Document:

Unassociated Document

     

     

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

     

    
      	Principal Amount: $___________  	
              Issue
                Date: December ___,
                2007

            

    

     

    SENIOR
      SECURED CONVERTIBLE NOTE

    

    FOR
      VALUE
      RECEIVED, ADVANCE NANOTECH, INC., a Delaware corporation (hereinafter called
      “Borrower” or the “Company”), hereby promises to pay to
      ________________________________,
      ___________________________________________________________________ (the
“Holder”), with an address of ________________, ___________, _______ ___________
      (and telecopier number of ____________), or order, without demand, the sum
      of
      _______________________________________ Dollars ($__________), with simple
      and
      unpaid interest thereon, on December____, 2010 (the “Maturity Date”), if not
      paid sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1 Payment
      Grace Period.
      The
      Borrower shall have a ten (10) business day grace period to pay any monetary
      amounts due under this Note, after which grace period and during the pendency
      of
      an Event of Default (as defined in Article III) a default interest rate of
      eighteen percent (18%) per annum shall apply to the amounts owed
      hereunder.

    

    1.2.  Interest
      Rate.

    

    (a) Simple
      interest payable on this Note shall accrue at the annual rate of eight percent
      (8%). Interest will be payable on December 31, 2007 and on the last business
      day
      of each calendar quarter thereafter and on the Maturity Date, accelerated or
      otherwise, when the principal and remaining accrued but unpaid interest shall
      be
      due and payable, or sooner as described below.

    

    (b) Interest
      will be payable in cash, or at the election of the Borrower, in shares of Common
      Stock; provided, that such shares of Common Stock are registered at the time
      of
      issuance. Interest paid in shares of Common Stock shall be paid in full shares
      only, with any fractional share rounded up to the next whole share. The issuance
      of such shares of Common Stock shall be valued at 90% of the average per share
      Market Price for the ten (10) Trading Day period ending three business days
      preceding the earlier of (i) the date on which the interest payment is made
      and
      (ii) the later of (A) the date on which the interest payment becomes due and
      (B)
      if paid after the due date, the date of payment. Each interest payment paid
      in
      shares of Common Stock shall be mailed to the holder of record of this Note
      as
      notices pursuant hereto are to be delivered to such holder. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    (c) As
      used
      herein, “Market Price” means, with respect to any applicable security as of any
      applicable date, (i) the last closing bid price of such security on whichever
      national securities exchange or trading market (including, without limitation,
      the Nasdaq and the OTC Bulletin Board) is the principal trading market where
      such security is listed by the Company for trading (the “Principal Market”), as
      reported by Bloomberg, or (ii) if the Principal Market should operate on an
      extended hours basis and does not designate the closing bid price, then the
      last
      bid price of such security prior to the commencement of extended trading hours
      on the applicable date, but in no event later than 4:30:00 p.m., New York local
      time, as reported by Bloomberg, or (iii) if no last bid price is reported for
      such security by Bloomberg, the average of the bid prices, on the one hand,
      and
      the ask prices, on the other hand, of all market makers for such security as
      reported in the “pink sheets” by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). The applicable trading market for such calculation,
      whether it is the Principal Market or the “pink sheets”, is hereafter referred
      to as the “Trading Market”. The Company shall make all determinations pursuant
      to this paragraph in good faith. In the absence of any available public
      quotations for the Common Stock, the Board of Directors of the Company shall
      determine in good faith the fair value of the Common Stock, which determination
      shall be set forth in a certificate by the Secretary of the Company. As used
      herein, “Trading Day” means a day on which the principal Trading Market with
      respect to the Common Stock is open for the transaction of
      business.

    

    1.3. Conversion
      Privileges.
      The
      Conversion Privileges set forth in Article II shall remain in full force and
      effect immediately from the date hereof and until this Note is paid in full
      regardless of the occurrence of an Event of Default. This Note shall be payable
      in full on the Maturity Date, unless previously converted into Common Stock
      in
      accordance with Article II hereof.

    

    1.4 Change
      of Control.
      Within
      three (3) business days after the consummation of a Change of Control, the
      Company will repurchase all of the then-outstanding Notes at a purchase price
      in
      cash equal to not less than, (a) if the Change of Control occurs on or before
      90
      days after the Effective Date, 125% of the aggregate principal amount of this
      Note repurchased plus accrued and unpaid interest to the date of repurchase,
      (b)
      if the Change of Control occurs after 90 days and on or before 180 days after
      the Effective Date, 112.5% of the aggregate principal amount of this Note
      repurchased plus accrued and unpaid interest to the date of repurchase or (c)
      if
      the Change of Control occurs after 180 days and on or before 365 days after
      the
      Effective Date, 100% of the aggregate principal amount of this Note repurchased
      plus accrued and unpaid interest to the date of repurchase. As used herein,
      “Change of Control” means the occurrence of any of the following: (1) the direct
      or indirect sale, lease, transfer, conveyance or other disposition, in one
      transaction or a series of related transactions, of all or substantially all
      of
      the properties or assets of the Company to any “person” (as that term is used in
      Section 13(d) of the 1934 Act); (2) the adoption of a plan relating to the
      liquidation or dissolution of the Company; or (3) the consummation of any
      transaction (including, without limitation, any merger or consolidation), the
      result of which is that any “person” (as defined above), becomes the Beneficial
      Owner, directly or indirectly, of more than 50% of the then-outstanding Common
      Stock; provided, however, that a “person” shall not include any Subscriber. As
      used herein, “Beneficial Owner” has the meaning assigned to such term in Rule
      13d-3 and Rule 13d-5 under the 1934 Act, except that in calculating the
      beneficial ownership of any particular “person” (as defined above), such
“person” will be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire by conversion or exercise of other securities,
      whether such right is currently exercisable or is exercisable only after the
      passage of time.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    ARTICLE
      II

    

    CONVERSION
      RIGHTS

    

    The
      Holder shall have the right to convert the principal due under this Note into
      Shares of the Borrower's Common Stock, $.001 par value per share (“Common
      Stock”) as set forth below.

    

    2.1. Conversion
      into the Borrower's Common Stock.

    

    (a) The
      Holder shall have the right from and after the Issue Date of the issuance of
      this Note and then at any time until this Note is fully paid, to convert any
      outstanding and unpaid principal portion of this Note, and accrued interest
      if
      any, at the election of the Holder (the date of giving of such notice of
      conversion being a “Conversion Date”) into fully paid and nonassessable shares
      of Common Stock as such stock exists on the date of issuance of this Note,
      or
      any shares of capital stock of Borrower into which such Common Stock shall
      hereafter be changed or reclassified, at the conversion price as defined in
      Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein.
      Upon delivery to the Borrower of a completed Notice of Conversion, a form of
      which is annexed hereto, Borrower shall issue and deliver to the Holder within
      three (3) business days after the Conversion Date (such third day being the
      “Delivery Date”) that number of shares of Common Stock for the portion of this
      Note converted in accordance with the foregoing. At the election of the Holder,
      the Borrower will deliver accrued but unpaid interest on this Note in the manner
      provided in Section 1.3 through the Conversion Date directly to the Holder
      on or
      before the Delivery Date (as defined in the Subscription Agreement). The number
      of shares of Common Stock to be issued upon each conversion of this Note shall
      be determined by dividing that portion of the principal of this Note and accrued
      and unpaid interest to be converted, by the Conversion Price.

    

    (b)
      Subject
      to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
      share shall be $0.25.

    

    (c)
      The
      Conversion Price and number and kind of shares or other securities to be issued
      upon conversion determined pursuant to Section 2.1(a), shall be subject to
      adjustment from time to time upon the happening of certain events while this
      conversion right remains outstanding, as follows:

    

    A. Merger,
      Sale of Assets, etc.
      If the
      Borrower at any time shall consolidate with or merge into or sell or convey
      all
      or substantially all its assets to any other corporation, this Note, as to
      the
      unpaid principal portion thereof and accrued interest thereon, shall thereafter
      be deemed to evidence the right to purchase such number and kind of shares
      or
      other securities and property as would have been issuable or distributable
      on
      account of such consolidation, merger, sale or conveyance, upon or with respect
      to the securities subject to the conversion or purchase right immediately prior
      to such consolidation, merger, sale or conveyance. The foregoing provision
      shall
      similarly apply to successive transactions of a similar nature by any such
      successor. Without limiting the generality of the foregoing, the anti-dilution
      provisions of this Section shall apply to such securities of such successor
      after any such consolidation, merger, sale or conveyance.

    

    B. Reclassification,
      etc.
      If the
      Borrower at any time shall, by reclassification or otherwise, change the Common
      Stock into the same or a different number of securities of any class or classes
      that may be issued or outstanding, this Note, as to the unpaid principal portion
      thereof and accrued interest thereon, shall thereafter be deemed to evidence
      the
      right to purchase an adjusted number of such securities and kind of securities
      as would have been issuable as the result of such change with respect to the
      Common Stock immediately prior to such reclassification or other
      change.

     

    
      
         

      

      
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    C. Stock
      Splits, Combinations and Dividends.
      If the
      shares of Common Stock are subdivided or combined into a greater or smaller
      number of shares of Common Stock, or if a dividend is paid on the Common Stock
      in shares of Common Stock, the Conversion Price shall be proportionately reduced
      in case of subdivision of shares or stock dividend or proportionately increased
      in the case of combination of shares, in each such case by the ratio which
      the
      total number of shares of Common Stock outstanding immediately after such event
      bears to the total number of shares of Common Stock outstanding immediately
      prior to such event.

     

    D. Share
      Issuance.
      So long
      as this Note is outstanding, if the Borrower shall issue or agree to issue
      any
      shares of Common Stock except for the Excepted Issuances (as defined in the
      Subscription Agreement) for a consideration less than the Conversion Price
      in
      effect at the time of such issue, then, and thereafter successively upon each
      such issue, the Conversion Price shall be reduced to such other lower issue
      price. For purposes of this adjustment, the issuance of any security 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 an adjustment
      to the Conversion Price upon the issuance of the above-described security and
      again upon the issuance of shares of Common Stock upon exercise of such
      conversion or purchase rights if such issuance is at a price lower than the
      then
      applicable Conversion Price. The reduction of the Conversion Price described
      in
      this paragraph is in addition to other rights of the Holder described in this
      Note and the Subscription Agreement.

    

    (d) Whenever
      the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
      shall promptly mail to the Holder a notice setting forth the Conversion Price
      after such adjustment and setting forth a statement of the facts requiring
      such
      adjustment.

    

    (e) Borrower
      will reserve from its authorized and unissued Common Stock the number of shares
      of Common Stock during the time periods and in the amounts described in the
      Subscription Agreement. Borrower represents that upon issuance, such shares
      will
      be duly and validly issued, fully paid and non-assessable. Borrower agrees
      that
      its issuance of this Note shall constitute full authority to its officers,
      agents, and transfer agents who are charged with the duty of executing and
      issuing stock certificates to execute and issue the necessary certificates
      for
      shares of Common Stock upon the conversion of this Note.

    

    (f) A. Borrower
      understands that a delay in the issuance of shares of Common Stock beyond the
      Delivery Date could result in economic loss to the Holder. As compensation
      to
      the Holder for such loss, Borrower agrees to pay late payments to the Holder
      for
      late issuance of such shares upon conversion, unless the delay is due to causes
      beyond the reasonable control of Borrower and its transfer agent, in accordance
      with the following schedule (where “No. Business Days Late” refers to the number
      of business days which is beyond four (4) business days after the Delivery
      Date):

     

    
      
         

      

      
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              Interest

            	
               

              No.
                Business Days Late

            	 	
               

              Late
                Payment For Each $10,000 of Amount Being Converted

            
	 	
              1

            	 	
              $100

            
	 	
              2

            	 	
              $200

            
	 	
              3

            	 	
              $300

            
	 	
              4

            	 	
              $400

            
	 	
              5

            	 	
              $500

            
	 	
              6

            	 	
              $600

            
	 	
              7

            	 	
              $700

            
	 	
              8

            	 	
              $800

            
	 	
              9

            	 	
              $900

            
	 	
              10

            	 	
              $1,000

            
	 	
              >10

            	 	
              $1,000
                +$200 for

              each
                business day

              late
                beyond 10 days

            

    

    

    B. Borrower
      shall make any payments incurred under this Section 2.1(f) in immediately
      available funds upon demand as the Holder’s exclusive remedy (other than the
      following provisions of this Section 2.1(f)B and the provisions of the
      immediately following Section 2.1(f)C of this Note) for such delay. Furthermore,
      in addition to any other remedies which may be available to the Holder, in
      the
      event that Borrower fails to effect delivery of such shares of Common Stock
      by
      the close of business on the Delivery Date, unless such failure is due to causes
      beyond the reasonable control of Borrower and its transfer agent, the Holder
      will be entitled to revoke the relevant notice of conversion by delivering
      a
      notice to such effect to Borrower, whereupon Borrower and the Holder shall
      each
      be restored to their respective positions immediately prior to delivery of
      such
      notice of conversion; provided, however, that an amount equal to any payments
      contemplated by this Section 2.1(f) which have accrued through the date of
      such
      revocation notice shall remain due and owing to the Holder notwithstanding
      such
      revocation. 

    

    C. If,
      by
      the relevant Delivery Date, Borrower fails, unless such failure is due to causes
      beyond the reasonable control of Borrower and its transfer agent, to deliver
      the
      shares of Common Stock to be issued upon conversion of this Note and after
      such
      Delivery Date, the Holder purchases, in an arm’s-length open market transaction
      or otherwise, shares of Common Stock (the “Covering Shares”) in order to make
      delivery in satisfaction of a sale of Common Stock by the Converting Holder
      (the
“Sold Shares”), which delivery such Converting Holder anticipated to make using
      the shares to be issued upon such conversion (a “Buy-In”), the Converting Holder
      shall have the right to require Borrower to pay to the Converting Holder, in
      addition to and not in lieu of the amounts due under Section 2.1(f) hereof,
      the
      Buy-In Adjustment Amount (as defined below). The “Buy-In Adjustment Amount” is
      the amount equal to the excess, if any, of (x) the Converting Holder’s total
      purchase price (including brokerage commissions, if any) for the Covering Shares
      over (y) the net proceeds (after brokerage commissions, if any) received by
      the
      Converting Holder from the sale of the Sold Shares. Borrower shall pay the
      Buy-In Adjustment Amount to the Converting Holder in immediately available
      funds
      immediately upon demand by the Converting Holder. By way of illustration and
      not
      in limitation of the foregoing, if the Converting Holder purchases shares of
      Common Stock having a total purchase price (including brokerage commissions)
      of
      $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for
      net
      proceeds of $10,000, the Buy-In Adjustment Amount which Borrower will be
      required to pay to the Converting Holder will be $1,000. 

     

    
      
         

      

      
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    D. In
      lieu
      of delivering physical certificates representing the Common Stock issuable
      upon
      conversion, provided Borrower’s transfer agent is participating in the
      Depository Trust Company (“DTC”) Fast Automated Securities Transfer program,
      upon request of the Holder and its compliance with the provisions contained
      in
      this paragraph, so long as the certificates therefor do not bear a legend and
      the Holder thereof is not obligated to return such certificate for the placement
      of a legend thereon, Borrower shall use its reasonable best efforts to cause
      its
      transfer agent to electronically transmit the Common Stock issuable upon
      conversion to the Holder by crediting the account of the Holder’s Prime Broker
      with DTC through its Deposit Withdrawal Agent Commission system. 

    

    2.2 Method
      of Conversion.
      This
      Note may be converted by the Holder in whole or in part as described in Section
      2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this
      Note, a new Note containing the same date and provisions of this Note shall,
      at
      the request of the Holder, be issued by the Borrower to the Holder for the
      principal balance of this Note and interest which shall not have been converted
      or paid.

    

    2.3
       Mandatory
      Conversion.
      Subject
      to Section 2.4, (a) provided an Event of Default or an event which with the
      passage of time or giving of notice could become an Event of Default has not
      occurred, unless such Event of Default has been cured not less than twenty
      (20)
      days prior to the delivery of written notice by Borrower as hereinafter
      described, then, commencing after the Actual Effective Date, the Borrower will
      have the option by written notice to the Holder (“Notice of Mandatory
      Conversion”) of compelling the Holder to convert all or a portion of the
      outstanding and unpaid principal of this Note and accrued interest, thereon,
      into Common Stock at the Conversion Price then in affect (“Mandatory
      Conversion”). The Notice of Mandatory Conversion, which notice, if given by the
      Borrower at the Borrower’s sole election, can only be given on the first day
      following any period of thirty (30) consecutive Trading Days (“Lookback Period”)
      during which the Market Price for the Common Stock shall be greater than two
      hundred fifty percent (250%) of the Conversion Price each such Trading Day
      and
      during which thirty (30) Trading Days, the average price/volume (i.e. shares
      traded multiplied by bid price) as reported by Bloomberg LP for the Principal
      Market is greater than $100,000. The date the Notice of Mandatory Conversion
      is
      given is the “Mandatory Conversion Date.” A Notice of Mandatory Conversion may
      be given only in connection with Common Stock that has been included for resale
      in an effective Registration Statement during the entire Lookback and continues
      to be so included on the Mandatory Conversion Date. The Notice of Mandatory
      Conversion shall specify the aggregate principal amount of this Note which
      is
      subject to Mandatory Conversion. Mandatory Conversion Notices must be given
      proportionately to all Holders of Notes who received Notes similar in term
      and
      tenure as this Note. Each Mandatory Conversion Date shall be a deemed Conversion
      Date and the Borrower will be required to deliver the Common Stock issuable
      pursuant to a Mandatory Conversion Notice in the same manner and time period
      as
      described in Section 2.2 above. 

    

    2.4 Limitation
      on Conversion.
      Notwithstanding the provisions of this Note or the Subscription Agreement,
      in no
      event (except (i) as specifically provided in this Note as an exception to
      this
      provision, (ii) while there is outstanding a tender offer for any or all of
      the
      shares of the Common Stock, or (iii) at the Holder’s option, on at least
      sixty-five (65) days advance written notice from the Holder) shall the Holder
      be
      entitled to convert this Note, or shall the Borrower have the obligation to
      issue shares upon such conversion of all or any portion of this Note to the
      extent that, after such conversion the sum of (1) the number of shares of Common
      Stock beneficially owned by the Holder and its affiliates (other than shares
      of
      Common Stock which may be deemed beneficially owned through the ownership of
      the
      nonconverted portion of this Note or other rights to purchase Common Stock
      or
      through the ownership of the unexercised portion of the Warrants (as defined
      in
      the Subscription Agreement) or other convertible securities), and (2) the number
      of shares of Common Stock issuable upon the conversion of this Note with respect
      to which the determination of this proviso is being made, would result in
      beneficial ownership by the Holder and its affiliates of more than 4.99% of
      the
      outstanding shares of Common Stock (after taking into account the shares to
      be
      issued to the Holder upon such conversion). For purposes of the proviso to
      the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the 1934 Act, except as otherwise provided
      in
      clause (1) of such sentence. The Holder, by its acceptance of this Note, further
      agrees that if the Holder transfers or assigns this Note to a party who or
      which
      would not be considered such an affiliate, such assignment shall be made subject
      to the transferee’s or assignee’s specific agreement to be bound by the
      provisions of this Section 2.4 as if such transferee or assignee were the
      original Holder hereof.

     

    
      
         

      

      
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    ARTICLE
      III

     

    EVENT
      OF DEFAULT

    

    The
      occurrence of any of the following events of default (“Event of Default”) shall,
      at the option of the Holder hereof, make all sums of principal and interest
      then
      remaining unpaid hereon and all other amounts payable hereunder immediately
      due
      and payable, upon demand, without presentment, or grace period, all of which
      hereby are expressly waived, except as set forth below:

    

    3.1 Failure
      to Pay Principal or Interest.
      The
      Borrower fails to pay any installment of principal, interest or other sum due
      under this Note when due and such failure continues for a period of ten (10)
      business days after the due date. The ten (10) day period described in this
      Section 3.1 is the same ten (10)) business day period described in Section
      1.1
      hereof.

    

    3.2 Breach
      of Covenant.
      The
      Borrower breaches any material covenant or other material term or condition
      of
      the Subscription Agreement or this Note in any material respect and such breach,
      if subject to cure, continues for a period of fifteen (15) business days after
      written notice to the Borrower from the Holder. Notwithstanding the forgoing,
      this provision shall not apply to delayed registration under the Subscription
      Agreement for which liquidated damages shall be the sole remedy.

    

    3.3 Breach
      of Representations and Warranties.
      Any
      material representation or warranty of the Borrower made herein or in the
      Subscription Agreement shall be false or misleading in any material respect
      as
      of the date made and the Closing Date.

    

    3.4 Receiver
      or Trustee.
      The
      Borrower shall make an assignment for the benefit of creditors, or apply for
      or
      consent to the appointment of a receiver or trustee for it or for a substantial
      part of its property or business; or such a receiver or trustee shall otherwise
      be appointed without the consent of the Borrower is not dismissed within sixty
      (60) days of appointment.

    

    3.5 Judgments.
      Any
      money judgment shall be entered or filed against Borrower or any of its property
      or other assets for more than $250,000, and shall remain unpaid, unvacated,
      unbonded or unstayed for a period of forty-five (45) days.

    

    3.6 Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any substantially similar
      law,
      or the issuance of any notice in relation to such event, for the relief of
      debtors shall be instituted by or against the Borrower and if instituted against
      Borrower are not dismissed within sixty (60) days of initiation.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

       

    

    3.7  Delisting.
      Failure
      of the Common Stock to be listed for trading or quotation on a Principal Market
      which includes the Bulletin Board or similar exchanges or markets for five
      or
      more consecutive Trading Days.

    

    3.8 Non-Payment.
      A
      default by the Borrower under any one or more obligations in an aggregate
      monetary amount in excess of $250,000 for more than ninety (90) days after
      the
      due date, unless the Borrower is contesting the validity of such obligation
      in
      good faith.

    

    3.9 Stop
      Trade.
      An SEC
      or judicial stop trade order or Principal Market trading suspension that lasts
      for ten or more consecutive Trading Days.

    

    3.10 Failure
      to Deliver Common Stock or Replacement Note.
      Borrower's failure to deliver Common Stock to the Holder pursuant to and in
      the
      form required by this Note and Sections 7 and 11 of the Subscription Agreement,
      or, if required, a replacement Note more than seven (7) Business Days after
      the
      required delivery date of such Common Stock or Note.

    

    3.11 Reservation
      Default.
      Failure
      by the Borrower to have reserved for issuance upon conversion of this Note
      the
      amount of Common stock as set forth in this Note and the Subscription
      Agreement.

     

    3.12
       Cross
      Default.
      A
      default by the Borrower of a material term, covenant, warranty or undertaking
      of
      any other agreement to which the Borrower and Holder are parties, or the
      occurrence of a material event of default under any such other third party
      agreement which is not cured after any required notice and/or cure
      period.

    

    ARTICLE
      IV

    

    SECURITY
      INTEREST

    

    4. Security
      Interest/Waiver of Automatic Stay.
      This
      Note is secured by a first priority security interest granted to the Collateral
      Agent for the benefit of the Holder pursuant to a Security Agreement, as
      delivered by Borrower to Holder.

    

    ARTICLE
      V

    

    MISCELLANEOUS

    

    5.1 Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

    

    5.2 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 Borrower to: Advance
      Nanotech, Inc., 600 Lexington Avenue, 29th
      Floor,
      New York, NY, 10022, Attn:
      Thomas Finn,
      telecopier: 212-583-0001,
      with a
      copy by telecopier only to: Andrews
      Kurth LLP, 450 Lexington Avenue, New York, NY, 10017,
      Attn:
Richard
      Kronthal Esq.,
      telecopier:
      212-813-8133,
      and
      (ii) if to the Holder, to the name, address and telecopy number set forth on
      the
      front page of this Note.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

    

    5.3 Amendment
      Provision.
      The
      term “Note” and all reference thereto, as used throughout this instrument, shall
      mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented. The Holder by acceptance
      hereof confirms such Holder’s agreement to the terms and conditions set forth
      herein.

    

    5.4 Assignability.
      This
      Note shall be binding upon the Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns.

    

    5.5 Cost
      of Collection.
      If
      default is made in the payment of this Note, Borrower shall pay the Holder
      hereof reasonable costs of collection, including reasonable attorneys'
      fees.

    

    5.6 Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Note shall be brought only in the state courts of New
      York
      in the County of New York or in the federal courts located in the State and
      County of New York. Subject to the foregoing, the parties to this Note hereby
      irrevocably waive any objection to jurisdiction and venue of any action
      instituted hereunder and shall not assert any defense based on lack of
      jurisdiction or venue or based upon forum
      non conveniens.
      The
      Company and Holder 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 Note 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.

     

    5.7 Maximum
      Payments.
      Nothing
      contained herein 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 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 Borrower to the
      Holder pursuant to this Note and thus refunded to the Borrower.

    

    5.8. Construction.
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against
      the other.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    5.9 Shareholder
      Status.
      The
      Holder shall not have rights as a shareholder of the Borrower with respect
      to
      unconverted portions of this Note. However, the Holder will have the rights
      of a
      shareholder of the Borrower with respect to the Shares of Common Stock to be
      received after delivery by the Holder of a Conversion Notice to the
      Borrower.

    

    5.10 Remedies.
      This
      Note shall be deemed an unconditional obligation of Borrower for the payment
      of
      money and, without limitation to any other remedies available to
      Holder.

    

    5.11 Non-Business
      Days.
      Whenever any payment to be made shall be due on a Saturday, Sunday or a public
      holiday under the laws of the State of New York, such payment may be due on
      the
      next succeeding business day and such next succeeding day shall be included
      in
      the calculation of the amount of accrued interest payable on such
      date.

    

    5.12 Transfer
      Agent.

The
      Company covenants and agrees that, so long as any portion of this Note has
      not
      been converted, the Company will, upon reasonable request from the Holder,
      direct the Company’s transfer agent to provide information to the Holder
      relating to (i) the status of shares of Common Stock issued or claimed to be
      issued to the Holder in connection with a Notice of Conversion, or (ii) the
      number of outstanding shares of Common Stock of all stockholders of the Company
      as of a current or other specified date.

    

    

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by an authorized officer
      as of the ____ day of December, 2007.

    
      	 	 	 
	 	ADVANCE
              NANOTECH,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	 	
              Name:
                Thomas Finn

              Title:
                Chief Financial
                Officer 

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    NOTICE
      OF CONVERSION

    

    (To
      be
      executed by the Registered Holder in order to convert the Note)

    

    

    The
      undersigned hereby elects to convert $_________ of the principal and $_________
      of the interest due on the Note issued by Advance Nanotech, Inc. on December
      ___, 2007 into Shares of Common Stock of Advance Nanotech, Inc. (the “Borrower”)
      according to the conditions set forth in such Note, as of the date written
      below.

    

    

    

    Date
      of
      Conversion:____________________________________________________________________

    

    

    Conversion
      Price:______________________________________________________________________

    

    

    Shares
      To
      Be
      Delivered:_________________________________________________________________

    

    

    Signature:____________________________________________________________________________

    

    

    Print
      Name:__________________________________________________________________________

    

    

    Address:_____________________________________________________________________________

    

    ____________________________________________________________________________Unassociated Document

    

     

    SUBSCRIPTION
      AGREEMENT

     

     

    This
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      is
      dated as of December 19, 2007, by and among Advance Nanotech, Inc., a Delaware
      corporation
      (the
“Company”),
      and
      the subscribers identified on the signature page hereto (each, a “Subscriber”
and
      collectively, the “Subscribers”).

     

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

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      a minimum of $4,000,000 and a maximum of $8,800,000 (subject to an additional
      overallotment option to sell up to an additional 10% of the amount of securities
      offered hereby) (altogether, the “Purchase
      Price”)
      of the
      Company’s 8% Senior Secured Convertible Notes (each a “Note”
and
      collectively, the “Notes”),
      in
      the form attached hereto as Exhibit
      A. Such
      Notes shall be convertible into shares of the Company's Common Stock, $0.001
      par
      value (the “Common
      Stock”)
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”).
      In
      addition, each Subscriber shall be issued Common Stock purchase warrants (the
      “Warrants”),
      in
      the form attached hereto as Exhibit
      B,
      (the
“Warrant
      Shares”).
      The
      Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      “Securities”;
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
      shall be held in escrow pursuant to the terms of an Escrow Agreement (the
“Escrow
      Agreement”)
      between the Company, Axiom Capital Management, Inc. (the “Placement
      Agent”)
      and
      HSBC Bank USA, Inc., as Escrow Agent (the “Escrow
      Agent”).

     

    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
      and Purchase Price.

     

    (a) Closing
      Date.
      A
“Closing
      Date”
shall
      be each date upon which the Purchase Price is transmitted by wire transfer
      or
      otherwise credited to or for the benefit of the Company. The consummation of
      the
      transactions contemplated herein shall take place at the offices of the Company
      or such other location as shall be mutually agreed by the parties hereto, upon
      the satisfaction or waiver of all conditions to closing set forth in this
      Agreement. Subject to the satisfaction or waiver of the terms and conditions
      of
      this Agreement, on a 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 for the aggregate Purchase Price indicated thereon,
      and Warrants as described in Section 2 of this Agreement. The “First
      Closing Date”
shall
      be the first Trading Day after which all of the conditions to closing set forth
      in this Agreement shall have been satisfied or have been waived by the party
      in
      whose favor such conditions run and the Company shall have accepted
      subscriptions to purchase at least $4,000,000 principal amount of the Notes.
      The
      Company, at its discretion, may proceed with one or more additional Closing
      Dates after the First Closing Date with respect to any other subscriptions
      for
      Notes which the Company should thereafter accept. The “Final
      Closing Date”
shall
      be the last Closing Date.

     

    (b) Payment
      of Purchase Price.
      The
      aggregate Purchase Price with respect to the Securities being acquired on a
      Closing Date shall be paid by wire transfer of immediately available funds
      to
      the Escrow Agent pursuant to the Escrow Agreement for distribution upon the
      Closing Date pursuant to the terms of the Escrow Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Issuance
      of Notes and Warrants. 

    

    (a) Notes.
      On the
      Closing Date, the Company will issue Notes to the Subscribers. The parties
      acknowledge that the Company does not currently have a sufficient number of
      authorized but unissued shares to permit the issuance of Notes to Subscribers
      with a face amount of $8,800,000. The Company shall sell to Subscribers Notes
      with an aggregate principal amount that can be issued in light of the Company’s
      current capital structure (the percentage of Notes that can be issued being
      referred to herein as the “Applicable
      Percentage”);
      the
      calculation of such amount shall be subject to the consent of the Placement
      Agent. Any Purchase Price received by the Company in excess of the issued face
      amount of Notes shall be held in escrow pursuant to the terms of the Escrow
      Agreement, and the Company shall issue additional Notes to Subscribers when
      additional authorized but unissued shares of common stock become available.
      If
      such additional Notes have not been issued by February 15, 2008, then any part
      of the Subscribers’ Purchase Price remaining in escrow, together with interest
      thereon, shall be returned to the Subscribers within three (3) business days
      thereof.

    

    (b) Warrants.
      On the
      Closing Date, the Company will issue and deliver Warrants to the Subscribers.
      Each Subscriber shall be entitled to receive a Warrant to purchase one-half
      share of Common Stock for every share of Common Stock into which the Notes
      acquired by such Subscriber may be converted as of the Closing Date;
provided,
      however,
      that
      the Company shall be required to issue a Warrant on the Closing Date for only
      the Applicable Percentage of such shares of Common Stock, and when the Company
      has a sufficient number of shares of Common Stock authorized for issuance (as
      provided in the Escrow Agreement), the Company shall be required to issue to
      each Subscriber, pro rata, an additional Warrant for the portion of such shares
      of Common Stock then authorized and available for issuance within three (3)
      Trading Days after the applicable Escrow Termination Date (as defined in the
      Escrow Agreement). On the Closing Date, the exercise price to purchase a single
      Warrant Share upon exercise of a Warrant shall be the greater of $0.30 or the
      closing bid price on the Trading Day before the Closing Date. The Warrants
      shall
      be exercisable until five years after the First Closing Date. If such additional
      Warrants have not been issued by February 15, 2008, then the Company shall
      have
      no further obligation to issue, and the Subscribers shall not be entitled to
      receive, such Warrants.

    3. Security
      Interest.
      The
      Subscribers will be granted a security interest, which shall be a first priority
      security interest except as set forth on Schedule 3 hereto, in the Collateral
      (as defined in Section 3.2 of the Pledge and Security Agreement), which security
      interest will be memorialized in a “Security Agreement,”
in
      the
      form annexed hereto as Exhibit
      C.
      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
      D.

    

    4. Subscriber's
      Representations and Warranties.
      Each
      Subscriber hereby represents and warrants to 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
      the
      office of such Subscriber in which its investment decision was made is located
      at the address of such Subscriber set forth on its signature page
      hereto.

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

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

    

    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB for the fiscal year ended December
      31,
      2006, and the financial statements included therein for the year ended December
      31, 2006, together with all subsequent filings made with the Commission
      available at the EDGAR website (hereinafter referred to collectively as the
      "Reports").
      In
      addition, the Subscriber has had the opportunity to request and receive in
      writing from the Company (and, if so requested, 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, identified thereon
      as “OTHER WRITTEN INFORMATION” (such other information is collectively, the
      "Other
      Written Information"),
      if
      any, 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 purchased
      securities of United States publicly-owned companies in private placements
      in
      the past and, with its representatives, has such knowledge and experience in
      financial, tax and other business matters as to enable the Subscriber to utilize
      the information made available by the Company to evaluate the merits and risks
      of and to make an informed investment decision with respect to the proposed
      purchase, which represents a speculative investment. The Subscriber has the
      authority and is duly and legally qualified to purchase and own the Securities.
      The Subscriber is able to bear the risk of such investment for an indefinite
      period and to afford a complete loss thereof. The information set forth on
      the
      signature page hereto regarding the Subscriber is accurate.

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (g) Compliance
      with Securities Act.
       The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration.
The
      Subscribers will comply with all applicable rules and regulations in connection
      with the sales of the securities including laws relating to short
      sales.

     

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

     

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

     

    (i) Warrants
      Legend.
      The
      Warrants shall bear the following 

    or
      similar legend:

     

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

    

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

    

    (m) Restricted
      Securities.
      Subscriber understands that the Securities have not been registered under the
      1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
      hypothecate or otherwise transfer any of the Securities unless pursuant to
      an
      effective registration statement under the 1933 Act, or unless an exemption
      from
      registration is available. Notwithstanding anything to the contrary contained
      in
      this Agreement, such Subscriber may transfer (without restriction and without
      the need for an opinion of counsel) the Securities to its Affiliates (as defined
      below) provided that each such Affiliate is an “accredited investor” under
      Regulation D and such Affiliate agrees to be bound by the terms and conditions
      of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate includes each subsidiary of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

    

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

    

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

    

    (p) Anti-Money
      Laundering.
      The Subscriber hereby acknowledges that the Company seeks to comply with all
      applicable laws concerning money laundering and related activities. In
      furtherance of such efforts, the Subscriber hereby represents, warrants and
      agrees that to the best of the Subscriber’s knowledge based upon reasonable
      diligence and investigation:

    

    (i)
      no
      consideration that the Subscriber has contributed or will contribute to the
      Company has been or shall be derived from, or related to, any activity that
      is
      deemed criminal under United States law; and

    

    (ii)
      no
      consideration that the Subscriber has contributed or will contribute to the
      Company shall cause the Company or any officer or director of the Company to
      be
      in violation of the United States Bank Secrecy Act, the United States Money
      Laundering Control Act of 1986 or the United States International Money
      Laundering Abatement and Anti-terrorism Financing Act of 2001.

    

    The
      Subscriber agrees to provide the Company with any additional information
      regarding the Subscriber that the Company deems necessary or appropriate to
      ensure compliance with all applicable laws concerning money laundering and
      similar activities. The Subscriber understands and agrees that if at any time
      it
      is discovered that any of the foregoing representations are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      or similar activities, the Company may, in its sole discretion, undertake
      appropriate actions to ensure compliance with applicable law or regulation,
      including but not limited to freezing, segregating or requiring the sale of
      the
      Subscriber’s Securities. The Subscriber further understands that the Company may
      release confidential information about the Subscriber, and, if applicable,
      any
      underlying beneficial ownership, to proper authorities if the Company, in its
      sole discretion, determines that such release is in the best interests of the
      Company in light of relevant laws, rules and regulations concerning money
      laundering and similar activities.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    (q) ERISA. 
      If this
      Agreement is being entered into on behalf of an employee benefit plan (a “Plan”)
      subject to Title I of the Employment Retirement Income Security Act of 1974,
      as
      amended (“ERISA”), in accordance with the provisions of the instrument or
      instruments governing such Plan and its related trust, the Subscriber represents
      that: it is a “fiduciary” of such Plan and trust (within the meaning of Section
      3(21)(A) of ERISA); the execution and delivery of this Agreement with respect
      to
      the Plan and trust have been duly authorized; and in making this investment,
      the
      Subscriber is aware of, and has taken into consideration, among other things,
      risk return factors and the anticipated effect of an investment in the Company
      on the diversification, liquidity and cash flow needs of the Plan and the
      projected effect of the investments in meeting the Plan’s funding objectives and
      has concluded that this investment is a prudent one. Moreover, the Subscriber
      represents that: (i) neither the Company, its advisors, nor any of their
      affiliates: (A) has investment discretion with respect to the investment of
      such
      Plan assets; (B) has authority or responsibility to give or regularly gives
      investment advice with respect to such Plan assets, for a fee, pursuant to
      an
      agreement or understanding that such advice will be based on the particular
      investment needs of the Plan; or (C) is an employer maintaining or contributing
      to such a Plan; and (ii) an investment in the Company conforms in all respects
      to applicable law and to the appropriate employee benefit plan documents. The
      Subscriber represents and warrants that either (a) it is not an employee benefit
      plan that permits its beneficiaries to self-direct investments, or (b) if the
      Subscriber’s beneficiaries are permitted to self-direct investments, then each
      beneficiary who does so is an accredited investor. Please
      note that if the Subscriber permits self-directed investments by its
      beneficiaries, then each beneficiary must separately execute a copy of this
      Agreement.

    

     

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

     

    (a) Due
      Incorporation.
      The
      Company is a corporation or other entity duly incorporated or organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization and has the requisite corporate power to own
      its
      properties and to carry on its business as presently
      conducted. The Company is duly qualified as a foreign corporation to do business
      and is in good standing in each jurisdiction where the nature of the business
      conducted or property owned by it makes such qualification necessary, other
      than
      those jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purposes of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company and its Subsidiaries taken
      as
      a whole. For purposes of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity of which more than 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. The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a).

     

    (b) Outstanding
      Stock.
      As of
      each Closing Date, all issued and outstanding shares of capital stock of the
      Company and each Subsidiary have been duly authorized and validly issued and
      are
      fully paid and non-assessable.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    (e) Consents.
      No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, the OTC Bulletin Board (the “NASD
      Electronic Bulletin Board”)
      nor
      the Company's shareholders is required for the execution by the Company of
      the
      Transaction Documents and compliance and performance by the Company of its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities. The Transaction Documents and the Company’s
      performance of its obligations thereunder has been unanimously approved by
      the
      Company’s Board of Directors.

     

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

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default) under (A) the articles or certificate of
      incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
      any decree, judgment, order, law, treaty, rule, regulation or determination
      applicable to the Company of any court, governmental agency or body, or
      arbitrator having jurisdiction over the Company or over the properties or assets
      of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
      note or any other evidence of indebtedness, or any agreement, stock option
      or
      other similar plan, indenture, lease, mortgage, deed of trust or other
      instrument to which the Company or any of its Affiliates is a party, by which
      the Company or any of its Affiliates is bound, or to which any of the properties
      of the Company or any of its Affiliates is subject, or (D) the terms of any
      "lock-up" or similar provision of any underwriting or similar agreement to
      which
      the Company, or any of its Affiliates is a party except the violation, conflict,
      breach, or default of which would not have a Material Adverse Effect;
      or

     

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

     

    (iii) except
      as
      described in Schedule
      5(d),
      result
      in the activation of any anti-dilution rights or a reset or repricing of any
      debt or security instrument of any other creditor or equity holder of the
      Company, nor result in the acceleration of the due date of any obligation of
      the
      Company; or

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (iv) except
      as
      described in Schedule
      5(d),
      result
      in the triggering of any piggy-back registration rights of any person or entity
      holding securities of the Company or having the right to receive securities
      of
      the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

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

    

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

     

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

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders; and

     

    (v) assuming
      the representations and warranties of the Subscribers as set forth in Section
      4
      hereof are true and correct, will not result in a violation of Section 5 under
      the 1933 Act.

     

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

     

    (i) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold.

     

    (j) Information
      Concerning Company.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition as of their respective dates which
      information is required to be disclosed therein. Except as described in
Schedule
      5(j),
      since
      the date of the financial statements included in the Reports, and except as
      modified in the Transaction Documents or in the Schedules thereto, if at all,
      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 a material
      fact
      required to be stated therein or necessary to make the statements therein,
      taken
      as a whole, not misleading in light of the circumstances when made.

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (l) Defaults.
      The
      Company is not in violation of its certificate of incorporation or bylaws.
      The
      Company is (i) not in default under or in violation of any other material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect,
      (ii)
      not in default with respect to any order of any court, arbitrator or
      governmental body or subject to or party to any order of any court or
      governmental authority arising out of any action, suit or proceeding under
      any
      statute or other law respecting antitrust, monopoly, restraint of trade, unfair
      competition or similar matters, or (iii) to the Company’s knowledge not in
      violation of any statute, rule or regulation of any governmental authority
      which
      violation would have a Material Adverse Effect.

     

    (m) No
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the Bulletin Board or the “pink sheets” which would impair
      the exemptions relied upon in this Offering or the Company’s ability to timely
      comply with its obligations hereunder. Nor will the Company nor any of its
      Affiliates take any action or steps that would cause the offer or issuance
      of
      the Securities to be integrated with other offerings which would impair the
      exemptions relied upon in this Offering or the Company’s ability to timely
      comply with its obligations hereunder. The Company will not conduct any offering
      other than the transactions contemplated hereby that will be integrated with
      the
      offer or issuance of the Securities, which would impair the exemptions relied
      upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder.

     

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

     

    (o) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports or in the Transaction
      Documents or in the Schedules thereto or on Schedule
      5(o)
      other
      than those incurred in the ordinary course of the Company businesses since
      December 31, 2006 and which, individually or in the aggregate, would not
      reasonably be expected to have a Material Adverse Effect.

     

    (p) No
      Undisclosed Events or Circumstances.
      Since
      December 31, 2006, no event or circumstance has occurred or exists with respect
      to the Company or its businesses, properties, operations or financial condition,
      that, under applicable law, rule or regulation, requires public disclosure
      or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the Reports.

     

    (q)  Capitalization.
      The
      authorized and outstanding capital stock of the Company and Subsidiaries as
      of
      the date of this Agreement and as of the First Closing Date (not including
      the
      Securities) are set forth in the Reports or on Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (r)  “Intellectual
      Property”
shall
      mean all of the following as they are necessary in connection with the business
      of the Company or its subsidiaries as presently conducted and as they exist
      in
      all jurisdictions throughout the world, in each case, to the extent owned by
      or
      licensed to the Company or its subsidiaries: (i) patents, patent applications
      and inventions, designs and improvements described and claimed therein,
      patentable inventions and other
      patent
      rights (including any divisions, continuations, continuations-in-part, reissues,
      reexaminations, or interferences thereof, whether or not patents are issued
      on
      any such applications and whether or not any such applications are modified,
      withdrawn, or resubmitted) (“Patents”);
      (ii)
      trademarks, service marks, trade dress, trade names, brand names, designs,
      logos, or corporate names, whether registered or unregistered, and all
      registrations and applications for registration thereof (“Trademarks”);
      (iii)
      copyrights and mask works, including all renewals and extensions thereof,
      copyright registrations and applications for registration thereof, and
      non-registered copyrights (“Copyrights”);
      (iv)
      trade secrets, inventions, know-how, process technology, databases, confidential
      business information, customer lists, technical data and other proprietary
      information and rights (“Trade
      Secrets”);
      (v)
      computer software programs, including, without limitation, all source code,
      object code, and documentation related thereto (“Software”);
      (vi)
      Internet addresses, domain names, web sites, web pages and similar rights and
      items (“Internet
      Assets”);
      and
      (vii) all licenses, sublicenses and other agreements or permissions including
      the right to receive royalties, or any other consideration related to the
      property described in (i)-(vi). The Intellectual Property contains all of the
      intellectual property necessary to operate the business of the Company as
      currently conducted. The
      Company or its subsidiaries exclusively owns (or otherwise has the right to
      use
      the Intellectual Property pursuant to a valid license, sublicense or other
      agreement), free and clear of all Liens, and has the unrestricted right (subject
      to any such license terms, if applicable) to use, sell, license, or sublicense
      all Intellectual Property.  To
      the
      Company’s knowledge, upon
      reasonable inquiry in accordance with sound business practice and business
      judgment,
      all the
      Company’s Intellectual Property rights are valid and enforceable. The Company
      has taken all reasonably necessary actions to maintain and protect each item
      of
      Intellectual Property owned by the Company or its subsidiaries. The
      Company and each subsidiary of the Company has taken all reasonable precautions
      to protect the secrecy, confidentiality, and value of its Trade Secrets and
      the
      proprietary nature and value of its Intellectual Property. To
      the
      knowledge of the Company, upon
      reasonable inquiry in accordance with sound business practice and business
      judgment,
      none of
      the Intellectual Property, products or services owned, used, developed,
      provided, sold or licensed by the Company, or made for, used or sold by or
      licensed to the Company by any person infringes upon or otherwise violates
      any
      Intellectual Property rights of others. To
      the
      knowledge of the Company, upon
      reasonable inquiry in accordance with sound business practice and business
      judgment,
      no
      Person is infringing upon or otherwise violating the Intellectual Property
      rights of the Company. 

     

    (s)  Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the Notes
      hereunder, (i) the Company’s fair saleable value of its assets exceeds the
      amount that will be required to be paid on or in respect of the Company’s
      existing debts and other liabilities (including known contingent liabilities)
      due as of the Closing; (ii) the Company’s assets do not constitute unreasonably
      small capital to carry on its business for the current fiscal year as now
      conducted and as proposed to be conducted including its capital needs taking
      into account the particular capital requirements of the business conducted
      by
      the Company, and projected capital requirements and capital availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds the Company would receive, were it to liquidate all of its assets,
      after taking into account all anticipated uses of the cash, would be sufficient
      to pay all amounts on or in respect of its debt which are required to be paid
      at
      Closing. The Company does not intend to incur debts beyond its ability to pay
      such debts as they mature (taking into account the timing and amounts of cash
      to
      be payable on or in respect of its debt).

     

    (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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (u)
       No
      Disagreements with Accountants and Lawyers.
      There
      are no material disagreements of any kind presently existing, or reasonably
      anticipated by the Company to arise between the Company and the accountants
      and
      lawyers presently employed by the Company, including but not limited to disputes
      or conflicts over payment owed to such accountants and lawyers, nor have there
      been any such disagreements during the two years prior to the First Closing
      Date.

    

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

     

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

    

    (x) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
      Act")
      and
      has a class of Common Stock registered pursuant to Section 12(g) of the 1934
      Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
      all reports and other materials required to be filed thereunder with the
      Commission during the preceding twelve months.

    

    (y) Listing.
      The
      Company's Common Stock is quoted on the NASD Electronic Bulletin Board under
      the
      symbol AVNA.OB. The Company has not received any oral or written notice that
      its
      Common Stock is not eligible nor will become ineligible for quotation on the
      NASD Electronic Bulletin Board nor that its Common Stock does not meet all
      requirements for the continuation of such quotation. The Company satisfies
      all
      the requirements for the continued quotation of its Common Stock on the NASD
      Electronic Bulletin Board.

    

    (z) DTC
      Status.
      The
      Company’s transfer agent is a participant in and the Common Stock is eligible
      for transfer pursuant to the Depository Trust Company Automated Securities
      Transfer Program. The name, address, telephone number, fax number, contact
      person and email address of the Company transfer agent is set forth on
Schedule
      5(x)
      hereto.

    

    (aa) Legal
      Matters.
      None of
      the following has occurred since October 1, 2004 with respect to the Company
      or
      control person of the Company (each a “Person”):
      

    

    i.  a
      petition under the federal bankruptcy laws or any state insolvency law was
      filed
      by or against, or a receiver, fiscal agent or similar officer was appointed
      by a
      court for the business or property of such Person, or any partnership in which
      such Person was a general partner at or within two years before the time of
      such
      filing, or any corporation or business association of which such Person was
      an
      executive officer at or within two years before the time of such filing;

     

    ii.  such
      Person was convicted in a criminal proceeding or is a named subject of a pending
      criminal proceeding (excluding traffic violations and other minor offenses);
      

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    iii.  such
      Person was the subject of any order, judgment or decree, not subsequently
      reversed, suspended or vacated, of any court of competent jurisdiction,
      permanently or temporarily enjoining such Person from, or otherwise limiting,
      the following activities: 

     

    A.  acting
      as
      an investment advisor, underwriter, broker or dealer in securities, or as an
      affiliated person, director or employee of any investment company, bank, savings
      and loan association or insurance company, as a futures commission merchant,
      introducing broker, commodity trading advisor, commodity pool operator, floor
      broker or any other person regulated by the Commodity Futures Trading Commission
      (“CFTC”),
      or
      engaging in or continuing any conduct or practice in connection with such
      activity; 

     

    B.  engaging
      in any type of business practice; or 

     

    C.  engaging
      in any activity in connection with the purchase or sale of any security or
      commodity or in connection with any violation of federal or state securities
      laws or federal commodities laws; 

     

    iv.  such
      Person was the subject of any order, judgment or decree, not subsequently
      reversed, suspended or vacated, of any federal or state authority barring,
      suspending or otherwise limiting for more than 60 days the right of such Person
      to engage in any activity described in the foregoing clause iii, or to be
      associated with persons engaged in any such activity; or

     

    v.  such
      Person was found by a court of competent jurisdiction in a civil action or
      by
      the CFTC or Securities and Exchange Commission to have violated any federal
      or
      state securities law, and the judgment in such civil action or finding by the
      CFTC or Securities and Exchange Commission has not been subsequently reversed,
      suspended, or vacated. 

     

    (bb) 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 applicable Closing
      Date,
      shall be true and correct in all material respects as of each Closing
      Date.

    

    (cc) Trading
      in Securities.
      The
      Company acknowledges that, except to the extent specifically provided herein
      or
      in any of the other Transaction Documents (but limited in each instance to
      the
      extent so specified), and subject to compliance with all applicable laws and
      regulations, each Subscriber retains the right (but is not otherwise obligated)
      to purchase, sell, engage in hedging transactions or otherwise trade in the
      Securities at any time.

     

    (dd) Survival.
      The
      foregoing representations and warranties shall survive the Final Closing Date
      for a period of two years.

     

    6. Regulation
      D Offering/Legal Opinion.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. The Company will provide an opinion of legal counsel
      reasonably acceptable to each Subscriber and the Company from the Company's
      regular 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 substantially
      in the form annexed hereto as Exhibit
      E.
      Such an
      opinion will be provided (i) on the Closing Date with respect to the Securities
      issued to the Purchasers on such date and (ii) after the Escrow Termination
      Date
      and with respect to the Securities issued at such time (as contemplated by
      Section 2), on the date such Securities are issued to the Purchasers. The
      Company will provide, at the Company's expense, such other legal opinions in
      the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon conversion of the Notes and exercise of the Warrants
      pursuant to an effective registration statement, Rule 144 under the 1933 Act
      or
      an exemption from registration.

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    7.1. Conversion
      of Note.

    

    (a) Upon
      the
      conversion of a Note or part thereof in accordance with the terms and conditions
      thereof and applicable law, the Company shall, at its own cost and expense,
      take
      all necessary action, including obtaining and delivering, an opinion of counsel
      to assure that the Company's transfer agent shall issue stock certificates
      in
      the name of Subscriber (or its permitted nominee) or such other persons as
      designated by Subscriber and in such denominations to be specified at conversion
      representing the number of shares of Common Stock issuable upon such conversion.
      The Company warrants that other than as expressly set forth in the Transaction
      Documents, if at all, no instructions other than these instructions have been
      or
      will be given to the transfer agent of the Company's Common Stock and that
      the
      certificates representing such shares shall contain no legend other than the
      usual 1933 Act restriction from transfer legend. If and when the Subscriber
      sells the Shares, assuming (i) the Registration Statement (as defined below)
      is
      effective and the prospectus, as supplemented or amended, contained therein
      is
      current and (ii) the Subscriber or its agent confirms in writing to the transfer
      agent that the Subscriber has complied with the prospectus delivery
      requirements, the Company will reissue the Shares without restrictive legend
      and
      the Shares will be free-trading, and freely transferable. In the event that
      the
      Shares are sold in a manner that complies with an exemption from registration,
      the Company will promptly instruct its counsel to issue to the transfer agent
      an
      opinion permitting removal of the legend (indefinitely, if pursuant to Rule
      144(k) of the 1933 Act).

    

    (b) Each
      Subscriber will give notice of such Subscriber’s decision to exercise the
      Subscriber’s right to convert the Note, interest, or part thereof by
      telecopying, or otherwise delivering a completed Notice of Conversion (a form
      of
      which is annexed as Exhibit
      A
      to the
      Note) together with 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
      by 5 PM E.S.T. (or if received by the Company after 5 PM E.S.T. then the next
      business day) shall be deemed a “Conversion
      Date.”
The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company's Common Stock certificates representing the Shares issuable upon
      conversion of the Note to the Subscriber via express courier for receipt by
      such
      Subscriber within three (3) business days after the applicable Conversion Date
      (such third day being the "Delivery
      Date").
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber.
      A Note representing the balance of the Note not so converted will be provided
      by
      the Company to the Subscriber if requested by Subscriber, provided the
      Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion of a Note,
      the Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note.

    

    (c) The
      Company agrees and acknowledges that despite the pendency of any not yet
      effective Registration Statement which includes for registration the Registrable
      Securities (as defined in Section 11.1(iv)), the Subscriber is permitted to
      and
      the Company will issue to the Subscriber Shares upon conversion of the Note
      and
      Warrant Shares upon exercise of the Warrants. Such Shares will, if required
      by
      law, bear the legends described in Section 4 above and if the requirements
      of
      Rule 144 under the 1933 Act are satisfied, be resalable thereunder.

     

    
      
        
        

      

      
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    7.2. Redemption.
      The
      Notes shall not be redeemable or callable by the Company.

    

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

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

     

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

     

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

     

    (b) Listing/Quotation.
      If the
      Common Stock becomes listed or quoted on a national securities exchange or
      automated quotation system or other trading exchange or market, the Company
      shall promptly secure the quotation or listing of the Shares and Warrant Shares
      upon each such national securities exchange, or automated quotation system
      or
      other trading exchange or market. The Company will maintain the quotation or
      listing of its Common Stock on such a trading exchange or market or on the
      NASD
      Electronic Bulletin Board (whichever of the foregoing is at the time the
      principal trading exchange or market for the Common Stock, the “Principal
      Market”),
      and
      will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement and the Closing
      Date, the NASD Electronic Bulletin Board is and will be the Principal
      Market.

     

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

     

    (d) Filing
      Requirements.
      From
      the
      date of this Agreement and until the last to occur of (i) two (2) years after
      the Closing Date, (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations or (iii) the Notes
      are no longer outstanding (the date of occurrence of the last such event being
      the “End
      Date”),
      the
      Company will (A) cause or maintain its Common Stock to be registered under
      Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
      reporting and filing obligations under the 1934 Act, (C) voluntarily comply
      with
      all reporting requirements that are applicable to an issuer with a class of
      shares registered pursuant to Section 12(g) of the 1934 Act, if Company is
      not
      subject to such reporting requirements, and (D) comply with all requirements
      related to any registration statement filed pursuant to this Agreement. The
      Company will use its best efforts not to take any action or file any document
      (whether or not permitted by the 1933 Act or the 1934 Act or the rules
      thereunder) to terminate or suspend such registration or to terminate or suspend
      its reporting and filing obligations under said acts until the End Date. Until
      the End Date, the Company will maintain 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (e) Use
      of
      Proceeds.
      The net
      proceeds of the Offering will be employed by the Company for working capital
      and
      general corporate purposes.

     

    (f) Reservation.
      Prior
      to the Closing Date, and at all times thereafter, the Company shall have
      reserved, pro rata,
      on
      behalf of each holder of an outstanding Note or Warrant, from its authorized
      but
      unissued Common Stock, a number of common shares equal to the
      number of shares of Common Stock necessary to allow each holder of an
      outstanding Note to be able to convert all such outstanding Notes and interest
      thereon and the number of Warrant Shares issuable upon exercise of the
      outstanding Warrants. 

     

    (g)
       Notices.
      For so
      long as the Subscribers hold any Securities, the Company will maintain as United
      States address and United States fax number for notices purposes under the
      Transaction Documents. 

     

    (h) Taxes.
      From
      the date of this Agreement and until the End Date, the Company will promptly
      pay
      and discharge, or cause to be paid and discharged, when due and payable, all
      lawful taxes, assessments and governmental charges or levies imposed upon the
      income, profits, property or business of the Company; provided, however, that
      any such tax, assessment, charge or levy need not be paid if the validity
      thereof shall currently be contested in good faith by appropriate proceedings
      and if the Company shall have set aside on its books adequate reserves with
      respect thereto, and provided, further, that the Company will pay all such
      taxes, assessments, charges or levies forthwith upon the commencement of
      proceedings to foreclose any lien which may have attached as security
      therefore.

     

    (i) Insurance.
      From
      the date of this Agreement and until the End Date, the Company will keep its
      assets which are of an insurable character insured by financially sound and
      reputable insurers against loss or damage by fire, explosion and other risks
      customarily insured against by companies in the Company’s line of business, in
      amounts sufficient to prevent the Company from becoming a co-insurer and not
      in
      any event less than one hundred percent (100%) of the insurable value of the
      property insured less reasonable deductible amounts; and the Company will
      maintain, with financially sound and reputable insurers, insurance against
      other
      hazards and risks and liability to persons and property to the extent and in
      the
      manner customary for companies in similar businesses similarly situated and
      to
      the extent available on commercially reasonable terms.

     

    (j) Books
      and Records.
      From the
      date of this Agreement and until the End Date, the Company will keep true
      records and books of account in which full, true and correct entries will be
      made of all dealings or transactions in relation to its business and affairs
      in
      accordance with generally accepted accounting principles applied on a consistent
      basis.

     

    (k) Governmental
      Authorities.
      From the
      date of this Agreement and until the End Date, the Company shall duly observe
      and conform in all material respects to all valid requirements of governmental
      authorities relating to the conduct of its business or to its properties or
      assets.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (l) Intellectual
      Property.
      From
      the date of this Agreement and until the End Date, the Company shall maintain
      in
      full force and effect its corporate existence, rights and franchises and all
      licenses and other rights to use intellectual property owned or possessed by
      it
      and reasonably deemed by the Company to be necessary to the conduct of its
      business, unless the same are sold for value, disposed of in the ordinary course
      of the Company’s business, or otherwise disposed of as permitted under the
      Security Agreements.

     

    (m) Properties.
      From the
      date of this Agreement and until the End Date, the Company will keep its
      properties in good repair, working order and condition, reasonable wear and
      tear
      excepted, and from time to time make all necessary and proper repairs, renewals,
      replacements, additions and improvements thereto; and the Company will at all
      times comply with each provision of all leases to which it is a party or under
      which it occupies property if the breach of such provision could reasonably
      be
      expected to have a Material Adverse Effect.

     

    (n) Confidentiality/Public
      Announcement.
      The
      Company undertakes to file a Form 8-K or make a public announcement describing
      the Offering not later than the fourth business day after the Closing
      Date.

     

    (o) Seniority.
      Except
      for Permitted Liens and as described on Schedule 9(p), until the Notes are
      fully
      satisfied or converted, the Company shall not grant nor allow any security
      interest to be taken in the assets of the Company or any Subsidiary; nor issue
      any debt, equity or other instrument which would give the holder thereof
      directly or indirectly, a right in any assets of the Company or any Subsidiary,
      equal or superior to any right of the holder of a Note in or to such
      assets.

    (p) Negative
      Covenants.
      Except
      as described on Schedule
      9(p)
      or in
      this Section 9(p), for so long as a Note is outstanding, without the consent
      of
      the Subscribers, the Company will not directly or indirectly:

    

    (i) create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired except for: (A)
      the
      Excepted Issuances (as defined in Section 12 hereof) and (B) (a) Liens imposed
      by law for taxes that are not yet due or are being contested in good faith
      and
      for which adequate reserves have been established in accordance with generally
      accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
      material men’s, repairmen’s and other like Liens imposed by law, arising in the
      ordinary course of business and securing obligations that are not overdue by
      more than 60 days or that are being contested in good faith and by appropriate
      proceedings; (c) pledges and deposits made in the ordinary course of business
      in
      compliance with workers’ compensation, unemployment insurance and other social
      security laws or regulations; (d) deposits to secure the performance of bids,
      trade contracts, leases, statutory obligations, surety and appeal bonds,
      performance bonds and other obligations of a like nature, in each case in the
      ordinary course of business; (e) Liens created with respect to the financing
      of
      the purchase of new property in the ordinary course of the Company’s business up
      to the amount of the purchase price of such property; and (f) easements, zoning
      restrictions, rights-of-way and similar encumbrances on real property imposed
      by
      law or arising in the ordinary course of business that do not secure any
      monetary obligations and do not materially detract from the value of the
      affected property (each of (a) through (f), a “Permitted
      Lien”);

     

    
      
        
        

      

      
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    (ii) except
      for an increase in the Company’s authorized Common Stock or the filing of a
      certificate of designations with respect to the Company’s preferred stock, amend
      its certificate of incorporation, bylaws or its charter documents so as to
      materially and adversely affect any rights of the Subscriber;

    

    (iii) repay,
      repurchase or offer to repay, repurchase or otherwise acquire or make any
      dividend or distribution in respect of any of its Common Stock, preferred stock,
      or other equity securities other than to the extent permitted or required under
      the Transaction Documents;

     

    (iv) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $100,000
      other than (i) for payment of salary or consulting fees for services rendered
      or
      applicable placement agency fees, (ii) reimbursement for expenses incurred
      on
      behalf of the Company, and (iii) for other employee benefits, including stock
      option agreements under any stock option plan of the Company; or

    

    (v) so
      long
      as any Warrants remain outstanding and unexercised, enter into any variable
      convertible debt financing transaction with any Person.

     

    (q) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement, and as set forth on Schedule 11.1 hereto, the
      Company will not, without the consent of the Subscribers, file with the
      Commission or with state regulatory authorities any registration statements
      or
      amend any already filed registration statement to increase the amount of Common
      Stock registered therein, or reduce the price of which such Common Stock is
      registered therein, (including but not limited to Forms S-8), until the
      expiration of the “Exclusion
      Period,”
which
      shall be defined as the sooner of (i) the Registration Statement having been
      current and available for use in connection with the resale of all of the
      Registrable Securities (as defined in Section 11.1(i)) for a period of ninety
      (90) days, or (ii) until all the Shares and Warrant Shares have been resold
      or
      transferred by the Subscribers pursuant to the Registration Statement or Rule
      144, without regard to volume limitations. The Exclusion Period will be tolled
      or reinstated, as the case may be, during the pendency of an Event of Default
      as
      defined in the Note.

     

    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 in this Agreement or in any Exhibits or Schedules attached hereto,
      or
      other agreement delivered pursuant hereto, or breach of any warranty by Company
      in
      this
      Agreement or in any Exhibits or Schedules attached hereto, or other agreement
      delivered pursuant hereto;
      or (ii)
      after any applicable notice and/or cure periods, any breach or default in
      performance by the Company of any covenant or undertaking to be performed by
      the
      Company hereunder, or any other agreement entered into by the Company and
      Subscriber relating hereto.

     

    (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 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 Company or any such person which results, arises
      out of or is based upon (i) any material misrepresentation by such Subscriber
      in
      this Agreement or in any Exhibits or Schedules attached hereto, or other
      agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
      cure periods, any breach or default in performance by such Subscriber of any
      covenant or undertaking to be performed by such Subscriber hereunder, or any
      other agreement entered into by the Company and Subscribers, relating
      hereto.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    (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 greater
      of (x)
      the price paid by such Subscriber (or the fair value of the consideration by
      such permitted successor) to acquire the Registrable Securities or (y) the
      dollar amount of the net proceeds actually received by such Subscriber (or
      such
      permitted successor) 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) The
      Company shall file with the Commission a Form S-3 registration statement (or
      such other form that it is eligible to use) (the “Registration
      Statement”),
      in
      order to register the Registrable Securities for resale and distribution under
      the 1933 Act, within forty-five (45) calendar days after the First Closing
      Date
(the
      “Filing
      Date”),
      and
      use its best efforts to cause the Registration Statement to be declared
      effective not
      later
      than one hundred and twenty (120) calendar days after the Closing Date
(the
      “Effective
      Date”).
      At
      the Effective Date, the Company will register not less than a number of shares
      of Common Stock in the Registration Statement that is equal to 100%
      of
      the Shares issued and issuable upon conversion of all of the Notes and 100%
      of
      the Warrant Shares issuable 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 promptly be amended or
      additional registration statements will be promptly 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 registering the Initial
      Registrable Securities (as defined in Section 11.1(ii)) is declared effective
      by
      the Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Subscribers
      for
      thirty or more consecutive days less than the
      amount of Common Shares required to be registered as described in this Section
      11. Except for Common Stock described on Schedule
      11.1,
      no
      other securities of the Company will be included in the Registration Statement
      other than the Registrable Securities.

     

    (ii) The
      amount of Registrable Securities required to be included in the initial
      Registration Statement as described in Section 11.1(i) (“Initial
      Registrable Securities”)
      shall
      be not less than 100% of the maximum amount of Common Stock which may be
      included in a Registration Statement without exceeding registration limitations
      imposed by the Commission pursuant to Rule 415 of the 1933 Act (“Rule
      415 Amount”).
      In
      the event that less than all of the Registrable Securities are included in
      the
      Registration Statement as a result of the limitation described in this Section
      11.1(ii), then the Company will file additional Registration Statements each
      registering the Rule 415 Amount (each such Registration Statement a
“Subsequent
      Registration Statement”),
      seriatim,
      until
      all of the Initial Registrable Securities have been registered. The Filing
      Date
      and Effective Date of each such additional Registration Statement shall be,
      respectively, thirty (30) and ninety (90) days after the first day such
      Subsequent Registration Statement may be filed without objection by the
      Commission based on Rule 415 of the 1933 Act.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (iii) Unless
      otherwise instructed in writing by a holder of Registrable Securities and only
      if the initial Registration Statement does not include all of the Registrable
      Securities, the Registrable Securities will be registered on behalf of each
      such
      holder in the Registration Statements based on Common Stock issuable upon
      conversion or exercise of Notes and Warrants, in the following order and
      priority:

     

    (A) Notes
      (based on the multiple set forth above).

     

    (B) Warrants
      issued to the Subscribers at any time based on exercise prices, with the lower
      exercise priced Warrant Shares being registered first and then the higher
      exercise priced Warrant Shares. In the case of Warrants with the same exercise
      prices but different Issue Dates, the later issued Warrants will be registered
      first.

     

    (C) Warrant
      Shares issuable upon not yet issued Warrants.

     

    (iv) On
      one
      occasion, for a period commencing one hundred and twenty-one (121) days after
      the Closing Date, but not later than two years after the Closing Date, upon
      a
      written request therefor from any record holder or holders of more than 50%
      of
      the Shares issued and issuable upon conversion of the outstanding Notes and
      outstanding Warrant Shares, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering the
      Registrable Securities which are the subject of such request for unrestricted
      public resale by the holder thereof. For purposes of Sections 11.1(iv) and
      11.1(v), Registrable Securities shall not include Securities which (A) are
      registered for resale in an effective registration statement, (B) are included
      for registration in a pending registration statement, (C) have been issued
      without further transfer restrictions after a sale or transfer pursuant to
      Rule
      144 under the 1933 Act, or (D) are not yet required to be included in a
      Registration Statement. Upon the receipt of such request, the Company shall
      promptly give written notice to all other record holders of the Registrable
      Securities that such registration statement is to be filed and shall include
      in
      such registration statement Registrable Securities for which it has received
      written requests within ten days after the Company gives such written notice.
      Such other requesting record holders shall be deemed to have exercised their
      demand registration right under this Section 11.1(i)v.

     

    (v) 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 as described on Schedule
      11.1
      or 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 five (5) 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(v) 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(v)
      without thereby incurring any liability to the Seller.

     

    
      
        
        

      

      
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    (vi) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(iv), 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(v) rather than Section 11.1(iv), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(v).

     

    (vii) Priority
      shall be given to Common Stock issuable upon conversion of actual outstanding
      Notes ahead of Warrant Shares. The foregoing notwithstanding, Registrable
      Securities shall be allocated and registered pro rata among the Subscribers
      based upon their initial investments in the Offering.

     

    (viii) Notwithstanding
      the foregoing provisions of this Agreement to the contrary, in no event shall
      the Company be required to register in any Registration Statement more
      Registrable Securities than the Company is authorized to issue under its
      certificate of incorporation, and the failure to register such Registrable
      Securities shall not be considered a default or an Event of Default under this
      Agreement or any other Transaction Document.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, make available for inspection by the Sellers, and any attorney, accountant
      or other agent retained by the Seller or underwriter upon reasonable notice
      at
      reasonable times during normal business hours at the offices of the Company
      without unreasonable disruption of the Company’s business or expense, all
      publicly available, non-confidential financial and other records and pertinent
      corporate documents and properties of the Company solely for the purpose of
      preparation of such registration statement, and cause the Company's officers,
      directors and employees to make available for inspection by the Sellers and
      any
      attorney, accountant or other agent retained by the Seller or underwriter upon
      reasonable notice at reasonable times during normal business hours at the
      offices of the Company without unreasonable disruption of the Company’s business
      such publicly available, non-confidential information as may be reasonably
      requested by such persons or entities in connection with the preparation of
      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. Subscriber’s
      failure to comment on any Registration Statement or other document provided
      to a
      Subscriber or its counsel shall not be construed to constitute approval thereof
      nor the accuracy thereof.

     

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

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Registration Statement is not declared effective by the Commission by the
      Effective Date, and any registration statement required under Section 11.1(iv)
      or 11.1(v) is not filed within 90 days after written request and declared
      effective by the Commission within 150 days after such request, and maintained
      in the manner and within the time periods contemplated by Section 11 hereof,
      and
      it would not be feasible to ascertain the extent of such damages with precision.
      Accordingly, if (A) any Registration Statement is not declared effective on
      or
      before the required Effective Date (notwithstanding the use by the Company
      of
      its best efforts to procure such effectiveness), (B) due to the action or
      inaction of the Company the Registration Statement is not declared effective
      within three (3) business days after receipt by the Company or its attorneys
      of
      a written or oral communication from the Commission that the Registration
      Statement will not be reviewed or that the Commission has no further comments,
      (C) if the registration statement described in Sections 11.1(iv) or 11.1(v)
      is
      not filed within 90 days after such written request, or is not declared
      effective within 150 days after such written request, or (D) any registration
      statement described in Section 11.1(i), 11.1(iv) or 11.1(v) is filed and
      declared effective but shall thereafter cease to be effective for a period
      of
      time which shall exceed two periods per year (defined as every rolling period
      of
      365 consecutive days commencing on the Actual Effective Date) of twenty (20)
      consecutive days (each such event referred to in clauses A through D of this
      Section 11.4 is referred to herein as a "Non-Registration Event"), then the
      Company shall deliver to the holder of Registrable Securities, as Liquidated
      Damages, an amount equal to one percent (1%) of the principal amount of the
      outstanding Notes and purchase price of Shares and Warrant Shares issued upon
      conversion of Notes and exercise of Warrants held by Subscriber which are
      subject to such Non-Registration Event for each thirty (30) days (or such lesser
      pro-rata amount for any period of less than thirty (30) days) up to but not
      exceeding 18% of such sum in the aggregate. In no event whatsoever shall the
      amount of such Liquidated Damages exceed such 18% cap in the aggregate, nor
      shall liquidated damages accrue simultaneously under Clauses A, B, C and D
      of
      this Section 11.4 for the same Non-Registration Event (that is, there shall
      be
      no double-penalty for the same circumstances as to which a penalty has been
      applied for breach of one of those clauses). The Company must pay the Liquidated
      Damages in cash or, at the Company’s election, in Common Stock of the Company
      valued, for such purposes, as hereinafter set forth. The Liquidated Damages
      must
      be paid within ten (10) business 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 by
      the
      Company as promptly as is reasonably practicable after receipt of comments
      from
      the Commission. Notwithstanding anything to the contrary contained in this
      Subscription Agreement or any other Transaction Document, the remedies set
      forth
      in this Section 11.4 shall be the exclusive remedies for breach of Sections
      11.1
      through 11.4 of this Subscription Agreement. 

     

    
      
        
        

      

      
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    (a) For
      purposes of the issuance of shares of the Company’s Common Stock in payment of
      any Liquidated Damages pursuant to this Section 11.4, the issuance of such
      shares of Common Stock shall be valued at the average of the per share Market
      Price for the ten Trading Day period immediately preceding the date of such
      issuance.

     

    (b) As
      used
      herein, "Market
      Price"
      means,
      with respect to any applicable security as of any applicable date, (i) the
      last
      closing bid price of such security on whichever national securities exchange
      or
      trading market (including, without limitation, the Nasdaq and the OTC Bulletin
      Board) is the principal trading market where such security is listed by the
      Company for trading (the "Principal
      Market"),
      as
      reported by Bloomberg, or (ii) if the Principal Market should operate on an
      extended hours basis and does not designate the closing bid price, then the
      last
      bid price of such security prior to the commencement of extended trading hours
      on the applicable date, but in no event later than 4:30:00 p.m., New York local
      time, as reported by Bloomberg, or (iii) if no last bid price is reported for
      such security by Bloomberg, the average of the bid prices, on the one hand,
      and
      the ask prices, on the other hand, of all market makers for such security as
      reported in the "pink sheets" by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). The applicable trading market for such calculation,
      whether it is the Principal Market or the "pink sheets", is hereafter referred
      to as the "Trading
      Market".
      The
      Company shall make all determinations pursuant to this paragraph in good faith.
      In the absence of any available public quotations for the Common Stock, the
      Board of Directors of the Company shall determine in good faith the fair value
      of the Common Stock, which determination shall be set forth in a certificate
      by
      the Secretary of the Company. As used herein, "Trading
      Day"
      means a
      day on which the principal Trading Market with respect to the Common Stock
      is
      open for the transaction of business.

     

    (c) Notwithstanding
      the foregoing, the Commission’s refusal to accept one or more Registration
      Statements that, in the aggregate, register securities not exceeding the
      applicable Rule 415 Amount shall not be considered a “Non-Registration
      Event.”

     

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

     

    
      
        
        

      

      
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    11.6. Indemnification
      and Contribution.

     

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

     

    (b) In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement by or
      on
      behalf of a Seller 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
      greater
      of (x)
      the price paid by such Seller to acquire the Registrable Securities or (y)
      the
      dollar amount of the net proceeds actually received by such Seller upon the
      sale
      of Registrable Securities (as defined herein).

     

    
      
        
        

      

      
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    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel reasonably
      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(i)
      above
      (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Shares certificate, if any, to the Subscriber at the address specified
      in the notice of sale, via express courier, by electronic transfer or otherwise
      on or before the Unlegended Shares Delivery Date.

     

    
      
        
        

      

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

    

    12. Excepted
      Issuances.
      For
      purposes of the Transaction Documents, the following shall be deemed to be
      “Excepted
      Issuances”:
      (i)
      full
      or partial consideration in connection with a merger, acquisition, consolidation
      or purchase of substantially all of the securities
      or assets of any corporation or other entity, (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 apart from capital necessary to enter into the
      strategic license agreement or other partnering arrangement, (iii) the Company’s
      issuance of Common Stock or the issuances or grants of options to purchase
      Common Stock to employees, directors, and consultants, pursuant to plans
      approved by the Company’s Board of Directors and described on Schedule
      5(d),
      (iv)
      the Company’s issuance of Common Stock as a result of the exercise of Warrants
      or conversion of Notes which are granted or issued pursuant to this Agreement
      on
      the terms described in the Transaction Documents, (v) the Company’s issuance of
      Securities at a Closing Date subsequent to the First Closing Date, (vi) an
      underwritten public offering in connection with which not less than $10,000,000
      of gross proceeds is received from such public offering, (vii) capitalization
      of
      up to $1,000,000 of existing debt obligations, (viii) as described on
Schedule
      12(a), (ix) the
      Company’s issuance of Common Stock as payment of interest under
      Section 1.2(b) of the Notes, and (x) the Company’s issuance of common
      stock, warrants or options issued in transactions contemplated by the Exchange
      Agreement.

    

    13. Right
      of First Refusal.
      During
      the period from the Effective Date through and including the first anniversary
      thereof, the Subscribers shall be given not less than seven (7) Trading Days
      prior written notice of any proposed sale by the Company to any person of New
      Common Stock, except in connection with Excepted Issuances. Within the seven
      (7)
      Trading Days following receipt of such notice, each Subscriber shall have the
      right to purchase such Subscriber’s Allocable Share of the New Common Stock in
      accordance with the terms and conditions set forth in the notice of sale
      provided by the Company. Each Subscriber may exercise such right independent
      of
      the exercise thereof by any other Subscriber. In the event the sale terms and
      conditions are modified during the notice period, the Subscriber shall be given
      prompt notice of such modification and shall have the right during the seven
      (7)
      Trading Days following the notice of modification to exercise such right. As
      used herein, the term “Subscriber’s
      Allocable Share”
means
      the fraction, of which (i) the numerator is the Subscriber’s Purchase Price and
      (ii) the denominator is the aggregate Purchase Price of all Subscribers; and
      “New
      Common Stock”
means
      Common Stock, or securities convertible into and/or other rights exercisable
      for
      the issuance of Common Stock, issued after the First Closing to any
      person.

     

    
      
        
        

      

      
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    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: Advance Nanotech, Inc.,
      600
      Lexington Avenue, 29th
      Floor,
      New York, NY, 10022,
      Attn:
Thomas
      Finn, telecopier: 212-583-0001, with a copy by telecopier only to: Andrews
      Kurth
      LLP, 450 Lexington Avenue, New York, NY, 10017, Attn: Richard Kronthal, Esq.,
      telecopier: 212-813-8133, (ii)
      if
      to the Subscriber, to: one or more addresses and telecopier numbers indicated
      on
      the signature pages hereto, and (iii) if to the Broker, to: the name, address
      and telecopier number indicated on Schedule
      8(a)
      hereto.

     

    (b) Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers. 

     

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

     

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

     

    (e) Consent
      to Jurisdiction.
      Subject
      to Section 14(d) hereof, the Company hereby irrevocably waives, and agrees
      not
      to assert in any such suit, action or proceeding, any claim that it is not
      personally subject to the jurisdiction in New York of such court, that the
      suit,
      action or proceeding is brought in an inconvenient forum or that the venue
      of
      the suit, action or proceeding is improper. Nothing in this Section shall affect
      or limit any right to serve process in any other manner permitted by
      law.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

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

     

    (g) Attorney-in-Fact.
      To
      effectuate the terms and provisions hereof, the Subscriber hereby appoints
      the
      Placement Agent as its attorney-in-fact (which appointment has been accepted
      by
      the Placement Agent) for the purpose of carrying out the provisions of the
      Escrow Agreement including, without limitation, taking any action on behalf
      of,
      or at the instruction of, the Subscribers and executing any release notices
      required under the Escrow Agreement and taking any action and executing any
      instrument that the Placement Agent may deem necessary or advisable (and lawful)
      to accomplish the purposes hereof. All acts done under the foregoing
      authorization are hereby ratified and approved and neither the Placement Agent
      nor any designee or agent thereof shall be liable for any acts of commission
      or
      omission, for any error of judgment, for any mistake of fact or law except
      for
      acts of gross negligence or willful misconduct. This power of attorney, being
      coupled with an interest, is irrevocable while the Escrow Agreement remains
      in
      effect.

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 51% of the total of the Shares issued and
      issuable upon conversion of outstanding Notes owned by Subscribers on the date
      consent is requested.

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (j) Calendar
      Days/Time Periods.
      All
      references to “days” in the Transaction Documents shall mean calendar days
      unless otherwise stated. The term “business
      days”
shall
      mean days that the New York Stock Exchange is open for trading for three or
      more
      hours. Time periods shall be determined as if the relevant action, calculation
      or time period were occurring in New York City.

     

    (k) Conditions
      Precedent.
      Each of
      the following shall be a condition precedent to the initial closing under this
      Agreement:

     

    (A) The
      Company shall have entered into the Exchange Agreement (the “Exchange
      Agreement”)
      by and
      among the Company and the parties named therein in the form of Schedule
      14(k)(A)
      attached
      hereto; and

     

    (B) Each
      member of the Selling Group (as that term is defined in the Exchange Agreement)
      shall have entered into and delivered to each of the Subscribers a Lock-Up
      Agreement in the form of Schedule
      14(k)(B)
      attached
      hereto.

     

    (l) Additional
      Covenant.
      No
      later than the fifth business day after the First Closing Date, the Company
      shall file with the appropriate regulatory authority and shall thereafter
      diligently seek approval of a proxy or other appropriate action by the Company’s
      shareholders to authorize amendment of the Company’s charter to increase the
      number of shares of common stock that the Company is authorized to issue from
      75,000,000 shares to 200,000,000 shares or such other number of shares as may
      be
      mutually agreed by the parties to the Exchange Agreement.

     

    

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    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.

    
      	 	 	 
	 	
              ADVANCE
                NANOTECH, INC.,

              a
                Delaware corporation

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            
	 	
              Name:
                Thomas Finn

              Title:
                CFO

            

    

    

    
      	 	Dated: December 19,
              2007

    

    
       

       

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE AND NOTE PRINCIPAL

            
	
              Name
                of Subscriber: 

               

              __________________________________________________________

               

              Address:
                __________________________________________________

               

              _________________________________________________________

               

              Fax
                No.: __________________________________________________

               

              Taxpayer
                ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:
                

            	 

    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

     

    
      	
            	Exhibit
              A	
              Form
                of Note

            

    

     

    
      	
            	Exhibit
              B	
              Form
                of Warrant

            

    

     

    
      	
            	Exhibit
              C	
              Form
                of Security Agreement

            

    

     

    
      	
            	Exhibit
              D	
              Form
                of Collateral Agent Agreement

            

    

     

    
      	
            	Exhibit
              E	
              Form
                of Legal Opinion

            

    

     

    
      	
            	Schedule
              3	
              Security
                Interest

            

    

     

    
      	
            	Schedule
              5(a)	
              Subsidiaries

            

    

     

    
      	
            	Schedule
              5(d)	
              Additional
                Issuances / Capitalization / Reset
                Rights

            

    

     

    
      	
            	Schedule
              5(j)	
              Material
                Information

            

    

     

    
      	
            	Schedule
              5(o)	
              Undisclosed
                Liabilities

            

    

     

    
      	
            	Schedule
              5(x)	
              Transfer
                Agent

            

    

     

    
      	
            	Schedule
              8(a)	
              Brokerage
                Fee

            

    

     

    
      	
            	Schedule
              9(p)	
              Additional
                Permitted Liens

            

    

     

    
      	
            	Schedule
              11.1	
              Other
                Registrable Shares

            

    

     

    
      	
            	Schedule
              12(a)	
              Additional
                Excepted Issuances

            

    

     

    
      	
            	Schedule
              14(k)(A)	
              Exchange
                Agreement

            

    

     

    
      	
            	Schedule
              14(k)(B)	
              Form
                of Lock-Up Agreement

            

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

       

    

    Subscription
      Agreement - Schedule 3

    

    As
      security for the Obligations of Debtor, the Debtor hereby grants the Collateral
      Agent, for the benefit of the Lenders, a security interest in the Collateral,
      which security interest shall be a first priority security interest except
      the
      following: 

    

    
      	
            	1.	
              As
                of June 30, 2007, Advance Nanotech Inc is obligated to issue 8,000,000
                shares of its wholly owned subsidiary Advance Homeland Security in
                the
                future to the credit facility provider pending the conclusion of
                the
                entity’s share authorization
                approvals.

            

    

    

    
      	
            	2.	
              Security
                interest in favor of lender in connection with existing credit facility
                up
                to $3,000,000 or new credit facility in the principal amount of up
                to
                $3,000,000 to be provided to the
                Company.

            

    

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement - Schedule 5a

    

    As
      of
      June 30, 2007, Advance Nanotech, Inc. possessed controlling interests in five
      direct and six indirect subsidiaries and a minority interest in one company,
      as
      outlined below. With the exception of Owlstone Nanotech, Inc. and Advance
      Nanotech Singapore, Pte. Ltd., all of these companies are incorporated in the
      UK. Owlstone Nanotech, Inc. is incorporated in the State of Delaware. Advance
      Nanotech Singapore Pte. Ltd. is incorporated in Singapore and is not to be
      considered a pledged security for this transaction. The pledged securities
      are:

    

    

    Subsidiary
      Structure (ownership % is based on the direct level
      above)

    • Advance
      Nanotech, Inc.

    
      	 	o Advance
              Display Technologies plc	(92.9% owned)1,
              2
	 	o Advance
              Nanotech Ltd. 	(100% owned) 2
	 	o Owlstone
              Nanotech Inc.	(63.27 % owned) 3
	 	o Advance
              Homeland Security plc	(100% owned) 2,4 

    

    
    

    1
      Advance
      Display Technologies plc is listed on the PLUS-Quoted market in London
      (ADTP).

    2
      Security
      Interest to be delivered Post-Closing within 30 days.

    3
      Certificates to be delivered to Merrill Lynch on Closing (copies of certificates
      attached). 

    4
      Advance
      Homeland Security plc is obligated to issue 8,000,000 shares in the future
      to
      the credit facility provider pending the conclusion of the entities share
      authorization approvals.

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 5(d) Additional Issuances / Capitalization / Reset
      Rights

    

    The
      common stock of the company on a fully diluted basis outstanding as of the
      last
      Business Day preceding the First Closing Date is: 47,773,127.

    

    Agreements
      or understandings with respect to the sale or issuance of any shares of Common
      Stock or equity of the Company or subsidiaries or other equity interest in
      the
      Company except as set forth in the Transaction Documents and as described in
      the
      reports are:

    

    
      	
            	1.	
              Stock
                option and employee stock grant plans established and to be established
                for employees of Advance Nanotech, Inc. or one of its subsidiaries
                which
                permit the issuance of up to a number of shares equal to 10% of the
                issued
                and outstanding shares of AVNA on a fully-diluted
                basis.

            

    

    

    
      	
            	2.	
              As
                of June 30, 2007, Advance Nanotech Inc is obligated to issue 8,000,000
                shares of its wholly owned subsidiary Advance Homeland Security in
                the
                future to the credit facility provider pending the conclusion of
                the
                entity’s share authorization
                approvals.

            

    

    

    
      	
            	3.	
              Any
                rights under the Owlstone Convertible Notes referred to in the Exchange
                Agreement.

            

    

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 5(j) Material Information

    

    

    The
      Company has met with various potential investors and placement agents in its
      efforts to obtain the equity financing currently being sought by the Company.
      One private equity firm so contacted subsequently responded with an unsolicited
      suggestion that the Company engage in a going private transaction at a price
      to
      public shareholders below the trading price of the Company's common stock as
      of
      October 29, 2007. As a matter of course, the Company's Board of Directors will
      review and evaluate all of the discussions with potential investors and
      placement agents at its next Board meeting along with the advice of the
      Company's outside legal counsel. 

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 5(o) Undisclosed Liabilities

    

    

    None

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule
      5(x)

    

    

    Computershare
      Trust Company

    Team
      B

    350
      Indiana Street

    Suite
      800

    Golden,
      CO, 80401

    Telephone:
      303-262-0600

    www.computershare.com

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 8 Brokerage Fee

    

    

    1.
      Cash
      Fee: As compensation for its services in connection with the Private Placement,
      Advance Nanotech, Inc., ("Company") shall pay to Axiom Capital Management,
      Inc.
      ("Axiom"), a cash placement fee equal to ten percent (10%) of the aggregate
      purchase price paid by each purchaser of Securities that were placed in the
      Offering (the “Placement Agent’s Fee”) at each Closing. The Placement Agent’s
      Fee will be deducted from the gross proceeds of the Securities sold at each
      Closing. The Placement Agent will also receive a cash fee equal to ten percent
      (10%) of all amounts received by the Company in connection with the exercise
      of
      any Warrants by Purchasers. 

    

    2.
      Expenses: Regardless of whether an Offering is consummated, and in addition
      to
      any Fees payable to Axiom hereunder, within ten (10) days after written request
      therefor, Company shall reimburse Axiom for all reasonable fees and
      disbursements of Axiom’s outside counsel, including reasonable post-closing fees
      and expenses, and Axiom’s reasonable travel and other out-of-pocket expenses as
      incurred in connection with the service performed by Axiom pursuant to this
      Agreement, including without limitation, transportation, hotel, meals and
      associated expenses including postage, express/overnight mail delivery, courier
      services, etc. Axiom will submit any expense in excess of five hundred dollars
      ($500.00) to the Company for prior written approval.

    

    3.
      Warrants: In addition to the Placement Agent’s Fee, upon the closing of the sale
      of securities in connection with the Offering, the Company shall issue to the
      Placement Agent warrants (the “PA Warrants”) granting the Placement Agent the
      right to purchase a number of shares of the Company’s Common Stock equal to the
      Cash Fee divided by the initial conversion price of the Senior Secured
      Convertible Debentures. The PA Warrants shall be exercisable at 100% of the
      initial conversion price of the Senior Secured Convertible Debentures. The
      PA
      Warrants shall expire five (5) years from the date of issuance. The PA Warrants
      shall be in the same form, including, without limitation, the same registration
      rights and anti-dilution provisions, as the securities sold in the Offering.
      Upon initial Closing of the Offering, the Company shall extend the expiration
      dates of the warrants issued to the Placement Agents in conjunction with the
      Company’s Common Stock financing closed in February 2005 to the same date as the
      PA Warrants issued under this Agreement, and adjust the exercise price of those
      warrants to the initial exercise price of the PA Warrants issued under this
      Agreement.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

    Subscription
      Agreement: Schedule 9(p) Additional Permitted Liens

    

    

    As
      security for the Obligations of Debtor, the Debtor hereby grants the Collateral
      Agent, for the benefit of the Lenders, a security interest in the Collateral,
      which security interest shall be a first priority security interest except
      the
      following: 

    

    
      	
            	1.	
              Security
                interest in favor of lender in connection with existing credit facility
                up
                to $3,000,000 or new credit facility in the principal amount of up
                to
                $3,000,000 to be provided to the
                Company.

            

    

    

    
      	
            	2.	
              As
                of June 30, 2007, Advance Nanotech, Inc. is obligated to issue 8,000,000
                shares of its wholly owned subsidiary, Advance Homeland Security,
                in the
                future to the credit facility provider pending the conclusion of
                the
                entity’s share authorization
                approvals.

            

    

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 11.1 Other Registrable Shares

    

    

    Any
      and
      all registrable shares, warrants and options to be issued in transactions
      consummated pursuant to the terms of the Exchange Agreement.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    

    Subscription
      Agreement: Schedule 12(a) Additional Excepted Issuances

    

    None

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    Subscription
      Agreement - Schedule 14(k)(A) Exchange Agreement

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    
 

    Subscription
      Agreement - Schedule 14(k)(B) Form of Lock-Up Agreement

     

     

    42

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