Document:

D. Gillespie Stock Option Agreement

     

    Exhibit
      10.12

    
 

    H2DIESEL,
      INC.

     

    Stock
      Option Agreement

     

    1. Grant
      of Option.
      In
      accordance with and subject to the terms and conditions of this Stock Option
      Agreement (the “Agreement”),
      H2Diesel, Inc., a Delaware corporation (the “Corporation”,
      which
      term shall include any entity which acquires, through merger, share exchange,
      purchase of assets or otherwise, substantially all of the capital stock or
      assets of the Corporation), grants to David A. Gillespie (the “Optionee”)
      a
      nonqualified stock option (the “Option”)
      to
      purchase the number of shares (the “Option
      Shares”)
      of its
      common stock, par value $.0001 per share (“Common
      Stock”),
      set
      forth on each of Schedule
      1
      and
Schedule
      2
      attached
      hereto (collectively, the “Schedules”),
      at
      the initial option exercise price of $1.50 per share (such price, as it may
      be
      adjusted hereunder from time to time, the “Exercise
      Price”).
      Capitalized terms used but not otherwise defined herein shall have the meanings
      set forth in the Employment Agreement of even date herewith between the
      Corporation and the Optionee, as such agreement may be amended, supplemented,
      amended and restated or otherwise modified from time to time.

     

    2. Acceptance
      by Optionee.
      The
      exercise of the Option or any portion thereof is conditioned upon acceptance
      by
      the Optionee of the terms and conditions of this Agreement, as evidenced by
      the
      Optionee’s execution and delivery of the Schedules to this Agreement to the
      Corporation.

     

    3. Vesting
      of Option.
      The
      Options shall vest in the tranches as set forth in the Schedules and such vested
      Options shall be exercisable in accordance with this Agreement.

     

    4. Expiration
      of Option.
      The
      Options shall expire on the expiration date set forth in the Schedules (the
      “Expiration
      Date”)
      unless
      earlier terminated as set forth in Section
      6
      below,
      and may not be exercised after such date.

     

    5. Conditions
      to Exercise of Option.
      Except
      as otherwise set forth in Section
      6,
      the
      Optionee may exercise the Option or any portion thereof to the extent then
      vested at any time or from time to time during the period commencing on the
      grant date set forth on the Schedules and ending on the Expiration Date. The
      Option may be exercised only by the Optionee or, in the event of his death
      or
      incompetence, his personal representative or heirs, as the case may
      be.

     

    6. Termination
      of Employment.
      (a)
      Upon termination of the Optionee’s employment by the Corporation or any of its
      subsidiaries due to the death of the Optionee, any vested Options may be
      exercised on or before the Expiration Date.

     

    (b)
      Upon
      termination of the Optionee’s employment by the Corporation or any of its
      subsidiaries due to a Disability, the next unvested tranche of performance
      options set forth on Schedule
      2
      hereto
      (the “Performance
      Options”)
      will
      vest if the applicable Performance Targets are actually met and any vested
      Options may be exercised on or before the Expiration Date.

     

    (c)
      Upon
      termination of the Optionee’s employment by the Corporation or any of its
      subsidiaries for Cause, any vested Option may be exercised at any time or from
      time to time until and including the 30th day after such termination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)
      Subject to Section
      6(e)
      below,
      Upon termination of the Optionee’s employment by the Corporation or any of its
      subsidiaries without Cause or for Good Reason, then all of the unvested time
      based options set forth on Schedule
      1
      hereto
      (the “Time
      Based Options”)
      will
      vest and the next tranche of unvested Performance Options will vest as if the
      applicable Performance Targets had been met. Additionally, such vested portions
      of the Options may be exercised on or before the Expiration Date. 

     

    (e)
      If
      there is a Change of Control in the Corporation and within twelve (12) months
      thereafter the Optionee’s employment by the Corporation or any of its
      subsidiaries is terminated without Cause or for Good Reason, then all unvested
      Time Based Options and all unvested Performance Options will vest and may be
      exercised on or before the Expiration Date.

     

    (f)
      Notwithstanding anything in this Agreement to the contrary, in no event may
      any
      Option be exercised following the Expiration Date nor may any Option be
      exercised with respect to the unvested portion thereof. 

     

    7. Procedure
      for Exercise.
      (a) The
      vested portion of the Options may be exercised for the number of Option Shares
      specified in a written notice delivered to the Corporation at least five days
      prior to the date on which purchase is requested (such notice, an “Exercise
      Notice”),
      accompanied by full payment in cash of the aggregate Exercise Price in respect
      of such Option Shares. If specified in the Exercise Notice, payment of such
      Exercise Price may also be made by means of the Corporation retaining from
      the
      Option Shares to be delivered upon exercise of the Option, or portion thereof,
      that number of Option Shares having an aggregate Fair Market Value (as defined
      below) on the date that the Exercise Notice is delivered to the Corporation
      (the
      date that the Exercise Notice is delivered to the Corporation being referred
      to
      as the “Valuation
      Date”;
      provided,
      however,
      that if
      such date is not a day on which securities markets are open for trading, then
      the Valuation Date shall be the first succeeding date that such markets are
      open) equal to the aggregate Exercise Price of the total number of Option Shares
      with respect to which the Optionee shall then be exercising the Option. If
      upon
      exercise of all or a portion of the Option there shall be payable by the
      Corporation or a subsidiary any amount for withholding taxes, then, at the
      Corporation’s election and as a condition to such exercise, either (i) the
      Corporation shall reduce the number of Option Shares to be issued to the
      Optionee by a number of Option Shares of Common Stock having an aggregate Fair
      Market Value on the Valuation Date equal to the amount of such withholding
      tax
      or (ii) the Optionee shall pay such amount to the Corporation or its subsidiary,
      as applicable. 

     

    (b)
      If
      any applicable law requires the Corporation to take any action with respect
      to
      the Option Shares specified in the Exercise Notice, or if any action remains
      to
      be taken under the Certificate of Incorporation or Bylaws of the Corporation,
      as
      in effect at the time, to effect due issuance of Option Shares, then the
      Corporation shall take such action and the day for delivery of such Option
      Shares shall be extended for the period necessary to take such action. The
      Optionee shall not have any of the rights of a shareholder of the Corporation
      under the Option. 

     

    (c)
      As
      used herein, the phrase “Fair Market Value” shall mean (i) if the Common
      Stock is listed or admitted for trading on a national securities exchange,
      an
      automated quotation system or the Over-the-Counter Bulletin Board, the last
      reported sale price per share of the Common Stock on the Valuation Date, or,
      in
      case no such reported sale takes place on such day or is

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    reported,
      then the average of the last reported per share bid and ask prices for shares
      of
      the Common Stock on such date (or if such bid and ask prices are not available
      on such date, the most recent preceding date), in either case as officially
      reported by such securities exchange, quotation system or Bulletin Board on
      which the Common Stock is listed or admitted to trading, (ii) if not so
      listed or admitted for trading, the fair market value of a share of the Common
      Stock as determined by the Corporation’s board of directors in good faith, or
      (iii) if such exercise is in connection with a merger or consolidation of the
      Corporation in which the Corporation is not the survivor or in which the Common
      Stock is exchanged for cash or other securities or a sale of all or
      substantially all of the assets of the Corporation (collectively, a “Sale”), the
      implied price per share of the Common Stock resulting from such
      Sale.

     

    8. Adjustment
      of Exercise Price and Option Shares. (a)
      If,
      at any time prior to the Expiration Date, the number of outstanding
      shares
      of Common Stock is (i) increased by a stock dividend payable in shares of Common
      Stock or by a subdivision or split-up of shares of Common Stock, or (ii)
      decreased by a combination of shares of Common Stock, then, following the record
      date fixed for the determination of holders of Common Stock entitled to receive
      the benefits of such stock dividend, subdivision, split-up, or combination,
      the
      Exercise Price shall be adjusted to a new amount equal to the product of (A)
      the
      Exercise Price in effect on such record date, and (B) the quotient obtained
      by
      dividing (x) the number of Option Shares for which the Option was exercisable
      on
      such record date without giving effect to the event referred to in the foregoing
      clause (i) or (ii) (such number of Option Shares, the “Record
      Date Option Shares”),
      by
      (y) the aggregate number of shares to which the Record Date Option Shares would
      have been increased or decreased immediately after and as a result of the event
      referred to in the foregoing clause (i) or (ii) had the Record Date Option
      Shares been issued immediately prior to such record date.

     

    (b) Upon
      each
      adjustment of the Exercise Price as provided in Section
      8(a),
      the
      Optionee shall thereafter be entitled to subscribe for and purchase, at the
      Exercise Price
      resulting from such adjustment, the number of Option Shares equal to the product
      of (i) the number of Record Date Option Shares and (ii) the quotient obtained
      by
      dividing (A) the Exercise Price existing prior to such adjustment by (B) the
      new
      Exercise Price resulting from such adjustment.

     

    9. Reclassification,
      Etc. In
      case
      of any reclassification or change of the outstanding Common Stock of the
      Corporation (other than as a result of a subdivision, combination or stock
      dividend), or in case of any consolidation of the Corporation with, or merger
      of
      the Corporation into, another corporation or other business organization (other
      than a consolidation or merger in which the Corporation is the continuing
      corporation and which does not result in any reclassification or change of
      the
      outstanding Common Stock of the Corporation) at any time prior to the Expiration
      Date, then, as a condition of such reclassification, reorganization, change,
      consolidation or merger, lawful provision shall be made, and duly executed
      documents evidencing the same from the Corporation or its successor shall be
      delivered to the Optionee, so that the Optionee shall have the right prior
      to
      the Expiration Date to purchase, at a total price not to exceed that payable
      upon the exercise of this Option as to the number of Option Shares is then
      exercisable, the kind and amount of shares of stock and other securities and
      property receivable upon such reclassification, reorganization, change,
      consolidation or merger by a holder of the number of Option Shares which might
      have been purchased by the Optionee immediately prior to such reclassification,
      reorganization, change, consolidation or merger, and in any such
      case

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    appropriate
      provisions shall be made with respect to the rights and interest of the Optionee
      to the end that the provisions hereof (including provisions for the adjustment
      of the Exercise Price and of the number of shares purchasable upon exercise
      of
      the Option) shall thereafter be applicable in relation to any shares of stock
      and other securities and property thereafter deliverable upon exercise of the
      Option.

     

    10. Merger
      of Corporation.
      It is
      contemplated by the parties that the Corporation may be acquired by an existing
      publicly traded entity by means of a reverse merger. In the event of such a
      merger, the Corporation shall require such publicly traded entity to assume
      the
      Time Based Options and the Performance Options and to provide that they will
      be
      converted to an equivalent number of options for the common stock of such
      publicly traded company.

    

    11. Non-Transferability
      of Stock Options.
      The
      Option granted hereunder to the Optionee shall not be transferable by the
      Optionee otherwise than by will, or by the laws of descent and
      distribution.

     

    12. No
      Right to Employment.
      Nothing
      contained in this Agreement, nor any action taken by the board of directors,
      shall confer upon the Optionee any right with respect to continuation of
      employment by the Corporation or a subsidiary as an employee nor interfere
      in
      any way with the right of the Corporation or a subsidiary to terminate the
      Optionee’s employment as an employee at any time with or without
      Cause.

     

    13. Compliance
      With Applicable Law.
      The
      issuance of the Option Shares pursuant to the exercise of the Option is subject
      to compliance with all applicable laws, including without limitation laws
      governing withholding from employees and nonresident aliens for income tax
      purposes. 

     

    14. Investment
      Representations; Restrictions on Option Shares.
      Unless
      a
      current registration statement under the Securities Act of 1933, as amended
      (the
“Securities
      Act”)
      shall
      be in effect with respect to the Option Shares to be issued upon exercise of
      the
      Option, the Optionee, by accepting the Option, covenants and agrees that, at
      the
      time of exercise the Option, the Optionee will deliver to the Corporation such
      written representations that the Corporation may deem necessary or appropriate
      to ensure that the Option Shares are not required to be registered under the
      Securities Act or applicable state securities laws. The Optionee agrees that
      certificates representing Option Shares may bear a legend substantially as
      follows:

     

    
      
        THE
          SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
          THE
          SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.
          THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR TRANSFERRED UNTIL
          THE
          HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE
          DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY
          TO THE
          ISSUER) THAT SUCH OFFER, SALE, PLEDGE, 

        
 

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TRANSFER
      OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE
      LAWS.

     

    15. Notices
      Generally. Any
      notice, request, consent, other communication or delivery pursuant to the
      provisions hereof shall be in writing and shall be sent by one of the following
      means: (i) by registered or certified first class mail, postage prepaid, return
      receipt requested; (ii) by facsimile transmission with confirmation of receipt;
      (iii) by overnight courier service; or (iv) by personal delivery, and shall
      be
      properly addressed to the Optionee at the last known address or facsimile number
      appearing on the books of the Corporation, or, except as herein otherwise
      expressly provided, to the Corporation at its principal executive office
      Attention: Chairman of the Board of Directors, or such other address or
      facsimile number as shall have been furnished to the party giving or making
      such
      notice, demand or delivery.

     

    16. Miscellaneous.
      

     

    (a) This
      Agreement has been duly authorized on behalf of the Corporation by the board
      of
      directors. The Optionee represents that he is free to enter into this Agreement
      and that his entering into this Agreement does not violate any obligation that
      he has to any other person or legal entity.

     

    (b) In
      the
      event that any provision of this Agreement would be held to be invalid or
      unenforceable for any reason unless narrowed by construction, this Agreement
      shall be construed as if such invalid or unenforceable provision had been more
      narrowly drawn so as not to be invalid or unenforceable. If, notwithstanding
      the
      foregoing, any provision of this Agreement shall be held to be invalid or
      unenforceable for any reason, such invalidity or unenforceability shall attach
      only to such provision and shall not affect or render invalid or unenforceable
      any other provision of this Agreement.

     

    (c)
      This
      Agreement sets forth the entire understanding of the Corporation and the
      Optionee with respect to the subject matter hereof and cannot be amended or
      modified except by a writing signed by both parties.

     

    (d) Except
      as
      otherwise expressly provided herein, this Agreement shall be binding upon and
      inure to the benefit of the parties hereto, and their respective permitted
      successors and assigns, heirs and personal representatives.

     

    (e) This
      Agreement may not be amended, and no provision of this Agreement may be waived,
      except by a writing signed by Optionee and by a duly authorized representative
      of the Corporation. Failure to exercise any right under this Agreement shall
      not
      constitute a waiver of such right. Any waiver of any breach of this Agreement
      shall not operate as a waiver of any subsequent breaches. All rights or remedies
      specified for a party herein shall be cumulative and in addition to all other
      rights and remedies of the party hereunder or under applicable law

     

    (f) This
      Agreement shall be interpreted, construed and administered in accordance with
      the laws of the State of Florida without regard to its choice of law provisions
      that would cause the laws of another jurisdiction to apply. For the purposes
      of
      any suit, action, or other proceeding (collectively, a “Proceeding”)
      arising out of this Agreement or any transaction contemplated hereby, each
      of
      the parties hereto irrevocably submits to the exclusive
      jurisdiction

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    of
      the
      courts of the State of Florida located (i) in Palm Beach County and the Federal
      Courts of the United States of America located in Palm Beach County, Florida,
      or
      (ii) the county in which the Corporation’s principal executive offices are
      located at the time any such Proceeding is commenced.

     

    (g) This
      Agreement may be executed in counterparts which, taken together, shall
      constitute a single original document.

     

    

     

    

     

    

     

    

     

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    IN
      WITNESS WHEREOF,
      the
      Corporation has caused this Agreement to be executed as of the Date of Grant
      set
      forth in Schedules.

     

    H2DIESEL,
      INC.

     

    By:
      /s/
      Lee S. Rosen

    Name:
      Lee
      S. Rosen

    Title: Chairman
      of the Board

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      1

    Time
      Based Options

     

    

      

      
        	
                1.
                  Name of Optionee:

              	
                David
                  A. Gillespie

              
	 	 
	
                2.
                  Number of Option Shares:

              	
                800,000
                  shares of Common Stock

              
	 	 
	
                3.
                  Initial Option Exercise Price Per Share:

              	
                $1.50

              
	 	 
	
                4.
                  Date of Grant:

              	
                October
                  18, 2006

              
	 	 
	
                5.
                  Expiration Date:

              	
                October
                  18, 2016

              
	 	 
	
                6.
                  Vesting Schedule:

              	
                option
                  to purchase up to 200,000 shares of Common Stock shall vest on
                  the date of
                  grant

              
	 	 
	 	
                option
                  to purchase up to 200,000 shares of Common Stock shall vest on
                  October 18,
                  2007

              
	 	 
	 	
                option
                  to purchase up to 200,000 shares of Common Stock shall vest on
                  October 18,
                  2008

              
	 	 
	 	
                option
                  to purchase up to 200,000 shares of Common Stock shall vest on
                  October 18,
                  2009

              

      

       

       

    

    

    Accepted
      and agreed to as of October 18, 2006:

     

    /s/
      David A. Gillespie 

    David
      A.
      Gillespie 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      2

    Performance
      Options

    
 

    
      
        	
                1.
                  Name of Optionee:

              	
                David
                  A. Gillespie

              
	 	 
	
                2.
                  Number of Option Shares:

              	
                1,200,000
                  shares of Common Stock

              
	 	 
	
                3.
                  Initial Option Exercise Price Per Share:

              	
                $1.50

              
	 	 
	
                4.
                  Date of Grant:

              	
                October
                  18, 2006

              
	 	 
	
                5.
                  Expiration Date:

              	
                October
                  18, 2016

              
	 	 
	
                6.
                  Vesting Schedule:

              	
                option
                  to purchase up to 400,000 shares of Common Stock shall vest in
                  respect of
                  the fiscal year ending December 31, 2007 if the Performance Targets
                  (defined below) for such year are met

              
	 	 
	 	
                option
                  to purchase up to 400,000 shares of Common Stock shall vest in
                  respect of
                  the fiscal year ending December 31, 2008 if the Performance Targets
                  for
                  such year are met

              
	 	 
	 	
                option
                  to purchase up to 400,000 shares of Common Stock shall vest in
                  respect of
                  the fiscal year ending December 31, 2009 if the Performance Targets
                  for
                  such year are met

              
	 	 
	 	
                Commencing
                  with the fiscal year ending December 31, 2007, the Performance
                  Targets for
                  each fiscal year shall be established by the Compensation Committee
                  not
                  later than February 28 of such fiscal year. The Compensation Committee
                  shall determine whether the Performance Targets for the preceding
                  fiscal
                  year have been met not later than seven days after the date that
                  the
                  Corporation’s audited financial statements in respect of such fiscal year
                  become available. If such Performance Targets are determined to
                  have been
                  met, the Performance Options in respect of such fiscal year shall
                  be
                  deemed to be vested as of such date of
                  determination.

              

      

       

       

    

    

    Accepted
      and agreed to as of October 18, 2006:

     

    /s/ 
      David A.
      Gillespie            

    David
      A.
      GillespieTally Ho 8-K re Mercatus Ex 10-1 SPA

    EXHIBIT
      10.1

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      executed effective as of October 13, 2006 (the “Agreement
      Date”)
      between Tally
      Ho Ventures Inc.,
      a
      Delaware corporation (the “Company”),
      and
      its subsidiary corporations (the “Subsidiary”
or
      “Subsidiaries”)
      and
Mercatus&
      Partners,
      Ltd.
      (the
      "Purchaser"),
      a
      corporation organized under the laws of Luxemburg.

     

    WHEREAS,
      subject
      to the terms and conditions set forth in this Agreement, the Company desires
      to
      issue and sell to the Purchaser and the Purchaser desires to purchase from
      the
      Company the Shares and Warrants (each as hereinafter defined) of the Company
      set
      forth in Section 2.1(a) below for a purchase price of up to Two Million Two
      Hundred Thousand (US $2,200,000.00) Dollars (the “Purchase
      Price”).

     

    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 the Purchaser agrees 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(i).

     

    “Additional
      Shares”
shall
      mean the additional shares of Common Stock that may be issued under the
      provision of Section 2 at or prior to Closing.

     

    “Adjusted
      Average Price”
shall
      have the meaning ascribed to such term in Section 2.4.

     

    “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. 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. However, any entity not otherwise Affiliated with Purchaser
      shall not be deemed an Affiliate of Purchaser for purposes of this Agreement
      (other then for purposes of the definition of Purchaser Confidential
      Information) solely because such person(s) loan funds to the Purchaser, hold
      the
      Shares or other securities owned by Purchaser, act as Custodial Bank or SICAV
      manager, or provide valuation or other services to Purchaser.

     

    “Affidavit”
means
      the Affidavit required to be executed and sworn to by an officer of the Company,
      which shall be utilized, among other things, in connection with the delivery
      of
      the Shares to the Custodial Bank (or its agent) on behalf of the SICAV and
      obtaining a valuation and funding for such Shares, substantially in the form
      as
      annexed hereto as Exhibit
      A.
      

     

    “Agreement
      Date”
means
      the date that this Agreement is first entered into by all Parties, as set forth
      in the preamble to this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions in the
      State
      of New York, Luxembourg, and Italy are authorized or required by law or other
      governmental action to close. 

     

    “Class
      A Exercise Price”
means
      the Purchase Price Per Share as adjusted, at Closing. The Class A Warrant shall
      also be exercisable by cashless exercise. 

     

    “Class
      A Warrant”
means
      the Warrant issued by the Company to the Purchaser (or its designees and
      assigns) at Closing, exercisable at the Class A Exercise Price for the Class
      A
      Warrant Shares and bearing customary anti dilution provisions, which warrant
      is
      substantially in the form as annexed hereto as Exhibit
      B.

     

    “Class
      A Warrant Shares”
means
      the Warrant Shares issuable upon exercise of the Class A Warrant, which shall
      initially be such number of shares of Common Stock as equals the number of
      Shares purchased at Closing (inclusive of any Additional Shares) multiplied
      by
      .3, as may be adjusted from time to time as provided therein.

     

    “Class
      B Exercise Price”
means
      the lesser of $1.75 per share. 

     

    “Class
      B Warrant”
means
      the Warrant issued by the Company to the Purchaser (or its designees and
      assigns) at Closing, exercisable at the Class B Exercise Price for the Class
      B
      Warrant Shares and bearing customary anti dilution provisions, which warrant
      is
      substantially in the form as annexed hereto as Exhibit
      C.

     

    “Class
      B Warrant Shares”
means
      the Warrant Shares issuable upon exercise of the Class B Warrant, which shall
      initially be such number of shares of Common Stock as equals the number of
      Shares purchased at Closing (inclusive of any Additional Shares) multiplied
      by
      .25, as may be adjusted from time to time as provided therein.

     

    “Closing”
means
      the closing of the purchase and sale of the Common Stock and the Warrants
      pursuant to Section 2.1(b). If more than one closing takes place then pro rata
      amount of warrants and shares should be issued at each Closing.

     

    “Closing
      Date”
means
      the date(s) that a Closing takes place pursuant to Section 2.1
      hereof.

     

    “Commission”
or
      “SEC”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, $0.001
      par
      value per share, and any securities into which such common stock may hereafter
      be reclassified or converted into or shares of such successor of the Company
      exchangeable therefore.

     

    “Company
      Counsel”
means
      counsel to the Company.

     

    “Company
      Documents”
means
      the Company’s by-laws, articles or certificate of incorporation, any audit
      committee or corporation committee or similar charter or by-laws, each as
      amended and restated through the date of Closing, any organizational or similar
      document in which the Company is a Party, and any other agreement, instrument,
      or document governing the Company or setting forth any preference, control
      or
      similar right of procedure of the Company, its board of directors (or committees
      thereof) or Stockholders. 

     

    “Company Confidential
      Information”
means
      all confidential information of the Company concerning this Agreement
      (including, without limitation, any exhibits or schedules hereto), the other
      Transaction Documents, the transactions contemplated hereby and thereby, other
      confidential information regarding the Company delivered to the Purchaser in
      connection with the transaction and any information provided in response to
      any
      notice requirement or other disclosure delivered pursuant to the Transaction
      Documents. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Consultant”
means
      sponsor and arranger of transaction on behalf of the Company, which will be
      paid
      a fee by the Company as defined in Section 3.1(q). 

     

    “Consulting
      Warrants” shall
      have the meanings ascribed in Section 3.1(q).

     

    “Consulting
      Warrant Shares” shall
      mean the Shares issuable upon exercise of the Consulting Warrant.

     

    "Custodial
      Bank”
means
      the bank that will receive and retain the Shares of the Company on behalf of
      the
      parties (including such custodial Bank’s Agent or depository in the United
      States or elsewhere) until payment is received at Closing. The Custodial Bank
      may change from time to time including, without limitation, to an entity
      affiliated or owned or controlled by with the Purchaser, but shall remain
      subject to the terms of this Agreement.

     

    “Disclosure
      Materials”
shall
      have the meaning ascribed in Section 3.1(g).

     

    “Disclosure
      Schedule”
means
      the Disclosure Schedule attached as Schedule
      III
      hereto.

     

    "Documentation
      Fees"
      shall
      have the meaning ascribed in Section 7.1.

     

    "Due
      Diligence Fee"
      shall
      have the meaning ascribed in Section 7.1.

     

    “Effective
      Date”
means
      the date that the Registration Statement is first declared effective by the
      Commission.

     

    “Evaluation
      Date”
shall
      have the meaning ascribed in Section 3.1(p).

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended. 

     

    “GAAP”
shall
      have the meaning ascribed in Section 3.1(g).

     

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

     

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

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance or other restriction.

     

    “Loss
      Calculation Period”
shall
      have the meaning ascribed in Section 2.4.

     

    “Material
      Adverse Effect”
shall
      mean a material adverse effect on the business assets (including intangible
      assets), liabilities, financial condition, customer, vendor or suppler and
      employee relationships, property, business prospects or results of operations
      of
      the Company and its subsidiaries taken as a whole, or the occurrence of any
      change of or disagreements with accountants as described in Item 304 of
      Regulation S-B (or Regulation S-K if the Company is subject to such rules)
      or
      8-K resulting from a disagreement with the accountants of any kind, or any
      change that would require the auditors to withdraw or restate their audit report
      in any way. 

     

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

     

    “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
      lawfully recognized or established.

     

    “Purchase
      Price”
means
      the consideration paid by the Purchaser as set forth in the preamble to this
      Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Purchaser
      Confidential Information”
      means
      the identities of all Affiliates of the Purchaser including, without limitation,
      any banking, custodian or SICAV related to the Purchaser or which Purchaser
      utilizes or any information relating to the financing procedures as
      methodologies employed by Purchaser in connection with its business or the
      funding of the payment of the Purchase Price.

     

    “Purchase
      Price Per Share”
shall
      mean initially mean $1.40, as may be adjusted to the Adjusted Purchase Price
      at
      or prior to Closing as set forth in Section 2.

     

    “Qualified
      Transferee”
means
      an Affiliate of the Purchaser who (i) receives Securities in a transaction
      that
      complies with all applicable securities laws, (ii) and (ii) makes all
      representations of a Purchaser hereunder (including, without limitation, all
      representations contained in Section 3.2 hereof) to the extent that such
      representations are applicable to the Qualified Transferee and the Securities
      being transferred. Notwithstanding the foregoing, the Purchaser may encumber,
      hypothecate or transfer the Securities as may be necessary to facilitate the
      financing as contemplated herein.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchaser and Consultant(s)
      of
      the Shares, the Warrant Shares and Consulting Warrant Shares. 

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated as of the Closing Date, among the
      Company and the Purchaser, with respect to the Shares, the Warrant Shares and
      the Consulting Warrant Shares in the form of Exhibit
      E
      hereto.

     

    “Restricted
      Period”
shall
      have the meaning ascribed in Section 3.2(i).

     

    “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. 

     

    “SEC
      Documents”
shall
      mean the SEC Reports, the press releases of the Company and registration
      statements of the Company filed with the Commission pursuant to the Securities
      Act (including any amendments thereto).

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section 3.1(g).

     

    “Securities”
means
      the Shares, the Warrants and the Warrant Shares, or any securities, scrip or
      rights issued by the Company or its successor in exchange
      therefore.

     

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

     

    “Shares”
means
      the shares of Common Stock issued or issuable to Purchaser pursuant to this
      Agreement, the initial number of which is set forth in Section 2.1., and the
      Additional Shares as may be issued at or prior to Closing. 

     

    “SICAV”
means
      the open ended investment company with variable capital for which the Shares
      will be held by the Custodial Bank, which, it is intended, will, upon
      satisfaction of all the pre-requisites to closing, issue a SICAV Certificate.
      

     

    “SICAV
      Certificate”
means
      the certificate issued by the SICAV to the Purchaser or its affiliates, which
      certificate was issued directly as a result of the deposit of the Shares with
      the Custodial Bank. 

     

    “Subsidiary”
      means
      any
      entity which the Company holds greater than 50% of the voting, profits or equity
      ownership of, or which entity’s revenues account for more 25% of the company’s
      revenues or profits.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Trading
      Day”
means
      (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
      if
      the Common Stock is not listed on a Trading Market, a day on which the Common
      Stock is traded on the over-the-counter market, as reported by the OTC Bulletin
      Board, or (iii) if the Common Stock is not quoted on the OTC Bulletin Board,
      a
      day on which the Common Stock is quoted in the over-the-counter market as
      reported by the National Quotation Bureau Incorporated (or any similar
      organization or agency succeeding its functions of reporting prices); provided,
      that in the event that the Common Stock is not listed or quoted as set forth
      in
      (i), (ii) and (iii) hereof, then Trading Day shall mean a Business
      Day.

     

    “Trading
      Market”
means
      the following exchange on which the Common Stock is quoted for trading on the
      date in question: the American Stock Exchange, the New York Stock Exchange,
      the
      NASDAQ National Market or the NASDAQ Small Cap Market.

     

    “Transaction Document(s)”
means
      this Agreement, the Registration Rights Agreement, the Affidavit, the Class
      A
      Warrant and the Class B Warrant, the Closing Certificates delivered by the
      Company or its officers and any exhibit and schedule to any of the foregoing,
      the Share certificates and any other documents or agreements executed in
      connection with the Closing.

     

    “Warrant”
means
      each or any of the Class A Warrant and the Class B Warrant. 

     

    “Warrant
      Shares”
means
      the Class A Warrant Shares, Class B Warrant Shares.

     

    ARTICLE
      II  

     

    

     

    PURCHASE
      AND SALE

     

    2.1  Purchase
      and Sale of Securities.
      

     

    (a)  Subject
      to the terms and conditions of this Agreement, Purchaser agrees to purchase
      at
      the Closing and the Company agrees to sell and issue to Purchaser at the Closing
      each of (i) 1,571,428 Shares of Common Stock, (ii) the Class A Warrant and
      (iii)
      the Class B Warrant in exchange for the Purchase Price which shall be paid
      at
      Closing; provided,
      however,
      that the
      number of Shares set forth in 2.1(a)(i) above shall be revised to include any
      Additional Shares required to be issued as provided in Section 2.4.
      Notwithstanding the nature of the delayed Closing of the sale of Securities
      provided for herein, the Company shall deliver the Shares prior to Closing
      in
      accordance with Section 2.3 below. The portion of the Purchase Price allocable
      to the Shares and the Warrants shall be determined in good faith by the
      parties.

     

    (b)  The
      purchase and sale of the Shares and Warrants shall take place remotely via
      the
      exchange of documents, signatures and Purchase Price on the date (the
“Closing
      Date”)
      determined by the Purchaser by written notice to the Company, which the parties
      anticipate will be approximately 25 full Business Days after the most recent
      receipt of the Shares (or Additional Shares) pursuant to Section 2.3, or at
      such
      other time and place as the Purchaser agrees upon in writing (the “Closing”).
      The
      Closing Date set shall not be greater then 15 calendar days after the giving
      of
      notice (presuming all conditions to Closing are satisfied) as set forth in
      the
      previous sentence. In the event there is more than one Closing, the term
“Closing”
shall
      apply to each such closing unless otherwise specified. Notwithstanding the
      foregoing or any adjustments to price or number of shares set forth in this
      Article 2, neither party shall be obligated to enter into a Closing if the
      conditions to such parties obligations as set forth in Article V and Article
      VI,
      respectively, are not either satisfied or waived by such party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

      The
        Company
        may
        demand the return of its Shares at anytime after thirty (30) full Business
        Days
        following the most recent receipt by the Purchaser under Section 2.3 of any
        Shares (or Additional Shares, if any), only if and to the extent the Purchaser
        has not provided a notice to the Company setting a Closing Date or otherwise
        funded a Closing with respect to such Shares and Warrants. To the extent
        that no
        Shares are requested to be returned and no notice of Closing has been delivered
        by the Purchaser has been given, this Agreement shall remain in full force
        as
        against the parties until terminated by the parties or otherwise in accordance
        with this Agreement. 

     

    2.2  Deliveries
      of Parties.
      

     

    (a)  On
      the
      Agreement Date, the Company shall have delivered or caused to be delivered
      to
      the Purchaser each the following: 

     

    (i)  this
      Agreement duly executed by the Company along with the Disclosure Schedule;
      

     

    (ii)  all
      of
      the certificates representing the Shares (and, if applicable, any Additional
      Shares) to be subsequently fully paid for by the Purchaser at Closing, which
      certificates shall be delivered pursuant to Section 2.3 of this Agreement,
      as
      set forth on Exhibit
      F.
      

     

    (iii)  a
      certificate and affidavit substantially in the form is annexed hereto as
Exhibit
      A.

     

    

    (b)  On
      the
      Agreement Date, the Purchaser shall deliver or cause to be delivered this
      Agreement duly executed by the Purchaser.

     

    (c)  Additionally,
      from time to time after the Agreement Date the Company shall execute and deliver
      such questionnaires, letters, affidavits, certificates, or similar documents
      as
      requested from time to time by the Purchaser or the banks or Custodial Banks
      utilized by the Purchaser, which are necessary to verify that the Shares are
      duly issued in the name of Purchaser and providing other reasonable information
      that is necessary in order for the Purchaser to consummate the funding at the
      Closing and to satisfy the conditions of Article IV. The Company shall also
      make
      available its principal financial officer (as set forth in SEC Reports) for
      purposes of providing additional information and verification of factual matters
      to third party correspondent Banks, SICAV administrators or managers or
      Custodial Banks, from the Agreement Date and onward as set forth below.

     

    2.3  Delivery
      of Certificates Representing of Shares. The
      Company shall deliver to the Custodial Bank (i) within five (5) Business Days
      of
      the date of the Agreement Date (if they have not been delivered yet), a
      certificate or certificates evidencing a number of Shares equal to the
      Purchaser’s Subscription Amount set forth in paragraph 2.1 (a)(i), registered in
      the name of the Purchaser and (ii) within five (5) Business Days of the date
      of
      determination thereof, Certificates evidencing all Additional Shares it is
      required to deliver pursuant to 2.4.

     

    2.4  Purchaser
      Downside Protection.
      

     

    (a)  The
      Securities purchased pursuant to this Agreement are being issued at a discount
      because the Shares are illiquid and subject to Regulation S and therefore
      subject to a Restricted Period of twelve months beginning on the Closing Date.
      Notwithstanding the foregoing, the securities may be encumbered prior to such
      time for purposes of obtaining a valuation of such shares and obtaining a SICAV
      certificate in exchange for obtaining a valuation of such Shares and the deposit
      of such Shares.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (b)  Pre-Closing
      Adjustments.

     

    If,
      during any 30 day consecutive period prior to the Closing Date (“Loss
      Calculation Period”),
      the
      per share daily weighted average closing median price (between bid and asked)
      of
      the Company’s Common Stock as quoted on the NASDAQ or the OTC Bulletin Board
      market (the “Adjusted
      Average Price”)
      is
      below (but not greater than) $1.75 (adjusted for stock splits recombination’s
      and similar adjustment), then the following adjustments shall be made:

     

    (i)  If
      the
      occurrence of an event set forth in 2.4(b) above occurs prior to Closing then,
      the Purchase Price Per Share shall be reduced to equal the Adjusted Average
      Price multiplied by .8 and the Company shall, at its discretion and presuming
      all of the other conditions for Closing are met, either (A) reduce the aggregate
      Purchase Price to be paid at Closing to reflect the new Purchase Price Per
      Share
      multiplied by 1,575,429 or (B) increase the number of Shares to be acquired
      by
      issuing Additional Shares such that the total number of Shares issued at Closing
      multiplied by the new Purchase Price Per Share (i.e. .8 multiplied by the
      Adjusted Average Price), equals the Purchase Price. The determination of the
      number of Warrants, Consulting Warrants and the Exercise Prices of the
      Consulting Warrants shall be made at Closing based on the actions of the Company
      taken in accordance with this Sub-Section 2.4(b (i). 

     

    (ii)  
      There
      shall be no further adjustments for Purchase Price or Additional Shares issued
      after Closing. 

     

    Notwithstanding
      anything herein to the contrary, nothing herein shall be deemed a waiver of
      any
      parties rights to terminate this Agreement altogether or to not commence with
      a
      Closing if the conditions to such Closing set forth elsewhere in the Agreement
      have not been duly satisfied or waived in writing. 

     

    ARTICLE
      III  

     

    

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company and Subsidiaries.
      As a
      mutual inducement to the Purchaser to enter into and perform its obligations
      under this Agreement, the Company represents and warrants to Purchaser that
      the
      statements contained in this Article III are true and correct, except as set
      forth in the corresponding section of the Disclosure Schedule set forth as
      Schedule
      III
      hereto.
      All representations, warranties and covenants of the Company include the Company
      and all of its Subsidiaries unless the context require otherwise.

     

    (a)  Organization
      and Qualification.
      The
      Company is duly incorporated or otherwise organized, validly existing and in
      good standing under the laws of the jurisdiction of its incorporation or
      organization (as applicable) set forth above, with the requisite power and
      authority to own and use its properties and assets and to carry on its business
      as currently conducted and as proposed to be conducted. The Company is not
      in
      violation of any of the provisions of its certificate or articles of
      incorporation, bylaws or other organizational or charter documents
      (collectively, the “Company
      Documents”).
      The
      Company 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, would not have or reasonably be expected to result in a
      Material Adverse Effect.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (b)   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 hereby and thereby
      have
      been duly authorized by all necessary action on the part of the Company
      (including, without limitation, any and all bank or stockholder consents
      required under the Company Documents, law, or any rules of any exchange, Self
      Regulatory Organization (“SRO”)
      or
      regulatory authority to which the Company is subject) and no further action
      is
      required by the Company in connection therewith. 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, assuming the valid execution
      and
      delivery thereof by the Purchaser, will constitute the valid and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      terms. The Warrants and Consulting Warrants are each fully enforceable against
      the Company and do not violate any usury rule, statute or law to which the
      Company is subject.

     

    (c)   No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated thereby
      do
      not and will not (i) conflict with or violate or give rise to modification
      or to
      any person’s securities of the Company (or an increase or right to increase of
      such securities or in the voting or other rights in the Company or with any
      provision of the Company Documents, or (ii) conflict with, violate 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, equity or credit facility, debt or other
      instrument (evidencing a Company debt) to which the Company is a party or by
      which any property or asset of the Company is bound or affected, or (iii) 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
      is subject (including federal and state securities laws and regulations), or
      by
      which any property or asset of the Company is bound or affected, or (iv) result
      in the delisting of the Company’s Securities from any exchange or trading Market
      (such as the OTC: Bulletin Board) on which it is trading on the Agreement Date;
      except in the case of each of clauses (ii),(iii) and (iv), such as would not
      have or reasonably be expected to result in a Material Adverse Effect. The
      Company’s Board has determined that the Purchase Price represent a fair and
      accurate value for the Common Stock and Warrants and Consulting Warrant and
      that
      the discount to the market price of the Common Stock is fair and reasonable
      based on the illiquidity of the Shares and Warrants and Warrant Shares at the
      time of issuance.

     

    (d)  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, such regulatory
      authority, exchange automated quotation of listing source (such as NASDAQ of
      the
      OTC Bulletin Board market) or other Person in connection with the execution,
      delivery and performance by the Company of the Transaction Documents, other
      than
      (i) the filing with the Commission of the Registration Statement which shall
      only be necessary for purposes of re-sale of Shares and Warrant Shares in the
      United States, and applicable Blue Sky filings, (ii) such consents as have
      already been obtained or such exemptive filings as are required to be made
      under
      applicable securities laws, and (iii) such other filings as may be required
      following the Closing Date under the Securities Act, the Exchange Act and
      corporate law, from time to time. 

     

    (e)  Issuance
      of the Securities.
      The
      Securities are duly authorized. The Shares, when issued and paid for in
      accordance with this Agreement at Closing, will be duly and validly issued,
      fully paid and non assessable, and free and clear of all Liens. The Warrant
      Shares, upon issuance, upon due exercise of the respective Warrants, will be,
      validly issued, fully paid non-assessable in all respects and free and clear
      of
      all Liens. The Company has reserved from its duly authorized capital stock
      the
      Warrant Shares plus maximum number of Additional Shares of Common Stock issuable
      pursuant to this Agreement and additional securities that may be issued under
      the provisions of the Warrants.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    (f)   Capitalization.
      The
      capitalization of the Company (which includes the capitalization of each
      subsidiary) is as described in the Company’s most recent SEC Report filed with
      the Commission, as supplemented by the Disclosure Schedule. The Company has
      not
      issued any capital stock since the date of such report other than issuances
      in
      the Company’s ordinary course of business or as set forth on the Disclosure
      Schedule. 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, other than as set forth in the
      Disclosure Schedule and which right shall be complied with prior to Closing.
      Except as a result of the purchase and sale of the Securities, or set forth
      on
      the Disclosure Schedule or the SEC Reports, 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
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock or any securities of any subsidiary), commitments,
      understandings or arrangements by which the Company (or any subsidiary) is
      or
      may become bound to issue additional shares of Common Stock, or securities
      or
      rights convertible or exchangeable into shares of Common Stock. The issuance
      and
      sale of the Securities or execution by the Company of any of the Transaction
      Documents, will not obligate the Company to issue shares of Common Stock or
      other securities to any Person (other than the Purchaser and Consultant) and
      will not result in a right of any holder of Company securities to adjust the
      exercise, conversion, exchange or reset price under such securities. The
      Subsidiaries each wholly owned by the parent company and no subscriptions,
      commitments of options, warrants or other rights to purchase any securities
      of
      any Subsidiary are outstanding, other than as set forth in the Disclosure
      Schedule.

     

    (g)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) of the
      Exchange Act (including compliance with any requisites for additional,
      information of the SEC, NASDAQ or any exchanges with respect to the foregoing)
      for the two years preceding the date hereof (or such shorter period as the
      Company was required by law to file such material) (the foregoing materials,
      including the exhibits thereto, being collectively referred to herein as the
      “SEC
      Reports”
and,
      together with the Disclosure Schedule to this Agreement, the “Disclosure
      Materials”)
      on a
      timely basis or has received a valid extension of such time of filing is set
      forth on the Disclosure Schedule and has filed any such SEC Reports prior to
      the
      expiration of any such extension. The SEC Reports complied in all material
      respects with the requirements of the Securities Act and the Exchange Act and
      the rules and regulations of the Commission promulgated thereunder, and none
      of
      the SEC Reports, when filed, contained any untrue statement of a material fact
      or omitted to state a material fact required to be stated therein or necessary
      in order to make the statements therein, in light of the circumstances under
      which they were made, not misleading. The financial statements of the Company
      included in the SEC Reports comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission with
      respect thereto as in effect at the time of filing. Such financial statements
      have been prepared in accordance with generally accepted accounting principles
      applied on a consistent basis during the periods covered (“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 condition 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. The SEC has submitted comment or
      requests for any information with respect to any of the SEC Reports.

     

    (h)  Material
      Changes.
      Since
      June 30, 2006 (and, with respect to any periodic report, SEC Report or amendment
      thereto filed at or before Closing, the date of such Report) (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, leases 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, rights
      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) except as set forth on the Disclosure Schedule, the Company has
      not issued any equity securities to any officer, director or Affiliate. The
      Company does not have pending before the Commission any request for confidential
      treatment of information.

     

    (i)  Litigation.
      Except
      as disclosed in the SEC Reports and Disclosure Schedules, there is no action,
      suit, inquiry, arbitration, order, decree notice of violation, proceeding or
      investigation pending or, to the knowledge of the Company, threatened against
      or
      affecting the Company, or any of their respective officers or directors, or
      any
      other assets, before or by any court, arbitrator, governmental or administrative
      agency or regulatory authority (federal, state, county, local or foreign)
      (collectively, an “Action”).
      Except as set forth on the Disclosure Schedule, neither the Company, 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 or any other law enforcement agency, S.R.O. or regulatory body,
      involving the Company or any current or former director or officer of the
      Company regardless of whether such investigation or proceeding against an
      officer or directors relates to such persons activities as an officer or
      director of the Company or relates or activities of such person or their
      affiliates prior to their appointment as an officer or director 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 under the
      Exchange Act or the Securities Act. None of the officers or directors of the
      Company are subject to any judgment, decree, order, settlement order, or
      agreement, consent order indicative action or other action that will bar any
      such persons from holding the positions they currently hold or from violating
      any of the federal or state securities laws, or revoking any permit or license
      of such person to conduct business in the securities financial industry, or
      that
      would otherwise have any material adverse effect on the Company.

     

    (j)   Labor
      Relations.
      Except
      as set forth on the Disclosure Schedule, no material labor dispute exists or,
      to
      the knowledge of the Company, is imminent with respect to any of the employees
      of the Company. 

     

    (k)  Compliance.
      Except
      as disclosed in the SEC Reports, the Company (i) is not 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),
      nor
      is the Company aware of any notice or 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 not in violation of any order of any court, S.R.O., exchange,
      Commission, arbitrator or governmental body, or (iii) is not 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. 

     

    (l)  Regulatory
      Permits.
      The
      Company possess all certificates, authorizations and permits issued by the
      appropriate federal, state, local or foreign regulatory authorities necessary
      to
      conduct its “business” as described in the SEC Reports, except where the failure
      to possess such permits would not have or reasonably be expected to result
      in a
      Material Adverse Effect (“Material
      Permits”),
      and
      the Company has not received any notice of proceedings relating to the
      revocation or modification of any Material Permit.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (m)  Title
      to Assets.
      The
      Company has good and marketable title in fee simple to all real property owned
      by the Company that is material to the business of the Company and good and
      marketable title in all personal property that is material to the business
      of
      the Company, 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 Liens for
      the
      payment of federal, state or other taxes, the payment of which is neither
      delinquent nor subject to penalties. To the knowledge of the Company, any real
      property and facilities held under lease by the Company is held under valid,
      subsisting and enforceable leases of which the Company is in
      compliance.

     

    (n)  Patents
      and Trademarks.
      The
      Company has the right to use all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, copyrights, licenses and
      other similar rights that are necessary or material for use in connection with
      their respective businesses as described in the SEC Reports and which the
      failure to so have could have or reasonably be expected to result in a Material
      Adverse Effect, other than intellectual property rights generally available
      on
      commercial terms from other sources (collectively, the “Intellectual
      Property Rights”).
      The
      Company has not received a written notice that and has no reason to believe
      that
      the Intellectual Property Rights used by the Company violate or infringe upon
      the rights of any Person. The Company has taken all steps reasonably required
      in
      accordance with sound business practice and sound business judgment to establish
      and preserve its ownership of such Intellectual Property Rights.

     

    (o)  Insurance.
      The
      Company has the insurance policies described in the Disclosure Schedule. The
      Company believes that such insurance is underwritten 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 is engaged.
      The
      Company has no 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.

     

    (p)  Internal
      Accounting Controls.
      The
      Company maintains 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. The Company has established disclosure controls and procedures
      (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
      such disclosure controls and procedures to ensure that material information
      relating to the Company is made known to the certifying officers by others
      within those entities, particularly during the period in which the Company’s SEC
      Report for the period in question is being prepared. The Company’s certifying
      officers have evaluated the effectiveness of the Company’s controls and
      procedures as of a date within sixty (60) days prior to the filing date of
      the
      Form 10-Q for the quarter ended June 30, 2006 (and such other SEC Report(s)
      as
      may be filed prior to Closing) (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed SEC Report the conclusions of
      the
      certifying officers about the effectiveness of the disclosure controls and
      procedures based on their evaluations as of the Evaluation Date. Since the
      Evaluation Date, there have been no significant changes in the Company’s
      internal controls (as such term is defined in Item 307(b) of Regulation S-K
      or
      S-B under the Exchange Act) or, to the Company’s knowledge, in other factors
      that could significantly affect the Company’s internal controls.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (q)  Certain
      Fees.
      With
      the sole exception of fees payable to the Consultant (the “Consultant”)
      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 this Agreement. The Company will pay the Consultant a cash
      fee
      equal to seven percent (7%) of the Purchase Price and Consulting Warrants equal
      to seven percent (7%) of the Shares (including Additional Shares) purchased
      by
      the Purchaser which shall be exercisable at the Class A Exercise Price. The
      Consulting Warrant shall have a cashless exercise feature and be otherwise
      identical to and have all of the other rights of the Class A Warrants. 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 under any agreement or arrangement entered
      into
      by the Company in connection with the transactions contemplated by this
      Agreement. All fees paid by the Company to a Consultant shall only be made
      to
      NASD member firms or to persons exempt from such licensing requirements. As
      an
      alternative to the foregoing, if for any reason the Consultant cannot be paid
      by
      the Company, the Purchase Price shall be reduced by 7% and the Consulting
      Warrants shall be issued directly to the Purchaser, and the Company shall be
      deemed to have satisfied its obligations under this subsection (q).

     

    (r)  Private Placement.
      Assuming the accuracy of the Purchaser’s representations and warranties set
      forth in Section 3.2, and the accuracy of the representations of the Company,
      no
      registration under the Securities Act is required for the offer and sale of
      the
      Securities by the Company to the Purchaser as contemplated hereby.

     

    (s)  Investment
      Company.
      The
      Company is not, and is not an Affiliate of, an “investment company” within the
      meaning of the Investment Company Act of 1940, as amended.

     

    (t)  Registration
      Rights.
      Except
      as set forth on the Disclosure Schedule, no Person has any right to cause the
      Company to effect the registration under the Securities Act of any securities
      of
      the Company.

     

    (u)  Form
      SB-2 Eligibility.
      The
      Company is eligible to register the resale of its Common Stock by the Purchaser
      under Form SB-2 promulgated under the Securities Act.

     

    (v)  Listing
      and Maintenance Requirements.
      The
      Company has not, in the 12 months preceding the date hereof (and the date of
      Closing), received notice from the OTC Bulletin Board to the effect that the
      Company is not in compliance with the requirements of the OTC Bulletin Board
      to
      maintain quotation or listing of the Common Stock. The Company is not aware
      of
      any, and has not received a warning notice or letter or provisional notice
      of
      delisting probation or otherwise with respect to listing of its securities
      and
      the ticker symbol of the Company is not supplement (or threatened to be
      supplemented) with any provisional “letter” (such as an “E”).

     

    (w)  Application
      of Takeover Protections.
      To the
      Company’s knowledge, the Company and its Board of Directors have taken all
      necessary action, if any, in order to render inapplicable any non-statutory
      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 Purchaser as a result of the Purchaser and the Company fulfilling their
      obligations or exercising their rights under the Transaction Documents,
      including without limitation the Company’s issuance of the Securities and
      payment to the Consultants, and the Purchaser’s ownership of the
      Securities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (x)  Disclosure.
      The
      Company confirms that the Company has not, as of the date of this Agreement,
      provided the Purchasers or its agents or counsel with any information that
      constitutes or might constitute material, non-public information, unless the
      Purchaser has agreed to maintain the confidentiality of such material,
      non-public information. The Company understands and confirms that the Purchaser
      will rely on the foregoing representations in effecting transactions in
      securities of the Company.

     

    (y)  No
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor, to the Company’s knowledge, any
      Person acting on its or their behalf has, directly or indirectly, made any
      offers or sales of any security or solicited any offers to buy any security,
      under circumstances that would cause this offering of the Securities to be
      integrated with prior offerings by the Company in a manner that violates Section
      5 of the Securities Act.

     

    (z)  Non-Exclusivity.
      The
      Company represents and warrants that it has entered into this Agreement on
      an
      arms-length basis. The Company understands and acknowledges that a Closing
      will
      only be held on a delayed basis and that no
      guaranty
      or assurance can be made that a Closing will occur as anticipated or not at
      all
      or that the full Subscription Amount of Shares will be acquired. The
      Company is not relying on this funding to continue its operations or business
      and Purchaser will not be held responsible for the loss of profits or lost
      opportunity of the Company if the funding does not occur for any
      reason.

     

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

     

    3.2  Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby represents and warrants as of the date hereof and as of the
      Closing Date to the Company as follows:

     

    (a)  Organization;
      Authority; Conflicts.
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization set forth above 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 thereunder. The execution, delivery
      and
      performance by Purchaser of the transactions contemplated by this Agreement
      have
      been duly authorized by all necessary corporate action on the part of the
      Purchaser. Each Transaction Document to which it is party has been duly executed
      by Purchaser, and when delivered by Purchaser in accordance with the terms
      hereof, will constitute the valid and legally binding obligation of Purchaser,
      enforceable against it in accordance with its terms. The execution, delivery
      and
      performance by the Purchaser of this Agreement and compliance herewith, will
      not
      result in any violation of and will not conflict with, or result in a breach
      of
      any of the terms of, or constitute a default under, any provision of any
      mortgage, indenture, agreement, instrument, judgment, decree, order, law, rule
      or regulation or other restriction to which Purchaser is a party or by which
      it
      is bound, which violation, conflict, breach or default would have a material
      adverse effect upon the business or operations of the Purchaser, or result
      in
      the creation of any mortgage, pledge, lien, encumbrance or charge upon any
      of
      the properties or assets of the Purchaser. Notwithstanding the foregoing, the
      Purchaser has not yet obtained a valuation with respect to the Shares or a
      commitment from any bank that said Shares will be accepted for deposit into
      SICAV in exchange for SICAV

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Certificates
      or as to the date for value of the SICAV Certificates that will be issuable
      after deposit of the Shares into the SICAV. The parties understand that
      Purchaser is dependent on obtaining favorable valuation and issuance of a SICAV
      Certificate with a value sufficient enough for it to receive funding to cover
      the Purchase Price as one of its conditions to its obligation to pay the
      Purchase Price at the Closing.

     

    (b)  Investment Intent.
      Purchaser understands that the Shares and Warrants are “restricted securities”
and have not been registered under the Securities Act or any applicable state
      securities law and Purchaser is acquiring the Securities as principal for its
      own account for investment purposes only and not with a view to or for
      distributing or reselling such Shares and Warrants or any part thereof, has
      no
      present intention of distributing any of such Shares and Warrants and has no
      arrangement or understanding with any other persons regarding the distribution
      of such Shares and Warrant Shares (this representation and warranty not limiting
      the Purchaser’s right to sell the Shares and Warrant Shares pursuant to the
      Registration Statement or otherwise in compliance with applicable federal and
      state securities laws or pursuant to Resolutions or other exemptions to the
      representation requirements of such laws). Purchaser is acquiring the Shares
      and
      Warrants hereunder in the ordinary course of its business. Purchaser does not
      have any agreement or understanding, directly or indirectly, with any Person
      to
      distribute any of the Securities, other than the agreement(s) by which such
      Shares will be held by the Custodial Bank (or other agent or designees of a
      Custodial Bank) or which holds such shares for the SICAV. Notwithstanding the
      foregoing, Warrants may be held by an affiliate or transferee of the Purchaser
      at any time.

     

    (c)  Purchaser
      Status.
      At the
      time the Purchaser was offered the Securities, it was, and at the date hereof
      it
      is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
      The Purchaser’s place of business is outside of the United States. The Purchaser
      was not formed for the specific purpose of acquiring the Securities. The general
      business of the Purchaser does not require it to be registered as a
      broker-dealer under Section 15 of the Exchange Act. 

     

    (d)  Experience
      of the Purchaser.
      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.
      The Purchaser had access to the SEC Reports and has carefully reviewed the
      information contained therein. 

     

    (e)  General
      Solicitation.
      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)  Reliance
      by Company.
      The
      Purchaser understands that the Securities are being offered and sold to it
      in
      reliance on specific exemptions from the registration and qualification
      requirements of United States federal and state securities laws and that the
      Company is relying upon the truth and accuracy of, and the Purchaser’s
      compliance with the representations, warranties, agreements, acknowledgments
      and
      understandings of the Purchaser set forth herein or in the Registration Rights
      Agreement in order to determine the availability of such exemptions and the
      eligibility of the Purchaser to acquire the Securities.

     

    (g)  No
      Legal, Tax or Investment Advice.
      The
      Purchaser understands that nothing in this Agreement or any other materials
      presented to the Purchaser in connection with the purchase and sale of the
      Securities constitutes legal, tax or investment advice. The Purchaser has
      consulted such legal, tax and investment advisors as it, in its sole discretion,
      has deemed necessary or appropriate in connection with its purchase of the
      Securities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    (h)  Risk
      and Suitability.
      The
      Purchaser acknowledges and realizes that Purchaser’s purchase of the Securities
      involves a high degree of risk and the Purchaser could lose a substantial
      portion or all of its investment in the Securities. The Purchaser understands
      that the Company anticipates, based on currently proposed plans and assumptions
      relating to its operations, that the proceeds of this Offering will provide
      sufficient working capital to meet the Company’s needs (including the costs of
      maintaining correspondence with the periodic filing of all required SEC Reports,
      as the same become due) for at least the next 18 months. In the event that
      the
      Company’s plans change or its assumptions change or prove to be inaccurate, the
      Company would be required to seek additional financing sooner than anticipated.
      There can be no assurance that the Company will achieve cash flow from
      operations sufficient to satisfy its working capital requirements, or at all,
      or
      that additional financing will be available to the Company on commercially
      reasonable terms, or at all. Purchaser acknowledges and agrees that the Company
      does not make and has not made any representations and warranties with respect
      to the transactions contemplated hereby other than those set forth in Section
      3.1 hereof.

     

    (i)  Regulation
      S.
      Purchaser understands and acknowledges that (A) the Shares
      have not
      been registered under the Securities Act, are being sold in reliance upon an
      exemption from registration afforded by Regulation S; and that such Shares
      have
      not been registered with any state securities commission or authority; (B)
      pursuant to the requirements of Regulation S, the Shares may not be transferred,
      sold or otherwise exchanged unless in compliance with the provisions of
      Regulation S and/or pursuant to registration under the Securities Act, or
      pursuant to an available exemption thereunder; and (C) Purchaser is under no
      obligation to register the Shares under the Securities Act or any state
      securities law.

     

    Purchaser
      is not a U.S. person and is not acquiring the Shares for the account of any
      U.S.
      person; (A) no director or executive officer of Purchaser is a national or
      citizen of the United States; and (B) it is not otherwise deemed to be a “U.S.
      Person” within the meaning of Regulation S.

     

    Purchaser
      was not formed specifically for the purpose of acquiring the Shares purchased
      pursuant to this Agreement.

     

    Purchaser
      is purchasing the Shares for its own account and risk and not for the account
      or
      benefit of a U.S. Person as defined in Regulation S and no other person has
      any
      interest in or participation in the Shares or any right, option, security
      interest, pledge or other interest in or to the Shares. Purchaser understands,
      acknowledges and agrees that it must bear the economic risk of its investment
      in
      the Shares for an indefinite period of time and that prior to any such offer
      or
      sale, the Company may require, as a condition to effecting a transfer of the
      Shares, an opinion of counsel, acceptable to
      the
      company, as to the registration or exemption there from under the Securities
      Act
      and any state securities acts, if applicable.

     

    Purchaser
      will, after the expiration of the Restricted Period, as set forth under
      Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer
      the Shares only in accordance with Regulation S, or pursuant to an available
      exemption under the Securities Act and applicable state securities laws or
      following the Effective Date of a Registration of the Shares by the Company.
      The
      transactions contemplated by this Agreement have neither been pre-arranged
      with
      a purchaser who is in the U.S. or who is a U.S. Person, nor are they part of
      a
      plan or scheme to evade the registration provisions of the United States federal
      securities laws.

     

    The
      offer
      leading to the sale evidenced hereby was made in an “offshore transaction.” For
      purposes of Regulation S, Purchaser understands that an “offshore transaction”
as defined under Regulation S is any offer or sale not made to a person in
      the
      United States and either (A) at the time the buy order is originated, the
      purchaser is outside the United States, or the seller or any person acting
      on
      his behalf reasonably believes that the purchaser is outside the United States;
      or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed
      in, or on or through a physical trading floor of an established foreign exchange
      that is located outside the United States or (2) Rule 904 of Regulation S,
      the
      transaction is executed in, on or through the facilities of a designated
      offshore securities market, and neither the seller nor any person acting on
      its
      behalf knows that the transaction has been prearranged with a buyer in the
      U.S.

     

    Neither
      the Purchaser nor any affiliate or any person acting on
      the
      Purchaser’s behalf, has made or is aware of any “directed selling efforts” in
      the United States, which is defined in Regulation S to be any activity
      undertaken for the purpose of, or that could reasonably be expected to have
      the
      effect of, conditioning the market in the United States for any of the Shares
      being purchased hereby.

     

    Purchaser
      understands that the Company is the seller of the Shares which are the subject
      of this Agreement, and that, for purpose of Regulation S, a “distributor” is any
      underwriter, dealer or other person who participates, pursuant to a contractual
      arrangement, in the distribution of securities offered or sold in reliance
      on
      Regulation S and that an “affiliate” is any partner, officer, director or any
      person directly or indirectly controlling, controlled by or under common control
      with any person in question. Purchaser agrees that Purchaser will not, during
      the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor,
      either directly or though any affiliate, nor shall it sell, transfer,
      hypothecate or otherwise convey the Shares other than to a non-U.S. Person.
      

     

    (j)  No
      Governmental Review.
      The
      Purchaser understands that no United States federal or state agency or any
      other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (k)  Residency.
      The
      Purchaser is not organized in the United States and does not maintain its
      principal place of business in the United States.

     

    (l)  Requirements
      of Foreign Jurisdictions.
      The
      Purchaser acknowledges, represents and agrees that no activity has been or
      will
      be taken in any jurisdiction outside the United States by the Company for
      Consultant that would permit an offering of the Shares, or possession or
      distribution of offering materials in connection with the issue of the Shares,
      in any jurisdiction outside the United States where action for that purpose
      is
      required.

     

    (m)  Non-Affiliate
      Status; Other Purchaser Representations.
      The
      Purchaser has had no officer, voting director or similar position, office or
      other similar relationship within the past three years with the Company. The
      Purchaser is not an affiliate (as such term is defined in Rule 12b-2 under
      the
      Exchange Act) of any director or officer of the Company for purposes of Rule
      4350(i)(1)(A) of the NASD, Inc. Marketplace Rules. Neither the Purchaser, nor
      any group of which it is a member or to which it is related, beneficially owns
      (including the right to acquire or vote) Common Stock of the Company
      constituting more than 10% of the issued and outstanding Shares of Common Stock.
      The Purchaser is aware of the requirements of the anti-manipulation rules under
      the Exchange Act including, without limitation, Regulation M. Before the
      Registration Statement is declared effective, the Purchaser will not enter
      into
      any plan, arrangement or understanding with any broker-dealer, agent, market
      maker or underwriter regarding sales of the shares purchased in the Offering
      without providing notice to the Company other than as contemplated for the
      financing and managing of such Shares through SICAV.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    ARTICLE
      IV  

     

    

     

    OTHER
      AGREEMENTS AND COVENANTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

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

     

    (b)  The
      Purchaser agrees to the imprinting, so long as is required by this Section
      4.1(b), of a legend (in addition to any other legends required under applicable
      securities laws) on any of the Securities in the following form: THE SECURITIES
      REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT OF 1933 AS AMENDED AND ARE RESTRICTED SECURITIES AS DEFINED UNDER REGULATION
      S.  THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
      IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
      UNDER SAID ACT; (II) AN OPINION OF COMPANY COUNSEL STATING THAT SUCH
      REGISTRATION IS NOT REQUIRED; AND (III) THAT  CERTAIN
      OTHER RESTRICTIONS  ON TRANSFER AS MAY BE CONSENTED TO BY THE
      PARTIES AND WHICH CAN BE OBTAINED FROM THE COMPANY ARE SATISFIED.
 

     

    (c)  Certificates
      evidencing the Shares and Warrant Shares shall not contain any legend (including
      the legend set forth in Section 4.1(b)), (i) following any sale of such Shares
      or Warrant Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares
      are eligible for sale under Rule 144(k), or (iii) 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 agrees that at such time as such legend is no longer required under
      this
      Section 4.1(c), it will, no later than five (5) Trading Days following the
      delivery by the Purchaser to the Company or (with concurrent notice to the
      Company) the Company’s transfer agent of a certificate representing Shares or
      Warrant Shares, as the case may be, issued with a restrictive legend (together
      with any documentation required in the Company’s reasonable judgment to
      establish the facts permitting the removal of legends hereunder) (such date,
      the
“Legend
      Removal Date”),
      deliver or cause to be delivered to the Purchaser a certificate representing
      such Securities that are 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 (except as expressly provided in the Registration
      Statement or the Registration Rights Agreement or required by applicable
      securities laws). The Company understands that any delay in the foregoing will
      result in all liquidity to the Purchaser and, possibly, to the irreparable
      injury to Purchaser, and the Company will indemnify Purchaser for any form
      of
      delay in the delivery of such Shares or Warrants (including legal
      fees).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    4.2  Furnishing
      of Information.
      From
      the date of this Agreement through two (2) full years from the Closing Date
      (or,
      the date on which securities are only subject to the restrictions herein, if
      such date is later) 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 after the date hereof pursuant to the
      Exchange Act. Upon the request of any holder of Securities, the Company shall
      deliver to such holder a written certification of a duly authorized officer
      as
      to whether it has complied with the preceding sentence. As long as the Purchaser
      owns Securities, if the Company is not required to file reports pursuant to
      such
      laws, it will prepare and furnish to the Purchaser and make publicly available
      in accordance with Rule 144(c) such information as is required for the Purchaser
      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.

     

    4.3  Integration.
      The
      Company shall not for a period of six (6) months following the Closing Date
      sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
      of any security unless, in the Company’s reasonable judgment in consultation
      with its counsel, such offer and sale (i) would not be integrated with the
      offer
      or sale of the Securities in a manner that would require the registration under
      Section 5 of the Securities Act of the Offering and (ii) would not be integrated
      with the offer or sale of the Securities in violation of the rules and
      regulations of any Trading Market. 

     

    4.4  Securities
      Laws Disclosure; Publicity.
      The
      Company shall, within the time passing required by the instructions to the
      Current Report on Form 8-K (i) file form 8-K disclosing the entry into this
      Agreement and, (ii) after the consummation of the transactions contemplated
      hereby file a form 8-K disclosing the Closing with the final terms, and make
      such other filings and notices in the manner and time required by the
      Commission. Additionally, the Company shall, from time to time, make the
      disclosures (including the filing of any exhibits) that it is required to make
      under the Securities Act or Exchange Act or similar regulatory filings. The
      Purchaser will not distribute any press release regarding the transactions
      contemplated hereby absent the prior written consent of the Company. The Company
      shall not publicly disclose the name of Purchaser, or include the name of
      Purchaser in any filing with the Commission or any regulatory agency or Trading
      Market, without the prior written consent of 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. 

     

    4.5  Shareholders
      Rights Plan.
      To the
      Company’s knowledge, no claim with respect to the Securities being acquired by
      the Purchaser under this Agreement will be made or enforced by the Company
      that
      the Purchaser is an “acquiring person” or the person with any rights under any
      shareholders rights plan or similar plan or arrangement in effect, or that
      the
      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 Purchaser. The
      foregoing covenant shall apply only to those Securities acquired by the
      Purchaser or its Affiliates under this Agreement, and not to any securities
      of
      the Company held or subsequently acquired by the Purchaser or any Affiliate
      thereof.

     

    4.6  Board
      of Directors.
      On or
      at anytime after the Closing Date and continuing through the end of the
      Restricted Period, the Purchaser shall be entitled (but not required) to appoint
      one nominee to the board of directors or as a non voting observer to the Board
      of Directors of the Company and, if such nominee is for director, the Company
      shall obtain the consent by proxy or otherwise of the holders of the requisite
      percentage of its shareholders to elect the Purchaser nominee to the Board
      of
      Directors in each such election. The Company shall provide for compensation,
      insurance coverage, indemnification and reimbursement of its directors as set
      forth in the Company Documents.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    4.7  Non-Public
      Information.
      Other
      than as set forth in the Disclosure Schedule, the Company covenants and agrees
      that neither it nor any other Person acting on its behalf will provide the
      Purchaser or its agents or counsel with any information that the Company
      believes constitutes material non-public information, unless prior thereto
      the
      Purchaser shall have agreed, pursuant to Section 4.13 hereof or otherwise,
      to
      maintain the confidentiality and limit the use of such information. The Company
      understands and confirms that the Purchaser shall be relying on the foregoing
      representations in effecting transactions in securities of the
      Company.

     

    4.8  Use
      of Proceeds.
      The
      Company shall set aside in escrow $80,000 of the proceeds from the Purchase
      Price paid herein for the payment of accounting and audit fees and $75,000
      for
      legal fees which the Company shall use in good faith, to cover all of the costs
      relating to (i) the next annual report and proxy statement and compliance with
      the filing requirements and SEC reporting obligations of the Company for one
      year after the Closing, and (ii) completion of, and obtaining effectiveness
      of,
      the Registration Statement. Thereafter, the net proceeds from the sale of the
      Securities hereunder shall be used for working capital, capital expenditures
      and
      general corporate purposes. Said proceeds will not be used for any past due
      employment compensation or payment of loans from or liabilities of shareholders,
      officers, directors or other Affiliates. 

     

    4.9  Reservation
      of Common Stock.
      As of
      the date hereof, the Company has reserved, free of preemptive rights, a
      sufficient number of shares of Common Stock for the purpose of enabling the
      Company to issue Shares pursuant to this Agreement (including the maximum number
      of Additional Shares) and Warrant Shares pursuant to any exercise of the
      Warrants and Subcontract number of shares issuance under the Consulting Warrant.
      The Company consents that it will always maintain sufficient number of Shares
      of
      Common Stock for issuance as Additional Shares or Warrant Shares for so long
      as
      such Shares may be issued herein or under the Warrants, respectively. If for
      any
      reason there are insufficient unissued Shares available then the Company shall
      make best efforts to obtain Stockholder Consents modify its changes to
      accommodate such issuances. 

     

    4.10  Quotation/Listing
      of Common Stock.
      For as
      long as any Warrants are outstanding, the Company hereby shall maintain the
      quotation or listing of the Common Stock on the OTC Bulletin Board or the
      trading market to which it presently belongs, or to any National Securities
      Exchange (as defined by the rules of the Commission). 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 the Shares and the Warrant
      Shares, and will take such other action as is necessary to cause the Shares
      and
      Warrant Shares to be listed on such other Trading Market as promptly as
      possible. The Company will take commercially reasonable actions necessary to
      continue the quotation or listing of the Common Stock on the Trading Market
      to
      which it currently belongs and will comply in all respects with the Company’s
      reporting, filing and other obligations under the bylaws or rules of the that
      Trading Market. 

     

    4.11  Short
      Sale Prohibition.
      Purchaser hereby represents, covenants and agrees that Purchaser and its
      Affiliates did not engage, directly or indirectly, in any short sale or third
      party short sales or hold a “put equivalent position” (as defined in Rule
      16a-1(h) under the Exchange Act) with respect to the Company’s Common Stock
      prior to the end of the Restricted Period (unless the Shares are sold prior
      to
      such time in accordance with this Agreement). Additionally, Purchaser hereby
      represents, covenants and agrees that following the Closing Date and ending
      on
      the end of the Restricted Period (unless the Shares are sold prior to such
      time
      in accordance with this Agreement), Purchaser and its Affiliates will not
      engage, directly or indirectly, in any short sale or third party short sales
      or
      hold a “put equivalent position” with respect to the Company’s Common
      Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    4.12  Confidentiality.
      

     

    (a)  The
      Purchaser agrees to keep strictly confidential all Company Confidential
      Information. Purchaser understands that the Company Confidential Information
      is
      strictly confidential and proprietary to the Company and has been prepared,
      in
      large part, from the Company’s publicly available documents and other
      information and is being submitted to the Purchaser solely for the Purchaser’s
      confidential use. The Purchaser hereby acknowledges that it is prohibited from
      reproducing and/or distributing the Confidential Information, or any other
      offering materials or other information provided by the Company in connection
      with Purchaser’s consideration of its investment in the Company, in whole or in
      part, or divulging or discussing any of their contents to third parties.
      Further, Purchaser understands that the existence and nature of all
      conversations and presentations, if any, regarding the Company and the
      Transaction Documents must be kept strictly confidential. Purchaser understands
      that United States Federal and state securities laws impose restrictions on
      trading based on information hereby acknowledges that disclosure of information
      regarding the transactions contemplated
      in the Transaction Documents or the disclosure of other Confidential Information
      may cause the Company to violate Regulation FD and agrees not to engage in
      any
      such unauthorized disclosure. The restrictions in this subsection shall survive
      until the earlier of (i) two (2) years after the Closing Date and (ii) such
      time
      as such Confidential Information is publicly disclosed by the Company.
      Notwithstanding anything to the contrary in the prior sentence, with respect
      to
      any Company Confidential Information disclosed to the Purchaser subsequent
      to
      the Closing Date in response to any notice requirement or other disclosure
      delivered pursuant to the Transaction Documents, the restrictions in this
      section shall survive until the earlier of (i) one hundred eighty (180) days
      after the disclosure of such information to the Purchaser and (ii) such time
      as
      such Confidential Information is publicly disclosed by the Company.

     

    (b)  The
      Company agrees with the Purchaser to keep strictly confidential all Purchaser
      Confidential Information, which includes, without limitation, the structure
      of
      the Purchaser, the methods used by Purchaser for its activities and the identity
      of the banks, and other lending institutions or investigations in the Purchaser
      whose identities are known or become known to the Company other than through
      public knowledge. The Company understands that the Purchaser Confidential
      Information is strictly confidential and proprietary to the Purchaser and was
      disclosed strictly for Company’s Confidential use. The Company hereby
      acknowledges that it is prohibited from reproducing, utilizing and/or
      distributing the Purchaser Confidential Information, or any other materials
      or
      other information provided by the Purchaser in connection with the Purchaser’s
      consideration of its investment in the Company, in whole or in part, or
      divulging or discussing any of their contents to third parties. Further, the
      Company understands that the existence and nature of all conversations and
      presentations, if any, regarding the Purchaser and the Transaction Documents
      must be kept strictly confidential. The restrictions in this subsection shall
      survive until the earlier of (i) two (2) years after the Closing Date and (ii)
      such time as such Confidential Information is publicly disclosed by the
      Purchaser. 

     

    (c)  Notwithstanding
      anything herein the contrary, either party may make such disclosures are
      reasonably necessary to comply with securities laws of any jurisdiction that
      they are required to comply with, court order, bona fide subpoena or similar
      order or, as requested by the Commission or any S.R.O. for such information
      provided that the disclosing party shall notify the other party of such request
      and shall exercise commercially reasonable best efforts to request and maintain
      confidential treatment of such information by the parties requesting such
      disclosure. Additionally, the parties may make all filings that they are
      required to make pursuant to Section
      4.4
      above.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    4.13  Future
      Transactions.
      Commencing the Agreement Date and continuing for the 12-month period commencing
      the Closing Date (or, if later, the date of an effective Registration
      Statement), Purchaser shall have the right to participate in any proposed
      private placement of the Company’s securities to institutional or accredited
      investor(s). The election to exercise such right may be exercised during the
      five-day period following notice to the Purchaser of any such similar proposed
      transaction. Additionally, the Company shall not, during such period, issue
      any
      securities, options, convertible securities to any Affiliate for consideration
      (including the exercise or conversion price) of less than Purchase Price Per
      Share or the market price for the Common Stock at the time of issuance of such
      instrument, without consent of Purchaser during such period. Additionally,
      during such period, the Company will not (i) pledge, sell or assign or transfer
      any securities of any Subsidiary, or issue any rights or convertible
      indebtedness allowing the holder thereof of to obtain any of the foregoing,
      or
      (ii) cause or allow any Subsidiary to do any of the acts defined in (i) above,
      or (iii) enter into or allow any Subsidiary to enter into any merger or
      reorganization agreement or to enter into a dissolution.

     

    4.14  Designated
      Principal Financial Officer.
      The
      Company covenants that Jose Matthew Meleth is a principal financial officer
      as
      disclosed in the SEC Reports and that said person or his successor to such
      position, will, from the Agreement Date though the end of the Restricted Period,
      be made available to, and will be instructed to, answer questions, provide
      information, execute further documentation, certifications or other instruments
      as may be necessary from time to time to the Custodial Bank, and financing
      bank,
      any other representative or institution that reasonable requests information,
      in
      order for the Purchaser to deposit the Shares into the SICAV and to obtain
      a
      SICAV Certificate, to obtain funding on such certificates and to maintain
      regulatory or banking and lending compliance with a SICAV or to establish the
      value of the shares held for the benefit of a SICAV from time to time.

     

    4.15  Compliance
      with Law.
      Commencing the Agreement Date and continuing for two years after the Closing,
      the Company (which, for the avoidance of doubt, includes all Subsidiaries)
      will,
      and will cause each if its subsidiaries (if any) to: 

     

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

     

    (b)  Maintain,
      with financially sound and reputable insurers, insurance, including, without
      limitation, the Casualty Policies and the Liability Policies, with respect
      to
      their respective properties and businesses against such casualties and
      contingencies, of such types, on such terms and in such amounts (including
      deductibles, co-insurance and self-insurance, if adequate reserves are
      maintained with respect thereto) as is customary in the case of entities of
      established reputations engaged in the same or a similar business and similarly
      situated. 

     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

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

     

    (e)  Preserve
      and keep in full force and effect its corporate existence of itself and any
      subsidiary. 

     

    (f)  Use,
      or
      cause any subsidiaries to use, its and their best efforts, respectively, to
      complete, prosecute, and defend all patent applications, including and without
      limitation, those listed on the Disclosure
      Schedule
      and any
      other patent applications.

     

    ARTICLE
      V  

     

    

     

    CONDITIONS
      TO PURCHASER’S OBLIGATIONS AT CLOSING

     

    5.1  Conditions
      to the Purchaser’s Obligations at Closing.
      The
      obligations of Purchaser to purchase the Shares and Warrants at the Closing
      subject are to the fulfillment, on or before such Closing, of each of the
      following conditions, unless otherwise waived:

     

    5.2  Representations
      and Warranties.
      The
      representations and warranties and covenants of the Company and each subsidiary
      contained in Articles
      II, III and IV
      shall be
      true and correct in all material respects as of such Closing, except that any
      such representations and warranties shall be true and correct in all respects
      where such representation and warranty is already qualified with respect to
      materiality.

     

    5.3  Performance.
      The
      Company (and each Subsidiary) shall have performed and complied with all
      covenants, agreements, obligations and conditions contained in this Agreement
      that are required to be performed or complied with by the Company (and each
      Subsidiary) on or before such Closing under any other Transaction Documents
      (including, without limitation, the delivery of the Affidavit, the Shares and
      any Additional Shares, set forth in Article II, and the designation of a
      principal financial officer to provide information and answer questions from
      time to time and no Material Adverse Change shall have occurred. 

     

    5.4  Compliance
      Certificate.
      The
      President and a Principal Financial Officer of the Company shall deliver to
      the
      Purchaser at Closing a certificate certifying that the conditions specified
      in
Section
      5.2
      have
      been fulfilled, and that all of the representations and warranties of the
      Company as contained in Article III (including the Disclosure Schedule) are
      true
      and correct as of the Closing Date and that no Material Adverse Change shall
      have occurred.

     

    5.5  Qualifications.
      All
      authorizations, approvals or permits, if any, of any governmental authority
      or
      regulatory body of the United States or of any state that are required in
      connection with the lawful issuance and sale of the Shares pursuant to this
      Agreement shall be obtained and effective as of such Closing.

     

    5.6  [Omitted]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    5.7  Board
      of Directors.
      As of
      the Closing, the Company shall have appointed to the board (or as a board
      observer, if and as requested by the Purchaser), the nominee appointed by
      Purchaser.

     

    5.8  Delivery
      of Shares.
      The
      Shares, and any Additional Shares, shall have already been duly delivered as
      set
      forth in Section 2 above. 

     

    5.9  Issuance
      of SICAV Certificate.
      The
      Purchaser shall have received a valuation on the Shares sufficient for it to
      obtain one or more SICAV Certificate(s), and to receive loan funding on such
      SICAV Certificate in the amount that is no less then the Purchase
      Price.

     

    5.10  Indemnification
      Agreement.
      If a
      director nominee has been nominated by the Purchaser, the Company and each
      director (or observer) designated by a Purchaser shall have executed and
      delivered the Indemnification Agreement.

     

    5.11  Registration
      Rights Agreement.
      The
      Company and Purchaser shall have executed and delivered the Registration Rights
      Agreement.

     

    5.12  Warrants.
      

     

    (a)  The
      number of Class A Warrant Shares and the Class A Exercise Price shall have
      been
      adjusted and determined, and the Class A Warrant hall have been duly executed
      and delivered by the Company. 

     

    (b)  The
      number of Class B Warrant Shares shall have been adjusted and determined and
      the
      Class B Warrant shall have been duly executed and delivered by the Company.
      

     

    (c)  The
      number of shares underlying the Consulting Warrant and the exercise price of
      the
      Consulting Warrant shall have been adjusted and determined, and the Consulting
      Warrant shall have been duly executed and delivered by the Company.

     

    5.13  Secretary’s
      Certificate.
      The
      Secretary of the Company shall have delivered to the Purchaser at as of the
      Closing a certificate certifying (i) the Certificate of Incorporation and Bylaws
      of the Company, each in effect on the date of Closing, (ii) resolutions of
      the
      Board of Directors of the Company approving the Transaction Documents and the
      transactions contemplated under the Transaction Documents.

     

    5.14  Proceedings
      and Documents.
      All
      corporate and other proceedings in connection with the transactions contemplated
      at the Closing and all documents incident thereto shall be reasonably
      satisfactory in form and substance to Purchaser, and Purchaser (or its counsel)
      shall have received all such counterpart original and certified or other copies
      of such documents as reasonably requested. Such documents may include good
      standing certificates.

     

    5.15  Preemptive
      Rights.
      The
      Company shall have fully satisfied (including with respect to rights of timely
      notification) or obtained enforceable waivers in respect of any preemptive
      or
      similar rights directly or indirectly affecting any of its securities, which
      rights (whether waiver has been obtained or otherwise) shall be as disclosed
      in
      the Disclosure Statement. 

     

    5.16  Change
      in Stock Price.
      Neither
      the Adjusted Average Price, nor the trading price on or immediately prior to
      the
      Closing Date, shall have declined below $.75 per share of Common
      Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    ARTICLE
      VI  

     

    

     

    CONDITIONS
      OF THE COMPANY’S OBLIGATIONS AT CLOSING

     

    6.1   Conditions
      of the Company’s Obligations at Closing.
      The
      obligations of the Company to sell Shares to the Purchaser at the Closing are
      subject to the fulfillment, on or before the Closing, of each of the following
      conditions, unless otherwise waived:

     

    6.2  Representations
      and Warranties.
      The
      representations and warranties of Purchaser contained in Section 3.2 shall
      be
      true and correct in all respects as of such Closing.

     

    6.3  Performance.
      The
      Purchasers shall have performed and complied with all covenants, agreements,
      obligations and conditions contained in this Agreement that are required to
      be
      performed or complied with by them on or before such Closing.

     

    6.4  Qualifications.
      All
      authorizations, approvals or permits, if any, of any governmental authority
      or
      regulatory body of the United States or of any state that are required in
      connection with the lawful issuance and sale of the Share pursuant to this
      Agreement shall be obtained and effective as of the Closing.

     

    6.5  Registration
      Rights Agreement.
       Purchaser
      shall have executed and delivered the Registration Rights Agreement.

     

    6.6  Payment
      of Purchase Price.
      The
      Purchase Price, as adjusted shall have been paid.

     

    6.7  Change
      in Stock Price.
      Neither
      the Adjusted Average Price, nor the trading price on or immediately prior to
      the
      Closing Date, shall have declined below $.75 per share of Common Stock.

     

    ARTICLE
      VII  

     

    

     

    MISCELLANEOUS

     

    7.1  Fees
      and Expenses.
      Except
      as otherwise set forth in this Agreement, 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 stamp and similar taxes and duties levied in connection with
      the
      sale of the Securities from the Company to the Purchaser. The Company shall
      pay
      due diligence fees of the Purchaser of five thousand US dollars (US 5,000.00)
      ("Due
      Diligence Fee").
      The
      Due Diligence Fee, however, does not include the cost of any required
      third-party appraisals or extraordinary due diligence or opinions, memoranda
      or
      research that may be required in connection with the investment. Any such third
      party appraisals, opinions, memoranda or research or extraordinary due diligence
      costs, if any, must be approved by the Company in advance; provided,
      however,
      that if
      the Company elects not to pay such fees, Purchaser may in its discretion
      terminate the transaction. The Company will also pay the Purchaser's
      documentation and legal fees of ten thousand US dollars (US $10,000.00
      ("Documentation
      Fees")
      at
      Closing. Any fees not paid by the Company prior to the Closing will be deducted
      from the Purchase Price otherwise payable. The Company shall pay all Blue-Sky,
      Form D or similar filing costs or expenses. 

     

    7.2  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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

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

     

     

    If
      to the
      Purchaser:

    

    Mercatus
      & Partners, Ltd. 

    Via
      S.
      Roberto Bellarmino # 4

    00142
      Roma, Italy

    Tel:
      01139-397-985-65

     

    with
      copies to:

    

    Hodgson
      Russ LLP

    60
      East
      42nd Street, 37th Floor

    New
      York,
      New York 10165 - 0150

    Attn:
      Ronniel Levy, Esq.

    Telephone:
      (212) 661-3535

    Facsimile:
      (212) 972-1677

     

    If
      to the
      Company, to the following address: 

    

    Tally
      Ho
      Ventures, Inc.

    115
      Route
      d’Arlon

    L-8311
      Capellen, Luxembourg

    Attn:
      Nigel Gregg

    Telephone:

    Facsimile:
      (011) 353-1633-5175

    

    with
      copies to:

    

    Cozen
      O’Connor

    1900
      Market Street

    Philadelphia,
      Pennsylvania 19103

    Attn:
      _______________________

    Telephone:
      (215) 665-5542

    Facsimile:
      (215) 701-2478

     

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

     

    7.4  Amendments;
      Waivers.
      Without
      the written consent of (i) the Company and (ii) the Purchaser, the
      terms of the Securities Purchase Agreement may not be waived or amended. 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    7.5  Construction.
      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.

     

    7.6  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 Purchaser; provided, however, no consent shall be required in
      connection with a merger, consolidation or sale of substantially all of the
      Company’s assets. Purchaser may assign all of its rights under this Agreement to
      any Person to whom Purchaser assigns all of its Securities, provided such
      transferee is a Qualified Transferee. Nothing in this Agreement, express or
      implied, is intended to confer upon any party other than the parties hereto
      or
      their respective successors and assigns any rights, remedies, obligations or
      liabilities under or by reason of this Agreement, except as expressly provided
      by this Agreement. Further, notwithstanding anything to the contrary in the
      Transaction Documents, the rights under such Transaction Documents shall not
      transfer to any subsequent purchaser of such Securities.

     

    7.7  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.

     

    7.8   Governing
      Law.
      The
      validity and interpretation of this Agreement shall be governed by, and
      construed and enforced in accordance with, the laws of the State of New York.
      Each of the parties hereto and their assigns hereby consents to the exclusive
      jurisdiction and venue of the Courts of the State of New York, located in the
      City and County of New York and the United States District Court, Southern
      District, for the State of New York with respect to any matter relating to
      this
      Agreement and performance of the parties’ obligations hereunder, the documents
      and instruments executed and delivered concurrently herewith or pursuant hereto
      and performance of the parties’ obligations thereunder and each of the parties
      hereto hereby consents to the personal jurisdiction of such courts and shall
      subject itself to such personal jurisdiction. Any action, suit or proceeding
      relating to such matters shall be commenced, pursued, defended and resolved
      only
      in such courts and any appropriate appellate court having jurisdiction to hear
      an appeal from any judgment entered in such courts. The parties irrevocably
      waive the defense of an inconvenient forum to the maintenance of such suit
      or
      proceeding. Service of process in any action, suit or proceeding relating to
      such matters may be made and served within or outside the State of New York
      by
      registered or certified mail to the parties and their representatives at their
      respective addresses specified in Section 18 hereof, provided that a reasonable
      time, not less than thirty (30) days, is allowed for response. Service of
      process may also be made in such other manner as may be permissible under the
      applicable court rules.

     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    7.10  Survival.
      The
      representations and warranties contained in Section 3.1 and 3.2 shall survive
      the Closing Date and the delivery and exercise of the Securities, as applicable
      for a period of one (1) year. The agreements and covenants contained herein
      and
      in the Transaction Documents shall survive the Closing Date, until the Purchaser
      no longer holds any Shares (except for such provisions with a stated duration
      which will survive for such duration).

     

    7.11  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.

     

    7.12  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 therefore, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    7.13  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.

     

    7.14  Limitation
      of Remedies.
      With
      respect to claims by the Company or any person acting by or through the Company,
      or by the Purchaser or any person acting through the Purchaser, for remedies
      at
      law or at equity relating to or arising out of a breach of this Agreement,
      allegations of fraud, estoppel, reliance or otherwise, liability, if any, shall,
      in no event, include loss of profits, loss of business opportunities, loss
      of
      other funding opportunities, inability to fund operations of the Company or
      to
      enter into a material agreement, or incidental, indirect, exemplary, punitive,
      special or consequential damages of any kind. The Company’s sole remedy for any
      claim that against the Purchaser of any of its Affiliates prior to Closing
      shall
      be the return of its Shares that have not been funded at a Closing. The
      Company’s remedy for any claims after the Closing shall be limited to the
      Company’s actual out-of-pocket losses incurred that were clearly related to
      Purchaser’s breach of those covenants of Purchaser that specifically survive the
      Closing.

     

     (Signature
      Page Follows)

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    [Signature
      Page to Securities Purchase Agreement]

     

    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.

     

    TALLY
      HO VENTURES, INC.   

    

    By:
      ______________________________

    Name:
      ____________________________

    Title:______________________________
      

     

     

    

     MERCATUS
      & PARTNERS, LTD.

                                By:______________________________ 

                  Name:____________________________
       

                   Title:
      ___________________________

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