incidental thereto. The Agent may perform any of its duties
      hereunder by or through its agents or employees.

    

    2.
      Nature
      of Duties.
      The
      Agent shall have no duties or responsibilities except those expressly set forth
      in the Agreement. Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful misconduct as determined by a final
      judgment (not subject to further appeal) of a court of competent jurisdiction.
      The duties of the Agent shall be mechanical and administrative in nature; the
      Agent shall not have by reason of the Agreement or any other Transaction
      Document a fiduciary relationship in respect of any Debtor or any Secured Party;
      and nothing in the Agreement or any other Transaction Document, expressed or
      implied, is intended to or shall be so construed as to impose upon the Agent
      any
      obligations in respect of the Agreement or any other Transaction Document except
      as expressly set forth herein and therein.

    

    3.
      Lack
      of Reliance on the Agent.
      Independently and without reliance upon the Agent, each Secured Party, to the
      extent it deems appropriate, has made and shall continue to make (i) its own
      independent investigation of the financial condition and affairs of the Company
      and its subsidiaries in connection with such Secured Party’s investment in the
      Debtors, the creation and continuance of the Obligations, the transactions
      contemplated by the Transaction Documents, and the taking or not taking of
      any
      action in connection therewith, and (ii) its own appraisal of the
      creditworthiness of the Company and its subsidiaries, and of the value of the
      Collateral from time to time, and the Agent shall have no duty or
      responsibility, either initially or on a continuing basis, to provide any
      Secured Party with any credit, market or other information with respect thereto,
      whether coming into its possession before any Obligations are incurred
      or

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    at
      any
      time or times thereafter. The Agent shall not be responsible to the Debtors
      or
      any Secured Party for any recitals, statements, information, representations
      or
      warranties herein or in any document, certificate or other writing delivered
      in
      connection herewith, or for the execution, effectiveness, genuineness, validity,
      enforceability, perfection, collectibility, priority or sufficiency of the
      Agreement or any other Transaction Document, or for the financial condition
      of
      the Debtors or the value of any of the Collateral, or be required to make any
      inquiry concerning either the performance or observance of any of the terms,
      provisions or conditions of the Agreement or any other Transaction Document,
      or
      the financial condition of the Debtors, or the value of any of the Collateral,
      or the existence or possible existence of any default or Event of Default under
      the Agreement, the Debentures or any of the other Transaction
      Documents.

    

    4.
      Certain
      Rights of the Agent.
      The
      Agent shall have the right to take any action with respect to the Collateral,
      on
      behalf of all of the Secured Parties. To the extent practical, the Agent shall
      request instructions from the Secured Parties with respect to any material
      act
      or action (including failure to act) in connection with the Agreement or any
      other Transaction Document, and shall be entitled to act or refrain from acting
      in accordance with the instructions of Secured Parties holding a majority in
      principal amount of Debentures (based on then-outstanding principal amounts
      of
      Debentures at the time of any such determination); if such instructions are
      not
      provided despite the Agent’s request therefor, the Agent shall be entitled to
      refrain from such act or taking such action, and if such action is taken, shall
      be entitled to appropriate indemnification from the Secured Parties in respect
      of actions to be taken by the Agent; and the Agent shall not incur liability
      to
      any person or entity by reason of so refraining. Without limiting the foregoing,
      (a) no Secured Party shall have any right of action whatsoever against the
      Agent
      as a result of the Agent acting or refraining from acting hereunder in
      accordance with the terms of the Agreement or any other Transaction Document,
      and the Debtors shall have no right to question or challenge the authority
      of,
      or the instructions given to, the Agent pursuant to the foregoing and (b) the
      Agent shall not be required to take any action which the Agent believes (i)
      could reasonably be expected to expose it to personal liability or (ii) is
      contrary to this Agreement, the Transaction Documents or applicable
      law.

    

    5.
      Reliance.
      The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it.

    

    6.
      Indemnification.
      To the
      extent that the Agent is not reimbursed and indemnified by the Debtors, the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of
      Debentures, from and against any and all liabilities, obligations,
      losses,

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    damages,
      penalties, actions, judgments, suits, costs, expenses or disbursements of any
      kind or nature whatsoever which may be imposed on, incurred by or asserted
      against the Agent in performing its duties hereunder or under the Agreement
      or
      any other Transaction Document, or in any way relating to or arising out of
      the
      Agreement or any other Transaction Document except for those determined by
      a
      final judgment (not subject to further appeal) of a court of competent
      jurisdiction to have resulted solely from the Agent's own gross negligence
      or
      willful misconduct. Prior to taking any action hereunder as Agent, the Agent
      may
      require each Secured Party to deposit with it sufficient sums as it determines
      in good faith is necessary to protect the Agent for costs and expenses
      associated with taking such action.

    

    7.
      Resignation
      by the Agent.

     

    (a)
      The
      Agent may resign from the performance of all its functions and duties under
      the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtors and the
      Secured Parties. Such resignation shall take effect upon the appointment of
      a
      successor Agent pursuant to clauses (b) and (c) below.

    

    (b)
      Upon
      any such notice of resignation, the Secured Parties, acting by a Majority
      in Interest,
      shall
      appoint a successor Agent hereunder.

    

    (c)
      If a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above. If a successor Agent has not been appointed within such 30-day period,
      the Agent may petition any court of competent jurisdiction or may interplead
      the
      Debtors and the Secured Parties in a proceeding for the appointment of a
      successor Agent, and all fees, including, but not limited to, extraordinary
      fees
      associated with the filing of interpleader and expenses associated therewith,
      shall be payable by the Debtors on demand.

    

    8.
      Rights
      with respect to Collateral.
      Each
      Secured Party agrees with all other Secured Parties and the Agent (i) that
      it
      shall not, and shall not attempt to, exercise any rights with respect to its
      security interest in the Collateral, whether pursuant to any other agreement
      or
      otherwise (other than pursuant to this Agreement), or take or institute any
      action against the Agent or any of the other Secured Parties in respect of
      the
      Collateral or its rights hereunder (other than any such action arising from
      the
      breach of this Agreement) and (ii) that such Secured Party has no other rights
      with respect to the Collateral other than as set forth in this Agreement and
      the
      other Transaction Documents.

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