Document:

Exhibit 10.2

September
26, 2006

Ms. Sandra R.A. Karrmann

2620 King Arthur Blvd.

Lewisville, TX  75056

Amended
and Restated Change of Control Agreement

Dear Sandi:

The Board of Directors
continues to believe that it is in the best interests of Meritage Homes
Corporation (“Meritage”) to take appropriate steps to allay any concerns you
may have about your future employment opportunities with Meritage and its
subsidiaries (Meritage and its subsidiaries are collectively referred to as the
“Company”).  As a result, the Board has
decided to offer to you the benefits described below.  This Amended and Restated Change of Control
Agreement supersedes and replaces the Change of Control Agreement dated
December 5, 2005.

Please note that the
benefits described below will only be effective if you sign the extra copy of
this Change of Control Agreement (the “Agreement”) which is enclosed and return
it to me.  This Agreement was drafted to
comply with the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Code”) and the proposed regulations issued thereunder.  If the final regulations issued under Code
Section 409A provide for more liberalized rules than those under this Agreement,
and if the Company decides to amend the change of control agreements for other
Company executives to reflect any such change, this Agreement will be amended
in a manner consistent with the amendments made to those other change of
control agreements.

1.             TERM OF AGREEMENT.

This Agreement is
effective immediately and will continue in effect as long as you are actively
employed by the Company, unless you and the Company agree in writing to its
termination.

2.             SEVERANCE PAYMENT AND STOCK OPTION ACCELERATION.

If your employment with
the Company is terminated without “Cause” (as defined in Section 6) at any
time within two years following a “Change of Control” (as defined in Section
4), you will receive the “Severance Payment” described below.  You will also receive the Severance Payment
if you terminate your employment for “Good Reason” (as defined in Section 5) at
any time within two years following a Change of Control.

The “Severance Payment”
equals the sum of (i) the higher of (x) your annual base salary on the date of
termination of your employment, or (y) your annual base salary on the date 

preceding the Change of
Control, and (ii) the highest of the following (a) your average incentive
compensation for the two years prior to termination of your employment, or (b)
your incentive compensation for the year preceding the year in which the Change
of Control occurred.  In addition, you
will not be required to repay any portion of the hiring bonus upon such
termination of employment.

The Severance Payment
will be paid in one lump sum within 15 business days of your termination of employment.

You are not entitled to
receive the Severance Payment if your employment is terminated for Cause, if
you terminate your employment without Good Reason, or if your employment is
terminated by reason of your “Disability” (as defined in Section 8(d)) or your
death.  In addition, you are not entitled
to receive the Severance Payment if your employment is terminated by you or the
Company for any or no reason before a Change of Control occurs or more than two
years after a Change of Control has occurred.

In order to receive the
Severance Payment, you must execute any release reasonably requested by the
Company.

The Severance Payment
will be paid to you without regard to whether you look for or obtain
alternative employment following your termination of employment with the
Company.

Notwithstanding anything
in this Agreement or in any option agreement to the contrary, upon a Change of
Control, any stock option granted to you shall accelerate and become vested
without further action.  You will have a
period of one year from the date of termination to exercise such options.

3.             BENEFITS CONTINUATION.

If you are entitled to
severance under Section 2, you will continue to receive life, disability,
accident and group health insurance benefits substantially similar to those
which you were receiving immediately prior to your termination of employment
for a period of 18 months following your termination of employment.  Such benefits shall be provided on
substantially the same terms and conditions as they were provided prior to the
Change of Control.

The Company does not
intend to provide duplicative benefits. 
As a result, benefits otherwise receivable pursuant to this Section 3
shall be reduced or eliminated if and to the extent that you receive such
benefits pursuant to any employment agreement you may have with the Company.

Benefits otherwise
receivable pursuant to this Section 3 also shall be reduced or eliminated if
and to the extent that you receive comparable benefits from any other source
(for example, another employer); provided, however, you shall have no
obligation to seek, solicit or accept employment from another employer in order
to receive the benefits provided by this Agreement.

 2
 

4.             CHANGE OF CONTROL DEFINED.

For purposes of this
Agreement, the term Change of Control shall mean and include the following
transactions or situations:

(a)           A sale,
transfer, or other disposition by Meritage through a single transaction or a
series of transactions of securities of Meritage representing 33% or more of
the combined voting power of Meritage’s then outstanding securities to any “Unrelated
Person” or “Unrelated Persons” acting in concert with one another.  For purposes of this Section 4, the term “Person”
shall mean and include any individual, partnership, joint venture, association,
trust, corporation, or other entity (including a “group” as referred to in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the “Act”)).  For purposes of this Section 4, the term “Unrelated
Person” shall mean and include any Person other than the Company, or an
employee benefit plan of the Company.

(b)           A sale,
transfer, or other disposition through a single transaction or a series of
related transactions of all or substantially all of the assets of Meritage to
an Unrelated Person or Unrelated Persons acting in concert with one another.

(c)           Any
consolidation or merger of Meritage with or into an Unrelated Person, unless
immediately after the consolidation or merger the holders of the common stock
of Meritage immediately prior to the consolidation or merger are the beneficial
owners of securities of the surviving corporation representing at least 50% of
the combined voting power of the surviving corporation’s then outstanding
securities.

5.             GOOD REASON DEFINED.

For purposes of this Agreement,
the term “Good Reason” shall mean if following a Change of Control you are
either (i) not offered the senior most Human Resources position in the
surviving corporation or (ii) required to relocate to any employment location
that is more than thirty (30) miles from the Company’s Plano, Texas
headquarters.

6.             CAUSE DEFINED.

For purposes of this
Agreement, the term “Cause” will exist in the following circumstances:  (i) you are convicted of a felony, (ii) you
engage in any fraudulent or other dishonest act to the detriment of the
Company, (iii) you fail to report for work on a regular basis, except for
periods of authorized absence or bona fide illness, (iv) you misappropriate
trade secrets, customer lists, or other proprietary information belonging to
the Company for your own benefit or for the benefit of a competitor, (v) you
engage in any willful misconduct designed to harm the Company or its
stockholders, or (vi) you fail to perform properly your assigned duties.

 3
 

7.             CEILING ON BENEFITS.

The Code places
significant tax burdens on you and the Company if the total payments made to
you due to a Change of Control exceed prescribed limits.  For example, if your limit is $749,999
(because your “Base Period Income” (as defined below) is $250,000) and the “Total
Payments” (as defined below) exceed the limit by even $1.00, you are subject to
an excise tax under Section 4999 of the Code of 20% of all amounts paid to you
in excess of $250,000.  If your limit is
$749,999, you will not be subject to an excise tax if you receive exactly
$749,999.  If you receive $750,000, you
will be subject to an excise tax of $100,000 (20% of $500,000).

In order to avoid this
excise tax and the related adverse tax consequences for the Company, by signing
this Agreement, you agree that the present value of your Total Payments will
not exceed an amount equal to 2.99 times your Base Period Income.  This is the maximum amount which you may
receive without becoming subject to the excise tax imposed by Section 4999 of
the Code or which the Company may pay without loss of deduction under Section
280G of the Code.

“Base Period Income” is
an amount equal to your “annualized includible compensation” for the “base
period” as defined in Sections 280G(d)(1) and (2) of the Code and the regulations
adopted thereunder.  Generally, your “annualized
includible compensation” is the average of your annual taxable income from the
Company for the “base period,” which is the five calendar years prior to the
year in which the Change of Control occurs (or the number of years worked if
less than five).  For example, if a
Change of Control occurs in 2009, your base period compensation would be the
average of the compensation includible in your income for years 2006, 2007, 2008
and because you were first employed in 2005, your annualized compensation for
that partial year.  Any compensation
includible in your income for 2009 is disregarded for these purposes.  These concepts are complicated and technical
and all of the rules set forth in the applicable regulations apply for purposes
of this Agreement.

Your “Total Payments”
include the sum of the Severance Payment and any other “payments in the nature
of compensation” (as defined in Section 280G of the Code and the regulations
adopted thereunder).

If Meritage believes that
these rules will result in a reduction of the payments to which you are
entitled under this Agreement, it will so notify you within 60 days following
delivery of the “Notice of Termination” described in Section 8.  You and Meritage will then, at Meritage’s
expense, retain legal counsel, certified public accountants, and/or a firm of
recognized executive compensation consultants to provide an opinion or opinions
concerning whether your Total Payments exceed the limit discussed above.

Meritage will select the
legal counsel, certified public accountants and executive compensation
consultants.  If you do not accept one or
more of the parties selected by Meritage you may provide Meritage with the
names of legal counsel, certified public accountants and/or executive
compensation consultants acceptable to you. 
If Meritage does not accept the party or parties selected by you, the
legal counsel, certified public accountants and/or executive 

 4
 

compensation consultants
selected by you and Meritage, respectively, will select the legal counsel,
certified public accountants and/or executive compensation consultants to
provide the opinions required.

At a minimum, the
opinions required by this Section 7 must set forth (a) the amount of your Base
Period Income, (b) the present value of the Total Payments and (c) the amount
and present value of any excess parachute payments.

If the opinions state
that there would be an excess parachute payment, your payments under this
Agreement will be reduced to the extent necessary to eliminate the excess.

You will be allowed to
choose which payment should be reduced or eliminated, but the payment you
choose to reduce or eliminate must be a payment determined by such legal
counsel, certified public accountants, and/or executive compensation
consultants to be includible in Total Payments. 
You will make your decision in writing and deliver it to Meritage within
30 days of your receipt of such opinions. 
If you fail to so notify Meritage, it will decide which payments to
reduce or eliminate.

If the legal counsel,
certified public accountants, and/or executive compensation consultants
selected to provide the opinions referred to above so requests in connection
with the opinion required by this Section 7, a firm of recognized executive
compensation consultants, selected by you and Meritage pursuant to the
procedures set forth above, shall provide an opinion, upon which such legal
counsel, certified public accountants, and/or executive compensation
consultants may rely, as to the reasonableness of any item of compensation as
reasonable compensation for services rendered before or after the Change of
Control.

If Meritage believes that
your Total Payments will exceed the limitations of this Section 7, it will
nonetheless make payments to you, at the times stated above, in the maximum
amount that it believes may be paid without exceeding such limitations.  The balance, if any, will then be paid after
the opinions called for above have been received.

If the amount paid to you
by Meritage is ultimately determined, pursuant to the opinion referred to above
or by the Internal Revenue Service, to have exceeded the limitation of this
Section 7, the excess will be treated as a loan to you by Meritage and shall be
repayable on the 90th day following demand by Meritage, together with interest
at the “applicable federal rate” provided in Section 1274(d) of the Code.

In the event that the
provisions of Sections 280G and 4999 of the Code are repealed without
succession, this Section 7 shall be of no further force or effect.

8.             TERMINATION NOTICE AND PROCEDURE.

Any termination by the
Company or you of your employment within two (2) years following a Change of
Control shall be communicated by written Notice of Termination to you if 

 5
 

such Notice of Termination
is delivered by the Company and to the Company if such Notice of Termination is
delivered by you, all in accordance with the following procedures:

(a)           The Notice
of Termination shall set forth in reasonable detail the facts and circumstances
alleged to provide a basis for termination.

(b)           Any Notice
of Termination by the Company shall be in writing signed by a senior executive
officer of the Company or member of the Executive Compensation Committee of the
Board of Directors of Meritage specifying the basis for such termination.

(c)           If during
the two (2) year period following a Change of Control the Company furnishes a
Notice of Termination for Cause and you in good faith notify the Company that a
dispute exists concerning such termination within the 15-day period following
your receipt of such notice, you may elect to continue your employment during
such dispute.  If it is thereafter
determined that (i) Cause did exist, your “Termination Date” shall be the
earlier of (A) the date on which the dispute is finally determined, either by
mutual written agreement of the parties or pursuant to the alternative dispute
resolution provisions of Section 15 or (B) the date of your death; or (ii)
Cause did not exist, your employment shall continue as if the Company had not
delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.

(d)           If during
the two (2) year period following a Change of Control the Company furnishes a
Notice of Termination by reason of Disability and you in good faith notify the
Company that a dispute exists concerning such termination within the 15-day
period following your receipt of such notice, you may elect to continue your
employment during such dispute.  Any
dispute relating to the existence of a Disability shall be resolved by the
opinion of the licensed physician selected by Meritage, provided, however, that
if you do not accept the opinion of the licensed physician selected by
Meritage, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by you; provided further, however, that if Meritage does
not accept the opinion of the licensed physician selected by you, the dispute
shall be finally resolved by the opinion of a licensed physician selected by
the licensed physicians selected by Meritage and you, respectively.  If it is thereafter determined that (i) a
Disability did exist, your Termination Date shall be the earlier of (A) the
date on which the dispute is resolved or (B) the date of your death; or (ii) a
Disability did not exist, your employment shall continue as if the Company had
not delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.  For purposes
of this Agreement, “Disability” shall mean a disability that results in you
being medically unable to fulfill your duties of employment for six (6)
consecutive months.

(e)           If during
the two (2) year period following a Change of Control and as a result of such
Change of Control you in good faith furnish a Notice of Termination for Good
Reason and the Company notifies you that a dispute exists concerning the
termination within the 15-day period following the Company’s receipt of
such notice, you may elect to continue your employment during such
dispute.  If it is thereafter determined
that (i) Good Reason did exist, your Termination Date shall be the earlier of
(A) the date on which the dispute is finally 

 6
 

determined, either by mutual written agreement of the parties or
pursuant to the alternative dispute resolution provisions of Section 15, (B)
the date of your death or (C) one day prior to the second anniversary of a
Change of Control; or (ii) Good Reason did not exist, your employment shall
continue after such determination as if you had not delivered the Notice of Termination
asserting Good Reason.

(f)            If during
the two (2) year period following a Change of Control you do not elect to
continue employment pending resolution of a dispute regarding a Notice of
Termination, and it is finally determined that the reason for termination set
forth in such Notice of Termination did not exist, if such notice was delivered
by you, you shall be deemed to have voluntarily terminated your employment
other than for Good Reason and if delivered by the Company, the Company will be
deemed to have terminated you other than by reason of Disability or Cause.

(g)           For purposes
of this Agreement, a transfer of your employment from Meritage to one of its
subsidiaries or a transfer of your employment from a subsidiary to Meritage or
another subsidiary shall not be treated as a termination of employment.

9.             SUCCESSORS.

Meritage will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
Meritage to assume, whether expressly or by operation of law, this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.  Failure of Meritage to obtain such assumption
shall be a breach of this Agreement and shall entitle you to compensation in
the same amount and on the same terms to which you would be entitled hereunder
if you terminate your employment for Good Reason following a Change of Control,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Termination Date.  As used in this agreement “Company” shall
mean Company, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law or otherwise.

10.          BINDING AGREEMENT.

This Agreement shall
inure to the benefit of and be enforceable by you and your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If you should die
while any amount would still be payable to you hereunder had you continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.

11.          NOTICE.

For purposes of this
Agreement, notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered 

 7
 

or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to Meritage shall be directed to the
attention of the Chief Executive Officer of Meritage with a copy to the General
Counsel of Meritage, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.

12.          MISCELLANEOUS.

No provision of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by you and a senior
executive officer of the Company or a member of the Executive Compensation
Committee of the Board of Directors of Meritage.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.  No
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. 
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas without regard to
its conflicts of law principles.  All
references to sections of the Act or the Code shall be deemed also to refer to
any successor provisions to such sections. 
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law.

13.          VALIDITY.

The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.

14.          COUNTERPARTS.

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

15.          ALTERNATIVE DISPUTE RESOLUTION.

All claims, disputes and
other matters in question between the parties arising under this Agreement
shall, unless otherwise provided herein (such as in Sections 7 and 8(d)), be
resolved by the arbitration provisions set forth below.

Any dispute, controversy,
or claim, whether contractual or non-contractual, between Meritage and you
arising directly or indirectly out of or connected with this Agreement,
relating to the breach or alleged breach of any representation, warranty,
agreement, or covenant under this Agreement, unless mutually settled by the
parties hereto, shall be resolved by binding 

 8
 

arbitration in accordance
with the Employment Arbitration Rules of the American Arbitration Association
(the “AAA”).  Any arbitration shall be
conducted by arbitrators approved by the AAA and mutually acceptable to
Meritage and you.  All such disputes,
controversies, or claims shall be conducted by a single arbitrator, unless the
dispute involves more than $100,000 in the aggregate in which case the
arbitration shall be conducted by a panel of three arbitrators.  If the parties hereto are unable to agree on
the arbitrator(s), then the AAA shall select the arbitrator(s).  The resolution of the dispute by the
arbitrator(s) shall be final, binding, nonappealable, and fully enforceable by
a court of competent jurisdiction under the Federal Arbitration Act.  The arbitrator(s) shall award damages to the
prevailing party.  The arbitration award
shall be in writing and shall include a statement of the reasons for the
award.  The arbitration shall be held in
the Dallas/Fort Worth metropolitan area. 
The arbitrator(s) shall award reasonable attorneys’ fees and costs to
the prevailing party.

16.          EXPENSES AND INTEREST.

If a good faith dispute
shall arise with respect to the enforcement of your rights under this Agreement
or if any arbitration or legal proceeding shall be brought in good faith to
enforce or interpret any provision contained herein, or to recover damages for
breach hereof, and you are the prevailing party, you shall recover from the
Company any reasonable attorneys’ fees and necessary costs and disbursements
incurred as a result of such dispute or legal proceeding, and prejudgment
interest on any money judgment obtained by you calculated at the rate of
interest announced by Guaranty Bank from time to time as its prime rate from
the date that payments to you should have been made under this Agreement.

17.          PAYMENT OBLIGATIONS ABSOLUTE.

Meritage’s obligation to
pay you the compensation and to make the arrangements in accordance with the
provisions herein shall be absolute and unconditional and shall not be affected
by any circumstances; provided, however, that the Company may apply amounts
payable under this Agreement to any debts owed to the Company by you on your
Termination Date.  All amounts payable by
Meritage in accordance with this Agreement shall be paid without notice or
demand.  If Meritage has paid you more
than the amount to which you are entitled under this Agreement, the Company
shall have the right to recover all or any part of such overpayment from you or
from whomsoever has received such amount.

18.          ENTIRE AGREEMENT.

This Agreement sets forth
the entire agreement between you and Meritage concerning the subject matter
discussed in this Agreement and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations, or  warranties, whether written or oral, by any
officer, employee or representative of the Company.  Any prior agreements or understandings with
respect to the subject matter set forth in this Agreement are hereby terminated
and canceled.

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19.          PARTIES.

This Agreement is an
agreement between you and Meritage.  In
certain cases, though, obligations imposed upon Meritage may be satisfied by a
subsidiary of Meritage.  Any payment made
or action taken by a subsidiary of Meritage shall be considered to be a payment
made or action taken by Meritage for purposes of determining whether Meritage
has satisfied its obligations under this Agreement.

20.          SECTION 409A.

If any payments under
this Agreement are subject to the provisions of Code Section 409A, it is
intended that the Agreement will comply fully with and meet all the
requirements of Code Section 409A.

If you would like
to participate in this special benefits program, please sign and return the
extra copy of this letter which is enclosed.

	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By.

  	
  /s/ Steven J. Hilton

  	
   

  
	
   

  	
  Name:

  	
  Steven J. Hilton

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
						

 

ACCEPTANCE

I hereby accept the offer to participate in this
special benefits program and I agree to be bound by all of the provisions noted
above.

	
  

  	
  /s/ Sandra R.A. Karrmann

  	
   

  
	
   

  	
  Sandra R.A. Karrmann

  	
   

  

 

 10Exhibit 4.2

 

SUBSCRIPTION AGREEMENT

THIS
SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of May 31, 2006, by
and among Analytical Surveys, Inc., a Colorado corporation (the “Company”), and the subscribers identified
on the signature page hereto (each a “Subscriber”
and collectively “Subscribers”).

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

WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase up to $2,000,000 (the “Aggregate
Principal Amount”) of principal amount of promissory notes of the
Company (“Note” or “Notes”), a form of which is annexed hereto
as Exhibit A, convertible into shares of
the Company’s no par value common stock (the “Common
Stock”), at a per share conversion price set forth in the Note (“Conversion Price”); and share purchase
warrants (the “Warrants”), in the
form annexed hereto as Exhibits B1, B2, and B3,
to purchase shares of Common Stock (the “Warrant
Shares”).  The Notes, shares
of Common Stock issuable upon conversion of the Notes (the “Shares”), the Warrants and the Warrant
Shares are collectively referred to herein as the “Securities”; and

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

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

1.           Closing.  Subject to the satisfaction or waiver of the
terms and conditions of this Agreement, on the Closing Date, each Subscriber
shall purchase and the Company shall sell to each Subscriber a Note in the
principal amount designated on the signature page hereto.  The principal amount of the Notes to be
purchased by the Subscribers on the Closing Date shall, in the aggregate, be
equal to the Aggregate Principal Amount. 
The “Closing Date” shall be the date
that subscriber funds representing the net amount due the Company from the
Closing Purchase Price of the Offering [as defined in Section 8(b)] is
transmitted by wire transfer or otherwise to or for the benefit of the Company.   The consummation of the transactions
contemplated herein for all Closings shall take place at the offices of Grushko
& Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
upon the satisfaction of all conditions to Closing set forth in this Agreement.

2.          Warrants.

(a)           Class C Warrants.   On the Closing Date, the Company will issue
and deliver Class C Warrants to the Subscribers.  One-half Class C Warrant will be issued for
each one Share which would be issued on the Closing Date assuming the complete
conversion of the Notes issued on the Closing Date at the Conversion Price in
effect on the Closing Date.  The per
Warrant Share exercise price to acquire a Warrant Share upon exercise of a
Class C Warrant shall be 102% of the closing bid price of the Common Stock as
reported by Bloomberg L.P. for the trading day preceding the Closing Date.  The Class C Warrants shall be exercisable
only if the Approval (as defined in Section 13 below) is obtained, commencing
six months after the Closing Date and until five years after the Closing Date.

(b)           Class D Warrants.   On the Closing Date, the Company will issue
and deliver Class D Warrants to the Subscribers.  One Class D Warrant will be issued for each
one Share which would be issued on the Closing Date assuming the complete
conversion of the Notes issued on the Closing Date at the Conversion Price in
effect on the Closing Date.  The per
Warrant Share exercise price to acquire a Warrant Share upon exercise of a
Class D Warrant shall be 115% of the closing bid price of the Common Stock as
reported by Bloomberg L.P. for the trading day preceding the Closing Date.  The Class D Warrants shall be exercisable
only if the Approval is obtained, commencing six months after the Closing Date
and until five years after the Closing Date.

(c)           Class E Warrants.   On the Closing Date, the Company will issue
and deliver Class E Warrants to the Subscribers.  One Class E Warrant will be issued for each
one Share which would be issued on the Closing Date assuming the complete
conversion of the Notes issued on the Closing Date at the Conversion Price in
effect on the Closing Date.  The per
Warrant Share exercise price to acquire a Warrant Share upon exercise of a
Class E Warrant shall be 100% of the closing bid price of the Common Stock as
reported by Bloomberg L.P. for the trading day preceding the Closing Date.  The Class E Warrants shall be exercisable
commencing six months after the Closing Date and until five years after the
Closing Date.  Unless the Approval is
obtained, the maximum amount of Warrant

 1
 

 

Shares issuable upon exercise of Class E Warrants and Shares may not
exceed 752,072 shares of Common Stock. 
The Subscribers shall be allotted a portion of these shares in
proportion to Note principal acquired by them in the Offering as set forth on
the signature page (“Allotted Shares”).

 

3.          Security Interest.   The Subscribers will be granted a security
interest in certain assets of the Company and Subsidiaries (as defined in
Section 5(a) of this Agreement), including ownership of the Subsidiaries, to be
memorialized in a “Security Agreement”,
a form of which is annexed hereto as Exhibit
D.  Each Subsidiary will
execute and deliver to the Subscribers a form of “Guaranty”
annexed hereto as Exhibit E. The
Company will execute such other agreements, documents and financing statements
reasonably requested by Subscribers, which will be filed at the Company’s
expense with such jurisdictions, states and counties designated by the
Subscribers.  The Company will also
execute all such documents reasonably necessary in the opinion of Subscribers
to memorialize and further protect the security interest described herein.  The Subscribers will appoint a Collateral
Agent to represent them collectively in connection with the security interest
to be granted to the Subscribers.  The
appointment will be pursuant to a “Collateral
Agent Agreement”, a form of which is annexed hereto as Exhibit F.

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

(a)           Organization and Standing of the
Subscribers.  If the Subscriber is an
entity, such Subscriber is a corporation, partnership or other entity duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has the requisite
corporate power to own its assets and to carry on its business.

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

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

(d)           Information on Company.   The Subscriber has been furnished with or
has had access at the EDGAR Website of the Commission to the Company’s Form
10-KSB for the year ended September 30, 2005 and all periodic reports filed
with the Commission thereafter, but not later than five business days before
the Closing Date (hereinafter referred to as the “Reports”).  In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in
writing (such other information is collectively, the “Other
Written Information”), and considered all factors the Subscriber
deems material in deciding on the advisability of investing in the Securities.

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

 2
 

 

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

(g)           Compliance with Securities Act.  The Subscriber understands and agrees that the Securities have not been
registered under the 1933 Act or any applicable state securities laws, by
reason of their issuance in a transaction that does not require registration
under the 1933 Act (based in part on the accuracy of the representations and
warranties of Subscriber contained herein), and that such Securities must be
held indefinitely unless a subsequent disposition is registered under the 1933
Act or any applicable state securities laws or is exempt from such registration.  All sales of the Securities must and will be
made in compliance with all applicable securities laws and regulations.  Notwithstanding anything to the contrary
contained in this Agreement, such Subscriber may transfer (without restriction
and without the need for an opinion of counsel) the Securities to its
Affiliates (as defined below) provided that each such Affiliate is an “accredited
investor” under Regulation D and such Affiliate agrees to be bound by the terms
and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means
any other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity.  Affiliate when employed in connection with
the Company includes each Subsidiary [as defined in Section 5(a)] of the
Company.  For purposes of this
definition, “control” means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

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

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

(i)            Warrants
Legend.  The Warrants shall bear the
following or similar legend:

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

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

“THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ANALYTICAL SURVEYS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”

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

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

 3
 

 

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

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

(o)           Survival.  The foregoing representations and warranties
shall survive the Closing Date until three years after the Closing Date.

5.             Company
Representations and Warranties.  The
Company represents and warrants to and agrees with each Subscriber that except
as set forth in the Reports or the Other Written Information and as otherwise
qualified in the Transaction Documents:

(a)           Due
Incorporation.  The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power to own its properties and to carry on its business is disclosed in the
Reports.  The Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary, other than those jurisdictions in which the
failure to so qualify would not have a Material Adverse Effect.  For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse
effect on the financial condition, results of operations, properties or
business of the Company taken individually, or in the aggregate, as a
whole.  For
purposes of this Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity) of which more than 50% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership
or limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of determination,
owned or controlled directly or indirectly through one or more intermediaries,
by such entity.  All the Company’s
Subsidiaries as of the Closing Date are set forth on Schedule
5(a) hereto.

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

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

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

(e)           Consents.  Except as described in this Agreement, no
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, any Principal Market (as defined in Section 9(b) of this
Agreement), nor the Company’s shareholders is required for the execution by the
Company of the Transaction Documents and compliance and performance by the Company
of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities.

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

(i)            violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default
in any  material respect) under (A) the
articles or certificate of incorporation, charter or bylaws of the Company, (B)
to the Company’s knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company of any court,
governmental agency or body, or arbitrator having jurisdiction

 4
 

 

over the Company or over the properties or assets of the Company or any
of its Affiliates, (C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which the
Company or any of its Affiliates is a party, by which the Company or any of its
Affiliates is bound, or to which any of the properties of the Company or any of
its Affiliates is subject, or (D) the terms of any “lock-up” or similar provision
of any underwriting or similar agreement to which the Company, or any of its
Affiliates is a party except the violation, conflict, breach, or default of
which would not have a Material Adverse Effect; or

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

(iii)          result in the
activation of any anti-dilution rights or a reset or repricing of any debt or
security instrument of any current, former or future creditor or equity holder
of the Company, nor result in the acceleration of the due date of any
obligation of the Company; or

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

(g)           The Securities.  The Securities upon issuance:

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

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

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

(iv)          will not subject the holders thereof
to personal liability by reason of being such holders provided Subscriber’s
representations herein are true and accurate and Subscribers take no actions or
fail to take any actions required for their purchase of the Securities to be in
compliance with all applicable laws and regulations; and

(v)           will
have been issued in reliance upon an exemption from the registration
requirements of and will not result in a violation of Section 5 under the 1933
Act.

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

(i)            Reporting
Company.  The Company is a
publicly-held company subject to reporting obligations pursuant to Section 13
of the Securities Exchange Act of 1934 (the “1934 Act”)
and has a class of common shares registered pursuant to Section 12(g) of the
1934 Act.  Pursuant to the provisions of
the 1934 Act, the Company has timely filed all reports and other materials
required to be filed thereunder with the Commission during the preceding
twenty-four months.  The Company is
eligible to register the Shares for resale by the Subscribers on a Form S-3
registration statement.

(j)            No
Market Manipulation.  The Company and
its Affiliates have not taken, and will not take, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Securities or affect the price at which the
Securities may be issued or resold, provided, however, that this provision
shall not prevent the Company from engaging in investor relations/public
relations activities consistent with past practices.

(k)           Information
Concerning Company.  The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates and all the information
required to be disclosed therein.   Since
the last day of the fiscal year of the most recent audited financial statements
included in the Reports (“Latest Financial Date”),
and except as modified in the Other Written Information or in the Schedules
hereto, there has been no Material Adverse Event relating to the Company’s
business, financial condition or affairs not disclosed in the Reports. The
Reports do not contain any untrue statement of a material fact or omit to state

 5
 

 

a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.  The Company has not provided to the
Subscribers any material non-public information.

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

(m)          Defaults.   The Company is not in violation of its
articles of incorporation or bylaws.  The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect, (ii) not subject to nor in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action,
suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii)
to the Company’s knowledge not in violation of any statute, rule or regulation
of any governmental authority which violation would have a Material Adverse
Effect.

(n)           Not
an Integrated Offering.  Neither the
Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Nasdaq Capital Market (“NCM”)
which would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.  Nor will the Company or any of its Affiliates
take any action or steps that would cause the offer or issuance of the
Securities to be integrated with other offerings which would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder. 
The Company will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Securities, which would impair the exemptions relied upon in this Offering or
the Company’s ability to timely comply with its obligations hereunder.

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

(p)           Listing.  The Company’s common stock is listed on the
NCM under the symbol ANLT. The Company has not received any oral or written
notice that the Common Stock is not eligible nor will become ineligible for
listing on the NCM nor that the Common Stock does not meet all requirements for
the continuation of such listing.  The
Company satisfies all the requirements for the continued quotation of the Common
Stock on the NCM.

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

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

(s)           Capitalization.  The authorized and outstanding capital stock
of the Company and Subsidiaries as of the date of this Agreement and the
Closing Date (not including the Securities) are set forth on Schedule 5(d).  Except
as set forth on Schedule 5(d), there are no
options, warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company or any of its Subsidiaries.  All of the outstanding shares of Common Stock
of the Company have been duly and validly authorized and issued and are fully
paid and nonassessable.

(t)            Dilution.   The Company’s executive officers and
directors understand the nature of the Securities being sold hereby and
recognize that the issuance of the Securities will have a potential dilutive
effect on the equity holdings of other holders of the Company’s equity or
rights to receive equity of the Company. 
The board of directors of the Company has concluded, in its good faith
business judgment, that the issuance of the Securities is in the best interests
of the Company.  The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Notes, and the Warrant Shares upon exercise of the Warrants is binding upon the
Company and enforceable regardless of the dilution such issuance may have on
the ownership interests of other shareholders of the Company or parties
entitled to receive equity of the Company.

 6
 

 

(u)           No Disagreements with Accountants
and Lawyers.  There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers.

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

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

(x)            Subsidiary Representations.   The Company makes each of the representations
contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m), (q), (r), (s),
(u) and (w) of this Agreement, as same relate to each Subsidiary of the
Company, with the same qualifications to each such representation.

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

(z)            Survival.  The foregoing representations and warranties
shall survive until three years after the Closing Date.

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

7.1.          Conversion of Note.

(a)           Upon
the conversion of a Note or part thereof at a time when the Note may be
converted, the Company shall, at its own cost and expense, take all necessary
action, including obtaining and delivering, an opinion of counsel acceptable to
the Company’s transfer agent, so that the Company’s transfer agent shall issue
stock certificates in the name of Subscriber (or its nominee) or such other
persons as designated by Subscriber and in such denominations to be specified
at conversion representing the number of shares of Common Stock issuable upon
such conversion.  The Company warrants
that no instructions other than these instructions have been or will be given
to the transfer agent of the Company’s Common Stock and that, unless waived by
the Subscriber and provided that Subscriber has complied with all preconditions
set forth in this Agreement and the Note, the Shares will be free-trading, and
freely transferable, and will not contain a legend restricting the resale or
transferability of the Shares, provided the Subscriber represents that the
Shares are or will be sold pursuant to an effective registration statement
covering the Shares or exemption from registration, or are otherwise exempt
from registration.

(b)           Subscriber will give
notice of its decision to exercise its right to convert the Note and/or
interest due to the Subscriber under the Note or part thereof, by telecopying
an executed and completed Notice of Conversion
(a form of which is annexed as Exhibit A to
the Note) to the Company via confirmed telecopier transmission or otherwise
pursuant to Section 14(a) of this Agreement. 
The Subscriber will not be required to surrender the Note until the Note
has been fully converted or satisfied. 
Each date on which a Notice of Conversion is telecopied to the Company
in accordance with the provisions hereof shall be deemed a Conversion
Date.  The Company will itself
or cause the Company’s transfer agent to transmit the Company’s Common Stock
certificates representing the Shares issuable upon conversion of the Note to
the Subscriber via express courier for receipt by such Subscriber within four
(4) business days after receipt by the Company of the Notice of Conversion
(such fourth day being the “Delivery Date”).  In the event the Shares are electronically
transferable, then delivery of the Shares must be made by electronic
transfer provided request for such electronic transfer has been made by the
Subscriber and the Subscriber has complied with all applicable securities laws
in connection with the sale of the Common Stock, including, without limitation,
the prospectus delivery requirements.   A
Note representing the balance of the Note not so converted will be provided by
the Company to the Subscriber if requested by Subscriber, provided the
Subscriber delivers the original Note to the Company. In the event that a
Subscriber elects not to surrender a Note for reissuance upon partial payment
or conversion, the Subscriber hereby indemnifies the Company against any and
all loss or damage attributable to a third-party claim in an amount in excess
of the actual amount then due under the Note. 
“Business day” and “trading day”
as employed in the Transaction Documents is a day that the New York Stock
Exchange is open for trading for three or more hours.

 7
 

 

(c)           The Company understands that a delay
in the delivery of the Shares in the form required pursuant to Section 7.1
hereof, or the Mandatory Redemption Amount described in Section 7.2 hereof,
respectively after the Delivery Date or the Mandatory Redemption Payment Date
(as hereinafter defined) could result in economic loss to the Subscriber.  As compensation to the Subscriber for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty) to
the Subscriber for late issuance of Shares in the form required pursuant to
Section 7.1 hereof upon Conversion of the Note in the amount of $100 per business
day after the Delivery Date for each $10,000 of Note principal amount being
converted of the corresponding Shares which are not timely delivered.  The Company shall pay any payments incurred
under this Section in immediately available funds upon demand.  Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of the Shares by the Delivery
Date or make payment by the Mandatory Redemption Payment Date, the Subscriber
may revoke all or part of the relevant Notice of Conversion or rescind all or
part of the notice of Mandatory Redemption by delivery of a notice to such
effect to the Company whereupon the Company and the Subscriber shall each be
restored to their respective positions immediately prior to the delivery of
such notice, except that the liquidated damages described above shall be
payable through the date notice of revocation or rescission is given to the
Company.

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

7.2.          Mandatory Redemption at Subscriber’s Election.  In
the event (i) the Company is prohibited from issuing Shares, (ii) the Company
fails to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of
any other Event of Default (as defined in the Note or in this Agreement), any
of the foregoing that continues for more than thirty (30) business days, (iv) a
Change in Control (as defined below), or (v) of the liquidation, dissolution or
winding up of the Company, then at the Subscriber’s election, the Company must
pay to the Subscriber ten (10) business days after request by the Subscriber (“Calculation Period”), a sum of money determined by
multiplying up to the outstanding principal amount of the Note designated by
the Subscriber by 120%, together with accrued but unpaid interest thereon (“Mandatory Redemption Payment”). The Mandatory Redemption
Payment must be received by the Subscriber on the same date as the Shares
otherwise deliverable or within ten (10) business days after request, whichever
is sooner (“Mandatory Redemption Payment Date”).
Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.  Liquidated damages calculated pursuant to
Section 7.1(c) hereof, that have been paid or accrued for the ten day period
prior to the actual receipt of the Mandatory Redemption Payment by the
Subscriber shall be credited against the Mandatory Redemption Payment.  For purposes of this Section 7.2, “Change in Control” shall mean (i) the Company no longer
having a class of shares publicly traded or listed on a Principal Market, (ii)
the Company becoming a Subsidiary of another entity (other than a corporation
formed by the Company for purposes of reincorporation in another U.S.
jurisdiction), and (iii) the sale, lease or transfer of substantially all the
assets of the Company or Subsidiaries.

7.3.          Maximum Conversion.  The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
Affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date, which would
result in beneficial ownership by the Subscriber and its Affiliates of more
than 4.99% of the outstanding shares of common stock of the Company on such
Conversion Date.  Beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13d-3 thereunder.  Subject to the foregoing, the Subscriber shall
not be limited to aggregate conversions of only 4.99% and aggregate conversions
by the Subscriber may exceed 4.99%.  The
Subscriber may waive the conversion limitation described in this Section 7.3,
in whole or in part, upon and effective after 61 days prior written notice to
the Company to increase such percentage to up to 9.99%, but not in excess of
9.99%.  The Subscriber may decide whether
to convert a Note or exercise Warrants to achieve an actual 4.99% or up to
9.99% ownership position as described above, but not in excess of 9.99%.  The Company shall not be liable to the
Subscriber for complying with the provisions of this section.

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

7.5.          Buy-In.  In addition to any other rights available to
the Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after six (6)
business days after the Delivery Date the Subscriber or a

 8
 

 

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

 

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

7.7.          Redemption.    The Securities shall not be redeemable or
mandatorily convertible except as described in the Note and Warrants.

8.             Broker/Legal Fees.

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

(b)           Legal Fees.   The Company shall pay to Grushko &
Mittman, P.C., a cash fee of $32,500 (“Legal Fees”)
(of which $10,000 has been paid) as reimbursement for services rendered to the
Subscribers in connection with this Agreement and the purchase and sale of the
Notes and Warrants (the “Offering”).  The Legal Fees and reimbursement for
estimated UCC search fees, if any, (less any amounts paid prior to Closing) to
be paid by the Company will be payable on the Closing Date out of funds held
pursuant to the Escrow Agreement.

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

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

(b)           Listing.  If applicable, the Company shall promptly
secure the listing of the shares of Common Stock and the Warrant Shares upon
each national securities exchange, or electronic or automated quotation system
upon which they are or become eligible for listing and shall maintain such
listing so long as any Notes or Warrants are outstanding.  The Company will maintain the listing or
quotation of its Common Stock on the American Stock Exchange, NCM, Nasdaq
National Market System, OTC Bulletin Board, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock (the “Principal Market”)),
and will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock from any Principal Market.  As of
the date of this Agreement, the NCM is the Principal Market.

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

(d)           Filing
Requirements.  From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company will (A) cause its
Common Stock to continue to be registered under Section 12(b) or 12(g) of the
1934 Act, (B) comply in all respects with its reporting and filing obligations
under the 1934

 9
 

 

Act, (C) voluntarily comply with all reporting requirements that are
applicable to an issuer with a class of shares registered pursuant to Section
12(g) of the 1934 Act, if Company is not subject to such reporting
requirements, and (D) comply with all requirements related to any registration
statement filed pursuant to this Agreement. 
The Company will use its best efforts not to take any action or file any
document (whether or not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said acts until two (2)
years after the Closing Date.  Until the
earlier of the resale of the Shares and the Warrant Shares by each Subscriber
or two (2) years after the Closing Date, the Company will use its best efforts
to continue the listing or quotation of the Common Stock on a Principal Market
and will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market.  The Company agrees to timely file a Form D
with respect to the Securities if required under Regulation D and to provide a
copy thereof to each Subscriber promptly after such filing.

(e)           Use
of Proceeds.  The proceeds of the
Offering will be employed by the Company for the purposes set forth on Schedule 9(e) hereto. 
Except as set forth on Schedule 9(e),
the Purchase Price may not and will not be used for accrued and unpaid officer
and director salaries, payment of financing related debt, redemption of
outstanding notes or equity instruments of the Company, litigation related
expenses or settlements, brokerage fees, nor non-trade obligations outstanding
on a Closing Date.  For so long as any
Notes are outstanding, the Company will not prepay any financing related debt
obligations, nor redeem any equity instruments of the Company.

(f)            Reservation.   Prior to the Closing Date, the Company
undertakes to reserve, pro  rata, on behalf of the Subscribers from
its authorized but unissued common stock, a number of common shares equal to
150% of the amount of Common Stock necessary to allow each Subscriber to be
able to convert all Notes issuable pursuant to this Agreement and interest
thereon and reserve 100% of the amount of Warrant Shares issuable upon exercise
of the Warrants.  Failure to have
sufficient shares reserved pursuant to this Section 9(f) shall be a material
default of the Company’s obligations under this Agreement and an Event of
Default under the Note.

(g)           Taxes.  From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until the later of
the payment of the Note or until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.

(h)           Insurance.  From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until the later of
the payment of the Note or until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, explosion and
other risks customarily insured against by companies in the Company’s line of
business, in amounts sufficient to prevent the Company from becoming a
co-insurer and not in any event less than one hundred percent (100%) of the
insurable value of the property insured less reasonable deductible amounts; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and to the extent available on commercially reasonable
terms.

(i)            Books
and Records.  From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until the later of the payment of the Note or until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.

(j)            Governmental
Authorities.   From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until the later of the payment of the Note or until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall duly observe and conform in all material respects
to all valid requirements of governmental authorities relating to the conduct
of its business or to its properties or assets.

(k)           Intellectual
Property.  From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until the later of the payment of the Note or until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for value.

 10
 

 

(l)            Properties. 
From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until the later of the payment of the
Note or until all the Shares and Warrant Shares have been resold or transferred
by all the Subscribers pursuant to the Registration Statement (as defined in
Section 11.1(ii) hereof) or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make
all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
Material Adverse Effect.

(m)          Confidentiality/Public
Announcement.  From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until the later of the payment of the Note or until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company agrees that except in connection with a Form 8-K or
the Registration Statement or as otherwise required in any other Commission
filing, it will not disclose publicly or privately the identity of the
Subscribers unless expressly agreed to in writing by a Subscriber, only to the
extent required by law and then only upon five days prior notice to
Subscriber.  In any event and subject to
the foregoing, the Company shall file a Form 8-K or make a public announcement
describing the Offering not later than the first business day after the Closing
Date.  In the Form 8-K or public
announcement, the Company will specifically disclose the amount of common stock
outstanding immediately after the Closing. 
A form of the proposed Form 8-K or public announcement to be employed in
connection with the Closing is annexed hereto as Exhibit H.

(n)           Further Registration Statements.   Except for a registration statement filed on
behalf of the Subscribers pursuant to Section 11 of this Agreement, and a Form
S-8 to be filed in connection with not more than 150,000 shares of Common Stock
on behalf of officers, directors and employees of the Company, the Company will
not file any registration statements, including but not limited to Forms S-8,
with the Commission or with state regulatory authorities without the consent of
the Subscriber until the expiration of the “Exclusion
Period”, which shall be defined as the sooner of (i) the
Registration Statement shall have been current and available for use in
connection with the resale of the Registrable Securities (as defined in Section
11.1(i) for a period of 180 days, or (ii) the Notes have been fully paid or all
the Shares issuable upon conversion of the Notes have been resold or
transferred by the Subscribers pursuant to the Registration Statement or Rule
144(k) under the 1933 Act, without regard to volume limitations. The Exclusion
Period will be tolled during the pendency of an Event of Default (as defined in
the Note).

(o)           Blackout.    The Company undertakes and covenants that
until the end of the Exclusion Period, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction that could have the
effect of delaying the effectiveness of any pending registration statement or
causing an already effective registration statement to no longer be effective
or current.

(p)           Non-Public Information.  The Company covenants and agrees that neither
it nor any other person acting on its behalf will provide any Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Subscriber shall
have agreed in writing to receive such information.  The Company understands and confirms that
each Subscriber shall be relying on the foregoing representations in effecting
transactions in securities of the Company. 
In any event, the Company will offer to the Subscriber an opportunity to
review and comment on the Registration Statement thereto between three and five
business days prior to the proposed filing date thereof.

(q)           Offering Restrictions.   Until the expiration of the Exclusion
Period, except for the Excepted Issuances, the Company will not enter into an
agreement to nor issue any equity, convertible debt or other securities
convertible into Common Stock or equity of the Company nor modify any of the
foregoing which may be outstanding at anytime, without the prior written
consent of the Subscribers, which consent may be withheld for any reason.  Provided the Approval has been obtained, the
foregoing restriction will not apply after the expiration of the Exclusion
Period.   For so long as Notes or
Warrants remain outstanding, the Company will not enter into any equity line of
credit or similar agreement, nor issue nor agree to issue any floating or
variable priced equity linked instruments nor any of the foregoing or equity
with price reset rights.  The restriction
described in the previous sentence shall not apply after the Registration
Statement has been effective for 365 calendar days provided the Approval has
been obtained.

(r)            Negative Covenants.   So long as the Notes are outstanding,
without the consent of the Subscribers, the Company will not and will not
permit any of its Subsidiaries to directly or indirectly:

(i)            create, incur, assume or suffer to
exist any pledge, hypothecation, assignment, deposit arrangement, lien, charge,
claim, security interest, security title, mortgage, security deed or deed of
trust, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any
of its property, whether now owned or hereafter acquired except for (i) the
Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s,

 11

 

repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or that are
being contested in good faith and by appropriate proceedings; (c) pledges and
deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations; (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; (e) Liens created with respect to the financing of the purchase of
new property in the ordinary course of the Company’s business up to the amount
of the purchase price of such property, or (f) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property (each of (a) through (f), a “Permitted Lien”)
and (iii) indebtedness for borrowed money which is not senior or pari passu in
right of payment to the payment of the Notes;

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

(iii)          except
for dividends on Series A Convertible Stock outstanding on the Closing Date,
repay, repurchase or offer to repay, repurchase or otherwise acquire or make
any dividend or distribution in respect of any of its Common Stock, preferred
stock, or other equity securities other than to the extent permitted or
required under the Transaction Documents; or

(iv)          engage
in any transactions with any officer, director, employee or any Affiliate of
the Company, including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $10,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company,
and (iii) for other employee benefits, including stock option agreements under
any stock option plan of the Company.

10.           Covenants of the Company and
Subscriber Regarding Indemnification.

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

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

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

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

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

(i)            On
one occasion, for a period commencing one hundred and thirty-one (131) days
after the Closing Date, but not later than two (2) years after the Closing
Date, upon a written request therefor from any record holder or holders of more
than 50% of the Shares issued and issuable upon conversion of the outstanding
Notes and outstanding Warrant Shares, the Company shall prepare and file with
the Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder thereof.  For purposes of Sections 11.1(i) and
11.1(ii), Registrable Securities shall not include Securities which are (A)
registered for resale in an effective registration statement, (B) included for
registration in a pending registration statement, or  (C) which have been issued without further
transfer restrictions after a sale or transfer

 12
 

 

pursuant to Rule 144 under the 1933 Act.  Upon the receipt of such request, the Company
shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and
shall include in such registration statement Registrable Securities for which
it has received written requests within ten (10) days after the Company gives
such written notice.  Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 11.1(i).

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

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

(iv)          The
Company shall file with the Commission a Form S-3 registration statement (the “Registration Statement”) (or such other form that it is
eligible to use) in order to register the Registrable Securities for resale and
distribution under the 1933 Act within forty-five (45) calendar days after the
Closing Date (the “Filing Date”),
and cause to be declared effective not later than one hundred and thirty (130)
calendar days after the Closing Date (the “Effective Date”).  The Company will register not less than a
number of shares of common stock in the aforedescribed registration statement
that is equal to 150% of the Shares issuable upon conversion of all of the
Notes issuable to the Subscribers, and 100% of the Warrant Shares issuable
pursuant to this Agreement upon exercise of the Warrants (collectively the “Registrable Securities”). The Registrable Securities shall
be reserved and set aside exclusively for the benefit of each Subscriber and
Warrant holder, pro  rata, and not issued, employed or reserved
for anyone other than each such Subscriber and Warrant holder.  The Registration Statement will immediately
be amended or additional registration statements will be immediately filed by
the Company as necessary to register additional shares of Common Stock to allow
the public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities.  Except with the
written consent of the Subscribers, no securities of the Company other than the
Registrable Securities will be included in the Registration Statement.  It shall be deemed a Non-Registration Event
if at any time after the date the Registration Statement is declared effective
by the Commission (“Actual Effective Date”)
the Company has registered for unrestricted resale on behalf of the
Subscribers  fewer than 125% of the
amount of Common Shares issuable upon full conversion of all sums due under the
Notes and 100% of the Warrant Shares issuable upon exercise of the Warrants.

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

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

(b)           prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective until such
registration statement has been effective for a period of two (2) years, and
comply with the provisions of the 1933 Act with respect to the disposition of
all of the

 13
 

 

Registrable Securities covered by such registration statement in
accordance with the Sellers’ intended method of disposition set forth in such
registration statement for such period;

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

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

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

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

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

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

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

11.4.        Non-Registration Events.  The Company and the Subscribers agree that
the Sellers will suffer damages if the Registration Statement is not filed by
the Filing Date and not declared effective by the Commission by the Effective
Date, and any registration statement required under Section 11.1(i) or 11.1(ii)
is not filed within 60 days after written request and declared effective by the
Commission within 120 days after such request, and maintained in the manner and
within the time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision.  Accordingly, if (A) the Registration
Statement is not filed on or before the Filing Date, (B) is not declared
effective on or before the Effective Date, (C) due to the action or inaction of
the Company the Registration Statement is not declared effective within three
(3) business days after receipt by the Company or its attorneys of a written or
oral communication from the Commission that the Registration Statement will not
be reviewed or that the Commission has no further comments, (D) if the
registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
within 60 days after such written request, or is not declared effective within
120 days after such written request, or (E) any registration statement
described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared
effective but shall thereafter cease to be effective without being succeeded
within fifteen (15) business days by an effective replacement or amended
registration statement or for a period of time which shall exceed thirty (30)
days in the aggregate per year (defined as every rolling period of 365
consecutive days commencing on the Actual Effective Date (each such event referred
to in clauses A through E of this Section 11.4 is referred to herein as a “Non-Registration Event”), then the Company shall deliver to
the holder of Registrable Securities, as Liquidated Damages,
an amount equal to two percent (2%) for each thirty (30) days (or such lesser
pro-rata amount for any period of less than thirty (30) days) of the Purchase
Price of the outstanding Notes and purchase price of Shares issued upon
conversion of the Notes owned of record by such holder which are subject to
such Non-Registration Event.  The Company
must pay the Liquidated Damages in cash. 
The Liquidated Damages must be paid within ten (10) days after the end
of each thirty (30) day period or shorter part thereof for which Liquidated
Damages are payable.  In the event a
Registration Statement is filed by the Filing Date but is withdrawn prior to
being declared effective by the Commission, then such Registration Statement
will be deemed to have not been filed and Liquidated Damages will be calculated
accordingly.  All oral or written
comments received from the Commission relating to the Registration Statement
must be satisfactorily responded to within fifteen (15) business days after
receipt of comments from the Commission. 
Failure to timely respond to Commission comments is a Non-Registration
Event for which Liquidated Damages shall accrue and be payable by the Company
to the holders of Registrable Securities at the same rate set forth above.  Notwithstanding the foregoing, the Company
shall not be liable to the Subscriber under this Section 11.4 for any events or
delays occurring as a consequence of the acts or omissions of the

 14
 

 

Subscribers contrary to the obligations undertaken by Subscribers in
this Agreement.  Liquidated Damages will
not accrue nor be payable pursuant to this Section 11.4 nor will a
Non-Registration Event be deemed to have occurred for times during which
Registrable Securities are transferable by the holder of Registrable Securities
pursuant to Rule 144(k) under the 1933 Act.

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

11.6.        Indemnification and Contribution.

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

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

(c)           Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party hereunder, notify the indemnifying
party in writing thereof, but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to such indemnified
party other than under this Section 11.6(c) and shall only relieve it from any
liability which it may have to such indemnified party under this Section
11.6(c), except and only if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the

 15
 

 

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

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

11.7.        Delivery of Unlegended Shares.

(a)           Within
four (4) business days (such fourth business day being the “Unlegended Shares Delivery Date”) after the business day on
which the Company has received (i) a notice that Shares or Warrant Shares or
any other Common Stock held by a Subscriber have been sold pursuant to the
Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144, as
applicable and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or Subscriber’s broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of
such counsel, directing the delivery of shares of Common Stock without any
legends including the legend set forth in Section 4(h) above, reissuable
pursuant to any effective and current Registration Statement described in
Section 11 of this Agreement or pursuant to Rule 144 under the 1933 Act (the “Unlegended Shares”); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the submitted Shares certificate, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the
Unlegended Shares Delivery Date.

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

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

 16
 

 

(d)           In addition to any other rights
available to a Subscriber, if the Company fails to deliver to a Subscriber
Unlegended Shares as required pursuant to this Agreement, within six (6)
business days after the Unlegended Shares Delivery Date and the Subscriber or a
broker on the Subscriber’s behalf, purchases (in an open market transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the particular shares of Common Stock which the Subscriber was
entitled to receive from the Company (a “Buy-In”), then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber’s total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase
price of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 10% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty).  For example, if a Subscriber purchases shares
of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to $10,000 of purchase price of shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares, the Company shall be required to
pay the Subscriber $1,000, plus interest. The Subscriber shall provide the
Company written notice indicating the amounts payable to the Subscriber in
respect of the Buy-In.

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

(f)            The liquidated and other damages
described in this Section 11.7 are not intended to duplicate the liquidated and
other damages set forth in Section 7 of this Agreement.

12.                                 Right
of First Refusal/Favored Nations Provision/Maximum Exercise of Rights.

(a)           Right of First Refusal.   Until one year after the Closing Date, the
Subscribers shall be given not less than seven (7) business days prior written
notice of any proposed sale by the Company of its common stock or other
securities or debt obligations, except in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition, consolidation
or purchase of substantially all of the securities or assets of corporation or
other entity which holders of such securities or debt are not at any time
granted registration rights, (ii) the Company’s issuance of securities in
connection with strategic license agreements and other partnering arrangements
so long as such issuances are not for the purpose of raising capital which
holders of such securities or debt are not at any time granted registration
rights, (iii) the Company’s issuance of Common Stock or the issuances or grants
of options to purchase Common Stock pursuant to stock option plans and employee
stock purchase plans described on Schedule 5(d)
hereto at prices equal to or higher than the closing price of the Common Stock
on the issue date of any of the foregoing, (iv) as a result of the exercise of
Warrants or conversion of Notes which are granted or issued pursuant to this
Agreement or that have been issued prior to the Closing Date, the issuance of
which has been disclosed in a Report filed not less than five (5) days prior to
the Closing Date, and (v) the payment of any interest on the Notes and
liquidated damages or other damages pursuant to the Transaction Documents or
other securities instruments that have been issued prior to the Closing Date,
the issuance of which has been disclosed in a Report filed not less than five
days prior to the Closing Date (collectively the foregoing are “Excepted Issuances”). 
The Subscribers who exercise their rights pursuant to this Section 12(a)
shall have the right during the seven (7) business days following receipt of
the notice to purchase such offered common stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Notes in the Offering.  In the event such terms and conditions are
modified during the notice period, the Subscribers shall be given prompt notice
of such modification and shall have the right during the seven (7) business
days following the notice of modification to exercise such right.

(b)           Favored
Nations Provision.   Other than in
connection with the Excepted Issuances, if at any time Notes or Warrants are
outstanding, the Company shall offer, issue or agree to issue any common stock
or securities convertible into or exercisable for shares of common stock (or
modify any of the foregoing which may be outstanding) to any person or entity
at a price per share or conversion or exercise price per share which shall be
less than the Conversion Price in respect of the Shares, or if less than the
Warrant exercise price in respect of the Warrant Shares, without the consent of
each Subscriber holding Notes, Shares, Warrants, or Warrant Shares, then the
Company shall issue, for each such occasion, additional shares of Common Stock
to each Subscriber so that the average per share purchase price of the shares
of Common Stock issued to the Subscriber (of only the Common Stock or Warrant
Shares still owned by the Subscriber) is equal to such other lower price per
share and the Conversion Price and Warrant exercise price shall automatically
be adjusted to such other lower price and as provided in the Notes and the
Warrants.  The average Purchase Price of
the Shares and average exercise price in relation to the Warrant Shares shall
be calculated separately for the Shares and Warrant Shares.  The foregoing calculation and issuance shall
be made separately for Shares received upon conversion and separately for
Warrant Shares.  The delivery to the
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue

 17
 

 

additional shares of Common Stock. 
The Subscriber is granted the registration rights described in Section
11 hereof in relation to such additional shares of Common Stock except that the
Filing Date and Effective Date vis-à-vis such additional common shares shall
be, respectively, the thirtieth (30th) and sixtieth (60th) date after the closing date giving rise
to the requirement to issue the additional shares of Common Stock.  For purposes of the issuance and adjustment
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or of
any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is
at a price lower than the Conversion Price or Warrant exercise price in effect
upon such issuance.  The rights of the
Subscriber set forth in this Section 12 are in addition to any other rights the
Subscriber has pursuant to this Agreement, the Note, any Transaction Document,
and any other agreement referred to or entered into in connection
herewith.  The Subscriber is also given
the right to elect to substitute any term or terms of any other offering in
connection with which the Subscriber has rights as described in Section 12(a),
for any term or terms of the Offering in connection with Securities owned by
Subscriber as of the date the notice described in Section 12(a) is required to
be given to Subscriber.  The Company will
not issue any Common Stock or Common Stock equivalents if such issuance could
or would cause the Company not to be in compliance with Nasdaq Marketplace
Rules unless approval of the Company’s shareholders would otherwise be
required.  The provisions of this Section
12(b) shall has been obtained or if the Company does not comply with its
obligations under Sections 9(n), 9(q), 9(r) or 12(a) of this Agreement.

 

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

13.           Approval.   The Company will use its best efforts to
obtain the approval of its shareholders so as to be able to fulfill the intent
and purpose of the Transaction Documents without such fulfillment violating the
Nasdaq Marketplace Rules.  The Company
will seek the obtain the approval of its shareholders at a meeting to be
conducted not later than 120 calendar days after the Closing Date (“Approval Date”) for each of the following, which
collectively is the “Approval”: (i)
ratification of all of the terms of the Transaction Documents, (ii) the
approval of the issuance of all of the Warrant Shares issuable upon exercise of
the Class C, Class D and Class E Warrants, (iii) the reduction of the
Conversion Price of the Notes to 85% of the closing bid price of the Common
Stock as reported by Bloomberg L.P. for the trading day preceding the Closing
Date, (iv) the issuance of all of the Shares issuable upon conversion of the
Notes, (v) the specific approval of the provisions of Section 12(b) of this
Agreement, Section 2.1(c) of the Notes, and Section 3.4 of the Warrants and the
issuance of Common Stock and reduction of the Conversion Price and Warrant
exercise prices as described therein. 
Not later than the first business day after the Approval has been
obtained, the Company must provide to the Subscribers a certificate signed by
the Company’s Chief Executive Officer and Chief Financial Officer that the
Approval has been obtained.  The Company
must notify the Subscribers not later than the first business day after the
Company has determined that the Approval cannot reasonably be timely obtained
or that the Company has abandoned its efforts to obtain the Approval.

14.           Miscellaneous.

(a)           Notices.  All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. 
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.  The addresses for such communications shall
be: (i) if to the Company, to: Analytical Surveys, Inc., 9725 Datapoint Drive,
Suite 300B, San Antonio, Texas 78229, Attn: Lori A. Jones, CEO, telecopier:
(210) 599-3162, with a copy by telecopier only to: Daniel D. Dinur, Esq., Dinur
& Associates, PC, 990 Hammond Drive, Suite 760, Atlanta, GA 30328,
telecopier: (770) 395-3171, (ii) if to the Subscriber, to: the one or more
addresses and telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212)
697-3575, and (iii) if to the Brokers, to: the addresses and telecopier numbers
set forth on Schedule 8 hereto.

(b)           Entire
Agreement; Assignment.  This
Agreement and other documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by

 18
 

 

both parties.  Neither the
Company nor the Subscribers have relied on any representations not contained or
referred to in this Agreement and the documents delivered herewith.   No right or obligation of the Company shall
be assigned without prior notice to and the written consent of the Subscribers.

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

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

(e)           Specific
Enforcement, Consent to Jurisdiction. 
To the extent permitted by law, the Company and Subscriber acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. 
It is accordingly agreed that the parties shall be entitled to one or
more preliminary and final injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity. 
Subject to Section 14(d) hereof, each of the Company, Subscriber and any
signator hereto in his personal capacity hereby waives, and agrees not to
assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction in New York of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

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

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

(h)           Consent.   As used in the Agreement, “consent of the
Subscribers” or similar language means the consent of holders of not less than
70% of the total of the Shares issued and issuable upon conversion of
outstanding Notes owned by Subscribers on the date consent is requested.

 19
 

 

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

 20
 

 

SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT (A)

 

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

 

	
  

  	
  ANALYTICAL
  SURVEYS, INC.

  
	
   

  	
  a Colorado
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lori Jones

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Lori
  Jones

  
	
   

  	
   

  	
   

  	
  Title:  CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Dated: May 31,
  2006

  
					

 

 

	
  

  	
   

  	
  NOTE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRINCIPAL

  	
   

  	
  CLASS C

  	
   

  	
  CLASS D

  	
   

  	
  CLASS E

  	
   

  	
  ALLOTTED

  	
   

  
	
  SUBSCRIBER

  	
   

  	
  AMOUNT

  	
   

  	
  WARRANTS

  	
   

  	
  WARRANTS

  	
   

  	
  WARRANTS

  	
   

  	
  SHARES

  	
   

  
	
  ALPHA CAPITAL

  	
   

  	
  $

  	
  500,000.00

  	
   

  	
  263,491

  	
   

  	
  526,981

  	
   

  	
  526,981

  	
   

  	
  188,018

  	
   

  
	
  AKTIENGESELLSCHAFT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pradafant 7

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9490 Furstentums

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vaduz, Lichtenstein

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fax: 011-42-32323196

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/Konrad Ackermann

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:  Konrad
  Ackermann

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
														

 

 21
 

 

SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT (B)

 

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

 

	
  

  	
  ANALYTICAL
  SURVEYS, INC.

  
	
   

  	
  a Colorado
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lori Jones

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Lori
  Jones

  
	
   

  	
   

  	
   

  	
  Title:  CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Dated: May 31,
  2006

  
					

 

	
  

  	
   

  	
  NOTE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRINCIPAL

  	
   

  	
  CLASS C

  	
   

  	
  CLASS D

  	
   

  	
  CLASS E

  	
   

  	
  ALLOTTED

  	
   

  
	
  SUBSCRIBER

  	
   

  	
  AMOUNT

  	
   

  	
  WARRANTS

  	
   

  	
  WARRANTS

  	
   

  	
  WARRANTS

  	
   

  	
  SHARES

  	
   

  
	
  LONGVIEW FUND, LP

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  790,472

  	
   

  	
  1,580,944

  	
   

  	
  1,580,944

  	
   

  	
  564,014

  	
   

  
	
  600 Montgomery Street, 44th

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  San Francisco, CA 94111

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fax: (415) 981-5301

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ S. Michael Rudolph

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:  S. Michael
  Rudolph

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
														

 

 22

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