Document:

Exhibit 10.11

EXHIBIT 10.11

THE UNITS SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND TRANSFER OF THE INTERESTS IS RESTRICTED AS A RESULT THEREOF, AND ALSO BY THE TERMS OF THIS AGREEMENT

SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT

Name of Subscriber ______________________

The Quantum Group, Inc.

3420 Fairlane Farms Road, Suite C

Wellington, Florida 33414

Ladies and Gentlemen:

1.

Subscription.  I (sometimes referred to herein as the “Investor”) hereby subscribe for and agree to purchase ___ Unit(s) (as defined below) of The Quantum Group, Inc, a Nevada corporation (the “Company”), on the terms and conditions described herein and in the Financing Agreement for Sale of Bridge Securities dated August 21, 2006 (“Financing Agreement”), Confidential Private Placement Memorandum of the Company dated August 29, 2006 and the Exhibits thereto (collectively, the “Offering Documents”), together with all supplements, if any, relating to this Offering.  Terms not defined herein are as defined in the Offering Documents.  The purchase price per Unit is $50,000.  There is no Minimum Offering.  The Maximum Offering is $3,000,000, or 60 Units, provided that the Company has the option to increase the offering by up to an additional $500,000, or 10 Units.

By execution of this Subscription Agreement the Investor accepts the terms of the Financing Agreement and acknowledges the terms and conditions thereof.

THE AGGREGATE AMOUNT SUBSCRIBED FOR HEREBY IS $_______

2.

Description of Units.  Each Unit consists of (i) one $50,000 Bridge Note (“Bridge Note”) bearing interest at the rate of 8% per annum payable at maturity and (ii) shares of common stock of the Company (“Bridge Shares”) equal to the principal amount of Bridge Notes purchased, divided by $0.33 (or 151,515 shares of common stock per Unit).  The Bridge Notes and Bridge Shares are herein called the Bridge Securities.  Following the completion of the sale of Bridge Securities pursuant to this Financing Agreement, the Company intends to conduct a secondary public offering (the “Secondary Public Offering” or “SPO”) of its securities in the approximate amount of $8,000,000 with Newbridge Securities Corporation (“Newbridge”) as its managing underwriter.  The Company agrees that the securities offered in the SPO will consist of units comprised of two shares of common stock and two five-year non-callable warrants (“Public Offering Units”).  At the closing of the Secondary Public Offering, holders of Bridge Shares shall have the right, but not the obligation, to exchange their Bridge Shares for a pro-rata portion of $3,000,000 of Public Offering Units, as set forth in the Financing Agreement.  Holders of the Bridge Notes shall also have the right to convert all or any part of the principal and accrued interest of the Bridge Notes prior to the payment in full of the Bridge Notes into any

Company securities hereinafter offered including, but not limited to the SPO (“Conversion Securities”).  The conversion price shall be 70% of the offering price of any such securities.  For purposes of this section, Conversion Securities shall not include the issuance of (i) shares of common stock or options to consultants, employees, officers and directors of the Company, (ii) securities upon the exercise or exchange of or conversion of any securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Company common stock issued and outstanding on the closing of this financing, and (iii) securities issued pursuant to acquisitions or strategic transactions.

3.

Purchase; Registration Rights.

(a)

 hereby tender to the Company cash or a check or wire transfer (information to be provided to me on my request) made payable to the order of U.S. Bank/The Quantum Group, Inc. - Escrow Account, as escrow agent for the Company in the amount indicated above, an executed copy of this Subscription Agreement and an executed copy of my Investor Questionnaire.

(b)

This offering will continue until the earlier of (a) the sale of 70 Units or (b) September 29, 2006, unless extended without notice by the Company for up to two (2) additional 30-day periods (the “Termination Date”).  Payments delivered herewith will be held in an escrow account subject to the terms and conditions herein. I Upon the earlier of a closing for my subscription or completion of the offering, I will be notified promptly by the Company as to whether my subscription has been accepted by the Company.

(c)

Registration Rights

i.

The Company shall use its reasonable best efforts to include the Bridge Shares, the Public Offering Units issuable to Purchasers in exchange for the Bridge Shares, and/or any securities issued upon conversion of the Bridge Notes (the “Conversion Securities”) issued to any Purchaser prior to the effective date of the SPO (collectively the “Registrable Securities”) in the registration statement for the SPO, subject to a 180-day underwriter’s lock-up and any other restrictions required by a national securities exchange as a condition to listing such securities for trading on such exchange.  Within thirty days following the initial filing of such registration statement (or any registration statement described below) and notice of the filing by the Company to the Holders, the Holders of the Bridge Shares and Bridge Notes shall have the right and the opportunity to convert or exchange such securities into Registrable Securities for inclusion in such registration statement.  In the event all of the Registrable Securities can not be included in such registration statement, the Company shall use its reasonable best efforts to file a resale registration statement for the Registrable Securities no later than the earlier of (a) March 31, 2007, or (b) 30 days following the effective date of the SPO registration statement, and shall use its reasonable best efforts to cause such registration statement to become effective within 90 days after filing.  In the event the SPO has not closed by February 28, 2007 the Company shall use its reasonable best efforts to file a resale registration statement for the Bridge Shares and Conversion Shares, if any, on or before March 31, 2007, and shall use its reasonable best efforts to cause such registration statement to become effective within 90 days after filing.  For each month or part thereof that:  (a) the Company fails to file a registration statement required by paragraphs (ii) and (iii) above of this Section 3(c); or (b) fails to have such a registration 

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statement, described in paragraphs (ii) and (iii) above, declared effective within 90 days after filing the Company shall deliver to the Investor, registered shares of common stock of the Company equal in value (based on the average of the previous five days closing bid prices as reported on Bloomberg) to 2% of the original principal amount of the Investor’s Bridge Note (the “Late Registration Shares”).  All Late Registration Shares shall be included in any pending registration statement, or if no registration statement is pending at the time of the issuance of such Late Registration Shares, in the first registration statement filed thereafter.  If after the effectiveness date of the registration statement for the Secondary Public Offering the Company fails to keep a registration statement continuously effective with a current prospectus available, other than for more than 25 consecutive calendar days or more than an aggregate of 40 calendar days during any 12 month period (which need not be consecutive) the Company shall extend the term of the Warrants included in the Public Offering Units one day for each day that such registration statement is not then effective. 

ii.

The Company will, until such time as the Registrable Securities may be sold under Rule 144 without volume limitation:

(A)

prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective;

(B)

furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities;

(C)

use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as the holders may reasonably request in writing within twenty (20) days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or subject itself to taxation in any such jurisdiction;

(D)

notify the Holders, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed;

(E)

notify the Holders promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information;

(F)

prepare and file with the SEC, promptly upon the request of any holders, any amendments or supplements to such registration 

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statement or prospectus which, in the opinion of counsel for such holders (and concurred in by counsel for the Company), is required under the Act or the rules and regulations thereunder in connection with the distribution of common stock by such holders;

(G)

prepare and promptly file with the SEC and promptly notify such holders of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; and

(H)

advise the Holders, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued.

The Company may require each holder of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing.

iii.

All fees, costs and expenses of and incidental to such registration, inclusion and public offering in connection therewith shall be borne by the Company, provided, however, that the Holders shall bear their pro rata share of the underwriting discount and commissions and transfer taxes. The fees, costs and expenses of registration to be borne by the Company as provided above shall include, without limitation, all registration, filing, and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered and qualified (except as provided above). Fees and disbursements of counsel and accountants for the Holders and any other expenses incurred by the holders not expressly included above shall be borne by the Holders.

iv.

The Company will indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Section (c)(i) hereof, its directors and officers, and any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or such underwriter within the meaning of the Act, from and against, and will reimburse such Holder and each such underwriter and controlling person with respect to, any and all loss, damage, liability, cost and expense to which such Holder or any such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged 

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untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, 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, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, liability, cost or expenses 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 such Holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof.

v.

Each Holder of Registrable Securities included in a registration pursuant to the provisions of Section (c)(i) hereof will indemnify and hold harmless the Company, its directors and officers, any controlling person and any underwriter from and against, and will reimburse the Company, its directors and officers, any controlling person and any underwriter with respect to, any and all loss, damage, liability, cost or expense to which the Company or any controlling person and/or any underwriter may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, 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, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by or on behalf of such Holder specifically for use in the preparation thereof.

vi.

Promptly after receipt by an indemnified party pursuant to the provisions of Sections (c)(iv) or (v) of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of said Sections (c)(iv) or (v), promptly notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, provided, however, if counsel for the indemnifying party concludes that a single counsel cannot under applicable legal and ethical considerations, represent both the indemnifying party and the indemnified party, the indemnified party or parties have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of said Sections (c)(iv) 

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or (v) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party.

4.

Acceptance or Rejection of Subscription.

(a)

I understand and agree that the Company reserves the right to reject this subscription for the Units, in whole or in part, for any reason and at any time prior to the Closing, notwithstanding prior receipt by me of notice of acceptance of my subscription.

(b)

In the event of the rejection of this subscription, my subscription payment will be promptly returned to me without interest or deduction and this Subscription Agreement shall have no force or effect.  In the event my subscription is accepted and the offering is completed, the funds specified above shall be released to the Company.

5.

Closing.  The closing (“Closing”) of this offering may occur any time and from time to time before the Termination Date.  There is no Minimum Offering.  The Units subscribed for herein shall not be deemed issued to or owned by me until one copy of this Subscription Agreement has been executed by me and countersigned by the Company and the Closing with respect to such Units has occurred.

6.

Disclosure.  Because this offering is limited to accredited investors as defined in Section 2(15) of the Act, and Rule 501 promulgated thereunder, in reliance upon the exemption contained in Section 4(2) of the Act and applicable state securities laws, the Units are being sold without registration under the Act. I acknowledge receipt of the Offering Documents and all related documents and represent that I have carefully reviewed and understand the Offering Documents and its exhibits. I have received all information and materials regarding the Company that I have requested. I fully understand that the Company has a limited financial and operating history and that the Units are speculative investments, which involve a high degree of risk of the loss of my entire investment. I fully understand the nature of the risks involved in purchasing the Units and I am qualified by my knowledge and experience to evaluate investments of this type. I have carefully considered the potential risks relating to the Company and purchase of its Units and have, in particular, reviewed each of the risks set forth in the Offering Documents. Both my advisors and I have had the opportunity to ask questions of and receive answers from representatives of the Company or persons acting on its behalf concerning the Company and the terms and conditions of a proposed investment in the Company and my advisors and I have also had the opportunity to obtain additional information necessary to verify the accuracy of information furnished about the Company. Accordingly, I have independently evaluated the risks of purchasing the Units.

7.

Investor Representations and Warranties.  I acknowledge, represent and warrant to, and agree with, the Company as follows:

(a)

I am aware that my investment involves a high degree of risk as disclosed in the Offering Documents and have read carefully the Offering Documents and I 

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understand that by signing this Subscription Agreement I am agreeing to be bound by all of the terms and conditions of the Financing Agreement, Bridge Note and Security Agreement, which are included in the Offering Documents, and my signature on this Subscription Agreement is deemed to be a signature on the Financing Agreement.

(b)

I acknowledge and am aware that there is no assurance as to the future performance of the Company.

(c)

I acknowledge that there may be certain adverse tax consequences to me in connection with my purchase of Units, and the Company has advised me to seek the advice of experts in such areas prior to making this investment.

(d)

I am purchasing the Units for my own account for investment purposes and not with a view to or for sale in connection with the distribution of the Units, the Bridge Notes, the Warrants, or the shares of common stock issuable upon conversion of the Bridge Notes and exercise of the Warrants, nor with any present intention of selling or otherwise disposing of all or any part of the foregoing securities.  I agree that I must bear the entire economic risk of my investment for an indefinite period of time because, among other reasons, the Units have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states or an exemption from such registration is available.  Furthermore, I hereby acknowledge and agree that I will not sell, transfer, pledge, encumber, give or otherwise dispose of, either publicly or privately, the Units, the Bridge Notes, or the shares of common stock issuable upon conversion of the Bridge Notes and exercise of the Warrants.  I hereby authorize the Company to place a legend denoting the restrictions on the Units that may be issued to me, as well as the Bridge Notes, Warrants, and shares of common stock issuable upon conversion of the Bridge Notes and exercise of the Warrants.

(e)

Except as described in my Investor Questionnaire, I am not a member of the National Association of Securities Dealers, Inc. (“NASD”); I am not and have not, for a period of 12 months prior to the date of this Subscription Agreement, been affiliated or associated with any company, firm, or other entity which is a member of the NASD; and I do not own any stock or other interest in any member of the NASD (other than interests acquired in open market purchases).

(f)

I recognize that the Units, as an investment, involve a high degree of risk including, but not limited to, the risk of economic losses from operations of the Company and the total loss of my investment.  I believe that the investment in the Units is suitable for me based upon my investment objectives and financial needs, and I have adequate means for providing for my current financial needs and contingencies and have no need for liquidity with respect to my investment in the Company.

(g)

I have been given access to full and complete information regarding the Company and have utilized such access to my satisfaction for the purpose of obtaining information in addition to, or verifying information included in, the Offering Documents and related documents, and I have either met with or been given reasonable opportunity to meet with officers of the Company for the purpose of asking questions of, and receiving answers from, such officers concerning the terms and conditions of the offering 

7

of the Units and the business and operations of the Company and to obtain any additional information, to the extent reasonably available.

(h)

I have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units and have obtained, in my judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Company.  I have not utilized any person as my purchaser representative as defined in Regulation D under the Securities Act in connection with evaluating such merits and risks.

(i)

I have relied solely upon my own investigation in making a decision to invest in the Company.

(j)

I have received no representation or warranty from the Company or any of its officers, directors, employees or agents in respect of my investment in the Company and I have received no information (written or otherwise) from them relating to the Company or its business other than as set forth in the Offering Documents.  I am not participating in the offer as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

(k)

I have had full opportunity to ask questions and to receive satisfactory answers concerning the offering and other matters pertaining to my investment and all such questions have been answered to my full satisfaction.

(l)

I have been provided an opportunity to obtain any additional information concerning the offering and the Company and all other information to the extent the Company possesses such information or can acquire it without unreasonable effort or expense.

(m)

I am an “accredited investor” as defined in Section 2(15) of the Securities Act and in Rule 501 promulgated thereunder and have attached the completed Accredited Investor Questionnaire to indicate my “accredited investor” category.  I can bear the entire economic risk of the investment in the Units for an indefinite period of time and I am knowledgeable about and experienced in investments in the equity securities of non-publicly traded companies, including early stage companies.  I am acquiring the Units for my own account for investment purposes only and not with a view to the resale or distribution of such securities within the meaning of the Securities Act of 1933, as amended.  I am not acting as an underwriter or a conduit for sale to the public or to others of unregistered securities, directly or indirectly, on behalf of the Company or any person with respect to such securities.

(n)

I understand that (1) the Units and the underlying securities have not been registered under the Securities Act, or the securities laws of certain states in reliance on specific exemptions from registration, (2) no securities administrator of any state or the federal government has recommended or endorsed this offering or made any finding or determination relating to the fairness of an investment in the Company and (3) the Company is relying on my representations and agreements for the purpose of determining whether this transaction meets the requirements of the exemptions afforded by the Securities Act and certain state securities laws.

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(o)

I understand that (1) since neither the offer nor sale of the Units has been registered under the Securities Act or the securities laws of any state, the Units may not be sold, assigned, pledged or otherwise disposed of unless they are so registered or an exemption from such registration is available, and (2) it is not anticipated that there will be any market for the resale of the Units.

(p)

I have been urged to seek independent advice from my professional advisors relating to the suitability of an investment in the Company in view of my overall financial needs and with respect to the legal and tax implications of such investment.

(q)

If the Investor is a corporation, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an Investor in the Company and the person signing this Subscription Agreement on behalf of such entity has been duly authorized by such entity to do so.

(r)

The information contained in my Investor Questionnaire, as well as any information which I have furnished to the Company with respect to my financial position and business experience, is correct and complete as of the date of this Subscription Agreement and, if there should be any material change in such information prior to the Closing of the offering, I will furnish such revised or corrected information to the Company.  I hereby acknowledge and am aware that except for any rescission rights that may be provided under applicable laws, I am not entitled to cancel, terminate or revoke this subscription and any agreements made in connection herewith shall survive my death or disability.

8.

Indemnification.  I hereby agree to indemnify and hold harmless the Company and its officers, directors, stockholders, employees, agents, and counsel against any and all losses, claims, demands, liabilities, and expenses (including reasonable legal or other expenses, including reasonable attorneys’ fees) incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person, to which any such indemnified party may become subject under the Securities Act, under any other statute, at common law or otherwise, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by me and contained in this Subscription Agreement or my Investor Questionnaire, or (b) arise out of or are based upon any breach by me of any representation, warranty, or agreement made by me contained herein or therein.

9.

Severability.  In the event any parts of this Subscription Agreement are found to be void, the remaining provisions of this Subscription Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.

10.

Choice of Law and Jurisdiction.  This Subscription Agreement shall be governed by the laws of the State of Florida as applied to contracts entered into and to be performed entirely within the State of Florida.  Any action arising out of this Subscription Agreement shall be brought exclusively in a court of competent jurisdiction in Broward County, Florida, and the parties hereby irrevocably waive any objections they may have to venue in Broward County, Florida.

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11.

Counterparts.  This Subscription Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  The execution of this Subscription Agreement may be by actual or facsimile signature.

12.

Benefit.  This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto.

13.

Notices and Addresses.  All notices, offers, acceptance and any other acts under this Subscription Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addresses in person, by Federal Express or similar courier delivery or by facsimile delivery, as follows:

Investor:

At the address designated on the signature

page of this Subscription Agreement.

The Company:

The Quantum Group, Inc.

Attn: Noel J. Guillama, President

3420 Fairlane Farms Road, Suite C

Wellington, Florida 33414

phone: 561 -798-9800

fax: 561-828-0454

or to such other address as any of them, by notice to the others may designate from time to time.  The transmission confirmation receipt from the sender’s facsimile machine shall be conclusive evidence of successful facsimile delivery.  Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.

14.

Entire Agreement.  This Subscription Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof.  This Subscription Agreement may not be changed, waived, discharged, or terminated orally but, rather, only by a statement in writing signed by the party or parties against which enforcement or the change, waiver, discharge or termination is sought.

15.

Section Headings.  Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Subscription Agreement.

16.

Survival of Representations, Warranties and Agreements.  The representations, warranties and agreements contained herein shall survive the delivery of, and the payment for, the Units.

17.

Acceptance of Subscription.  The Company may accept this Subscription Agreement at any time for all or any portion of the Units subscribed for by executing a copy hereof as provided and notifying me within a reasonable time thereafter.

18.

Inconsistencies.  If there are any inconsistencies between this Agreement and the Financing Agreement, the terms of the Financing Agreement shall govern.

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RESIDENTS OF ALL STATES: THE UNITS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.  THE UNITS ARE SUBJECT TO REGISTRATIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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Manner in Which Title is to be Held.  (check one)

___

Individual Ownership

___

Community Property

___

Joint Tenant with Right of Survivorship (both parties must sign)

___

Partnership

___

Tenants in common

___

Corporation Trust

___

IRA or Keogh

___

Other (please indicate)

  

						
	 
	 
	Date:  

	 
	 

	  

	 
	 
	 
	 

	INDIVIDUAL INVESTORS

	             

	ENTITY INVESTORS

	  

	 
	Name of entity, if any

	  

	 
	 
	 
	 

	Signature (Individual)

	 
	By:

	                                                 

	 

	 
	 
	 
	*Signature

	 

	  

	 
	 
	 
	 

	  

	 
	Its:

	 
	 

	Signature (Joint)

	 
	Title:

	 
	 

	(all record holders must sign)

	 
	 
	 
	 

	  

	 
	 
	 
	 

	  

	 
	 
	 

	Name(s) Typed or Printed

	 
	Name Typed or Printed

	  

	 
	 

	Address to Which Correspondence

	 
	Address to Which Correspondence

	Should be Directed

	 
	Should be Directed

	  

	 
	 
	 
	 

	  

	 
	 

	  

	 
	 

	  

	 
	 

	City, State and Zip Code

	 
	City, State and Zip Code

	  

	 
	 
	 
	 

	  

	 
	 

	Tax Identification or

	 
	Tax Identification or

	Social Security Number

	 
	Social Security Number

———————

*

If Units are being subscribed for by any entity, the Certificate of Signatory on the next page must also be completed

The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms on _____ day of ___________________, 2006.

				
	 
	 
	THE QUANTUM GROUP, INC.

	Dated:

	                                                                          

	By:

	                                                              

	 
	 
	Name:

	 

	 
	 
	Its:

	 

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CERTIFICATE OF SIGNATORY

(To be completed if Units are being subscribed for by an entity)

I, ____________________________, the ____________________________________

(name of signatory)

(title)

of ________________________________________ (“Entity”), a ________________________

(name of entity)

(type of entity)

hereby certify that I am empowered and duly authorized by the Entity to execute the Subscription Agreement and to purchase the Units, and certify further that the Subscription Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ______ day of ____________, 2006.

		
	                                                                          

	                                                              

	 
	(Signature)

	 
	 

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ACCREDITED INVESTOR QUESTIONNAIRE

Purpose of this Questionnaire

The Units (the “Units”) of The Quantum Group, Inc., a Nevada corporation (the “Company”), (i) one $50,000 Bridge Note (“Bridge Note”) bearing interest at the rate of 8% per annum payable at maturity and (ii) shares of common stock of the Company (“Bridge Shares”) equal to the principal amount of Bridge Notes purchased, divided by $0.33 (or 151,515 shares of common stock per Unit) are being offered under the Securities Act of 1933, as amended (the “1933 Act”), or the securities laws of any state, in reliance on the exemptions contained in Sections 4(2) and 4(6) and Regulation D Rule 506 of the 1933 Act and on similar exemptions under applicable state laws. Under Sections 4(2) and 4(6) and Regulation D Rule 506 and/or certain state laws, the Company may be required to determine that an individual, or an individual together with a “purchaser representative” or each individual equity owner of an investing entity meets certain suitability requirements before selling the Units to such individual or entity.  THE COMPANY MAY, AT ITS ELECTION, NOT SELL UNITS TO A SUBSCRIBER WHO HAS NOT COMPLETELY FILLED OUT THIS QUESTIONNAIRE.  This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy the Units or any other security.

Instructions

One (1) copy of this Questionnaire should be completed, signed, dated, and delivered to Newbridge Securities Corporation; Attn: Douglas Aguililla, 1451 West Cypress Creek Road, Fort Lauderdale, Florida 33309 which shall provide copies to the Company and counsel.

Please Answer All Questions

If the appropriate answer is “None” or “Not Applicable,” so state.  Please print or type your answers to all questions.  Attach additional sheets if necessary to complete your answers to any item.

Your answers will be kept strictly confidential at all times; however, the Company may present this Questionnaire to such parties as it deems appropriate, including its counsel, in order to assure itself that the offer and sale of the Units will not result in a violation of the registration provisions of the 1933 Act or a violation of the securities laws of any state.

(1)

Please provide the following personal information:

Name: ________________________________   Age:  __________________________

Residence Address

(including zip code):  _____________________________________________________

Telephone Numbers:

Residence:  _________________________  Business  __________________________

Email Address:  ________________________  Cell Phone:  ______________________

1

(2)

Please describe your present or most recent business or occupation and indicate such information as the nature of your employment, the principal business of your employer, the principal activities under your management or supervision, and the scope (e.g., dollar volume, industry rank, etc.) of such activities.

(3)

Please provide the following information concerning your financial experience.

3.1

Indicate by check mark which of the following categories best describes the extent of your prior experience in the areas of investment listed below:

				
	 
	Substantial

Experience

	Limited

Experience

	No

Experience

	Marketable Securities

	 
	 
	 

	Private Placements

	 
	 
	 

	Limited Partnerships

	 
	 
	 

	Initial Public Offering

	 
	 
	 

3.2

Indicate by check mark whether or not you maintain any of the following types of accounts over which you, rather than a third party, exercise investment discretion, and the length of time you have maintained each type of account.

Securities (cash)

Yes  _____

No  _____

Number of years

______

Securities (margin)

Yes  _____

No  _____

Number of years

______

(4)

I am an accredited investor (as defined in Rule 501 (a) of Reg. D) because (check each appropriate description):

______

I am a natural person whose individual net worth, or joint net worth with my spouse, exceeds $1,000,000.

______

I am a natural person who had individual income exceeding $200,000 in each of the two most recent years or joint income with my spouse exceeding $300,000 in each of those years and I have a reasonable expectation of reaching the same income level in the current year.

______

I am a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.

______

I am an organization described in Section 501(c)(3) of the Internal Revenue Code, not formed for the specific purpose of acquiring the Units, with total assets exceeding $5,000,000.

______

I am a corporation, Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Units, with total assets exceeding $5,000,000.

2

______

I am a trust, not formed for the specific purpose of acquiring the Units, with total assets exceeding $5,000,000 and whose purchase is directed by a “sophisticated person,” as defined in Rule 506(b)(2)(ii) of Reg. D.

(For the purposes of this questionnaire, a “sophisticated person” means any person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment.)

______

I am an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 and (i) investment decisions for such plan are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is a bank, savings and loan association, insurance company or registered investment advisor or (ii) such plan has total assets exceeding $5,000,000 or (iii) if a self directed plan, investment decisions are made solely by accredited investors.

______

I am an entity in which all of the equity owners are accredited investors.

I am an accredited investor for the following reasons:

(5)

Check, if appropriate:

______

I hereby represent and warrant that I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of any prospective investment in the Company.

(6)

If you did not check the box to Question 5, please answer the following additional questions:

6.1

Please describe any pre-existing personal or business relationship that you have with the Company or any of its officers and directors.

6.2

Please describe any business or financial experience that you have had that would allow the Company to reasonably conclude that you are capable of protecting your interests in connection with your prospective investment in the Company.  If none, so state.

6.3

If your answer to Question 6.2 above was “None,” in order to evaluate the merits and risks of the investment, will you be relying upon the advice of any other person(s) who will be acting as your purchaser representative(s)?  Yes  ____  No  ____

If “yes,” please identify each such person and indicate his business address and telephone number in the space below (each such person must complete, and you must review and acknowledge, a separate purchaser representative questionnaire which will be supplied at your request and which must be returned to the Company prior to the sale of any Units to you).

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(7)

By signing this Questionnaire, I hereby confirm the following statements:

I am aware that the offering of the Units will involve securities for which no market currently exists, thereby requiring any investment to be maintained for an indefinite period of time, and I have no need to liquidate the investment.

I acknowledge that any delivery to me of any documentation relating to the Units prior to the determination by the Company of my suitability as an investor shall not constitute an offer of the Units until such determination of suitability shall be made, and I agree that I shall promptly return all such documentation to the Company upon request.

Neither I nor any of my associates or affiliates: (i) are a member or a person associated with a member firm of the NASD, (ii) own any stock or other securities of any NASD member, or (iii) made subordinated loans to any NASD member.

My answers to the foregoing questions are true and complete to the best of my information and belief, and I will promptly notify the Company of any changes in the information I have provided.

I also understand and agree that, although the Company will use its best efforts to keep the information provided in answers to this Questionnaire strictly confidential, the Company may present this Questionnaire and the information provided in answers to it to such parties as it may deem advisable if called upon to establish the availability under any federal or state securities laws of an exemption from registration of the private placement or if the contents thereof are relevant to any issue in any action, suit, or proceeding to which the Company is a party or by which it or they are or may be bound.

I realize that this Questionnaire does not constitute an offer by the Company to sell the Units but is merely a request for information.

___________________________________

Printed Name

___________________________________

Signature

___________________________________

Social Security Number or 

Employee Identification Number 

Date and Place Executed:

Date: _________________________   Place:  _________________________________

4EXHIBIT 10.12

EXHIBIT 10.12

SECURITY AGREEMENT

THIS SECURITY AGREEMENT, (“Agreement”) is made as of this _____ day of ___________, 2006, by and between THE QUANTUM GROUP, INC., a Nevada Corporation, 3420 Fairlane Road, Suite C, Wellington, FL 33414 (hereinafter “Borrower”), and investors as listed on Schedule “1” of this Agreement (the investors are hereinafter collectively referred to as the “Bridge Note Purchaser”).

WHEREAS, the Borrower and the Bridge Note Purchaser have entered into that certain Financing Agreement for Sale of Bridge Securities dated August 21, 2006.

WHEREAS, this Agreement is given to secure performance of the obligations under the 8% Secured Convertible Bridge Note(s) (the “Bridge Note(s)”) and Subscription Agreement(s) of even date herewith, executed by Borrower, to Bridge Note Purchaser in the aggregate principal amount of up to $3,500,000, together with interest thereon as provided for in the Bridge Note(s); and all other liabilities of all kinds of Borrower to Bridge Note Purchaser, whether created directly or acquired by Bridge Note Purchaser by assignment or otherwise, and whether now or existing or hereafter arising, absolute or contingent, due or to become due, (all such liabilities shall collectively be referred to as the “Obligations”).

NOW, THEREFORE, in consideration of the loan made by the Bridge Note Purchaser to Borrower, and further consideration of the covenants and promises contained in this Agreement, and for other good and valuable consideration, the parties agree as follows:

1.

Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

(a)

“Collateral” has the meaning set forth in paragraph 2 hereof.

(b)

“PTO” means the United States Patent and Trademark Office.

(c)

“UCC” means the Uniform Commercial Code as in effect in the State of Florida.

(d)

Terms Defined in UCC.  Where applicable in the context of this Agreement and except as otherwise defined herein, terms used in this Agreement shall have the meanings assigned to them in the UCC.

(e)

Construction.  In this Agreement, the following rules of construction and interpretation shall be applicable: (i) no reference to “proceeds” in this Agreement authorizes any sale, transfer, or other disposition of any Collateral by Borrower; (ii) “includes” and “including” are not limiting; (iii) “or” is not exclusive; and (iv) “all” includes “any” and “any” includes “all.”

2.

Security Interest.

(a)

Grant of Security Interest.  As security for the payment and performance of the Obligations, Borrower hereby assigns, transfers and conveys to Bridge Note Purchaser, and grants to Bridge Note Purchaser a security interest in and to all of Borrower’s right, title and interest in, to and under the following property, in each case whether now or hereafter existing or arising or in which Borrower now has or hereafter owns, acquires or develops an interest and wherever located (collectively, the “Collateral”):

(i)

accounts;

(ii)

chattel paper and electronic chattel paper;

(iii)

fixtures;

(iv)

goods;

(v)

inventory;

(vi)

software;

(vii)

all patents, trademark, patent applications and trademark applications, domestic or foreign, all licenses relating to any of the foregoing and all income and royalties with respect to any licenses (including such patents, trademark, patent applications and trademark applications as described in Schedule “2”), all rights to sue for past, present or future infringement thereof; all rights arising therefrom and pertaining thereto and all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof. Borrower represents and warrants to Bridge Note Purchaser that a true and correct list of all of the existing Collateral consisting of U.S. patents, trademark, patent applications and trademark applications or registrations owned by Borrower, in whole or in part, is set forth in Schedule “2”;

(viii)

all General Intangibles and all intangible intellectual or other similar property of Borrower of any kind or nature, associated with or arising out of any of the aforementioned properties and assets and not otherwise described above; and

(ix)

all Proceeds of any and all of the foregoing Collateral (including license royalties, rights to payment, accounts and proceeds of infringement suits) and, to the extent not otherwise included, all payments under insurance (whether or not Bridge Note Purchaser is the loss payee thereof) or any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to the foregoing Collateral.

(b)

Continuing Security Interest.  Borrower agrees that this Agreement shall create a continuing security interest in the Collateral, which shall remain in effect until terminated in accordance herewith.

3.

Collateral Subject to Other Security Interests.  Excluding and subject to that certain Security Agreement dated March 14, 2006 by and between the Borrower and High Capital Funding, LLC (the “March Security Agreement”), Borrower warrants that no financing statement covering any of the Collateral or its proceeds is on file in any public office at this date or will be on file with respect to the Collateral at the time the Collateral becomes subject to this Agreement (except any purchase money security interests).  Except as provided under the March Security Agreement, no other security interest of any kind affects the Collateral at this date, and no arrangement exists whereby the Collateral will in the future become subject to a security interest senior to the Agreement. 

2

Borrower will not sell, assign or otherwise alienate the ownership of the Collateral or its use or operation except any sale or replacement in the ordinary course of Borrower’s business; and Borrower will not use the Collateral in violation of any ordinance or state or federal statute or any administrative rule or regulation of law.

Borrower authorizes Bridge Note Purchaser at their option and their sole discretion to discharge any taxes, charges, assessments, liens or other security interests or other encumbrances to which the Collateral may become subject.  Bridge Note Purchaser may pay amounts to preserve and maintain the Collateral, if Borrower falls to do so.  Borrower agrees to reimburse Bridge Note Purchaser within ten (10) days after demand for any payment made or any expense incurred by Bridge Note Purchaser pursuant to the foregoing authorization, together with interest on the amount expended at the rate of eighteen percent (18%) per annum from the date of the payment.  Any such amounts shall be secured by and under this Agreement.

4.

Fees and Taxes.  Borrower will timely pay any and all license fees, taxes, assessments and public charges, general and special, that may at any time be levied or assessed upon or against Collateral.

5.

Maintenance of Collateral.  Borrower will, at Borrower’s expense, maintain and keep the Collateral at its present location in good order and repair, ordinary wear and tear excepted, and shall not remove, demolish or substantially alter the Collateral, except any sale or replacement in the ordinary course of Borrower’s business, without the prior written consent of the Bridge Note Purchaser.  Borrower will not attempt to or actually dispose of, lend, transfer, lease or assign the Collateral, except any sale or replacement in the ordinary course of Borrower’s business, without the prior written consent of Bridge Note Purchaser.

Borrower may remove the Collateral in its ordinary course of business, provided, that such Collateral shall be replaced with property of a similar nature of equal or greater value.  The security interest created by this Agreement will immediately attach to the substitute property when it is acquired, and the substitute property will become part or the Collateral defined in this Agreement.

Subject to Section 3 herein, Borrower will not permit the Collateral to be attached or seized by any legal process.  Borrower will defend and indemnify Bridge Note Purchaser from all expense and liability of every kind to any person or to the property of any person by reason of or in connection with the delivery, possession or use of the Collateral.

6.

Insurance.  Throughout the life of this Agreement, Borrower shall keep the Collateral insured by companies rated A+, Class VI or better by Best’s Insurance guide, against loss by fire, earthquake, lightening, all hazards included within the term “extended coverage” insurance, including a vandalism and malicious mischief endorsement or an “all perils” endorsement, and such hazards as Bridge Note Purchaser may from time to time reasonably require.  This insurance shall be maintained in an amount equal to the full insurable value of the Collateral.

All insurance policies shall provide that they cannot be modified or canceled except upon thirty (30) days’ prior written notice to Bridge Note Purchaser.  All policies shall, notwithstanding anything herein that might permit lower amounts of insurance, be written in such amounts as will prevent Borrower from becoming a co-insurer.  All policies will be in force and effect on the date hereof and will be completely paid for the current policy year.  Borrower shall promptly furnish to Bridge Note Purchaser copies of renewal notices and premium receipts, if requested.

3

7.

Further Acts.  On a continuing basis, Borrower shall make, execute, acknowledge and deliver, and file and record in the proper filing and recording places, all such instruments and documents, and take all such action as may be necessary or advisable or may be requested by Bridge Note Purchaser to carry out the intent and purposes of this Agreement, or for assuring, confirming or protecting the grant or perfection of the security interest granted or purported to be granted hereby, to ensure Borrower’s compliance with this Agreement or to enable Bridge Note Purchaser to exercise and enforce its rights and remedies hereunder with respect to the Collateral, including any documents for filing with the PTO or any applicable state office. Bridge Note Purchaser may record this Agreement, an abstract thereof, or any other document describing Bridge Note Purchaser’ interest in the Collateral with the PTO, at the expense of Borrower.  In addition, Borrower authorizes Bridge Note Purchaser to file financing statements describing the Collateral in any UCC filing office deemed appropriate by Bridge Note Purchaser.  If the Borrower shall at any time hold or acquire a commercial tort claim arising with respect to the Collateral, the Borrower shall immediately notify Bridge Note Purchaser in a writing signed by the Borrower of the brief details thereof and grant to the Bridge Note Purchaser in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Bridge Note Purchaser.

8.

Authorization to Supplement.  If Borrower shall obtain rights to any new patentable inventions or become entitled to the benefit of any patent application or patent for any reissue, division, or continuation, of any patent or trademark, the provisions of this Agreement shall automatically apply thereto.  Borrower shall give prompt notice in writing to Bridge Note Purchaser with respect to any such new patent or trademark rights.  Without limiting Borrower’s obligations hereunder, Borrower authorizes Bridge Note Purchaser unilaterally to modify this Agreement by amending Schedule “2” to include any such new patent or trademark rights.  Notwithstanding the foregoing, no failure to so modify this Agreement or amend Schedule “2” shall in any way affect, invalidate or detract from Bridge Note Purchaser’ continuing security interest in all Collateral, whether or not listed on Schedule “2”.

9.

Default.  The breach or failure of any term, agreement, covenant or term of this Agreement or the occurrence of an event or default upon any term contained in the Bridge Note(s), which breach or failure has not been cured within ten days written notice from Bridge Note Purchaser, shall constitute a default hereunder.  A notice of default under this Agreement and the Bridge Notes may only be made in accordance with the terms of the Bridge Notes.  A default may only be called by holders of at least fifty percent (50%) of the aggregate principal amount of the Bridge Notes then outstanding, including High Capital Funding, LLC.

10.

Remedies.  Upon the occurrence and continuance of any default as defined above, Bridge Note Purchaser will have the right at their option to enforce and to exercise any or all of their rights under this Agreement or otherwise.  In addition to all other rights and remedies, Bridge Note Purchaser shall have the remedies of a secured party under the Uniform Commercial Code.  In exercising these remedies, Bridge Note Purchaser and Borrower agree as follows:

(a)

Bridge Note Purchaser may, at its option, require Borrower to assemble the Collateral and make it available to Bridge Note Purchaser at a place to be designated by Bridge Note Purchaser, which is reasonably convenient to both parties.  In the event Borrower fails or refuses to assemble the Collateral, Bridge Note Purchaser shall have the right, and Borrower hereby authorizes and empowers Bridge Note Purchaser, to enter the premises upon which the Collateral is located in order to remove the same.

4

(b)

Bridge Note Purchaser will give Borrower reasonable notice of the time and place of any public sale of the Collateral, or of the time after which any private sale or other intended disposition of the collateral is to be made, unless the Collateral is perishable, threatens to decline speedily in value, or is of a type customarily sold on a recognized market.  The requirement of reasonable notice shall be met if a written notice is mailed to Borrower, postage prepaid, to the address of Borrower last known to Bridge Note Purchaser, at least ten (10) days prior to the date of the sale or disposition.

(c)

Borrower agrees to surrender possession of the Collateral to Bridge Note Purchaser in event Bridge Note Purchaser elects to foreclose this security interest.  Borrower waives any notice of the exercise of any and all options reserved to Bridge Note Purchaser by this Agreement.

(d)

Borrower will, upon Bridge Note Purchaser’s request, deliver to Bridge Note Purchaser all original invoices, bills, charge or credit card receipts, books and records and other documents evidencing or describing any of the account receivable constituting a part of the Collateral.  Borrower will also execute and deliver to Bridge Note Purchaser an assignment of the right to receive payments under all such Accounts.  The parties recognize, however, that in the event of default such Accounts shall be deemed assigned to Bridge Note Purchaser, whether or not the assignments described above are actually delivered.

(e)

Bridge Note Purchaser shall have the right and are hereby authorized to collect all amounts due under the Accounts; sue or take other actions to collect the same in their own name or as assignee of or in the name of Borrower; compromise or give acquittance for amounts due; and use such other measures as Bridge Note Purchaser may in its sole discretion deem appropriate for collection of the Accounts.  All such actions shall be taken at the sole expense of Borrower, who agrees to reimburse Bridge Note Purchaser for all reasonable amounts expended (including a reasonable attorney’s fee), together with interest thereon from the date of expenditure at the rate then applicable under the Bridge Note.

(f)

This Agreement constitutes a direction to and full authority to any Account debtor to pay directly to Bridge Note Purchaser any such accounts.  No proof of default shall be required.  Any such debtor is hereby irrevocably and unconditionally authorized to rely upon and comply with any notice from Bridge Note Purchaser.  The debtor shall not be liable to Borrower or any person claiming under Borrower for making any payment or rendering any performance to Bridge Note Purchaser.  The debtor shall have no obligation or right to inquire whether any default has occurred or is then existing.  By its execution of this Agreement, Borrower irrevocably and unconditionally joins in, authorizes and consents to the above instructions.

(g)

The proceeds of any sale of the Collateral shall be applied to the following items in the following order: (a) the reasonable expenses of repossessing the Collateral and preparing for the holding the sale, including without limitation all reasonable attorney’s fees incurred by Bridge Note Purchaser; (b) interest and principal then due (by acceleration or otherwise) under the Bridge Note and any other debts specifically secured by this Agreement; (c) interest and principal then due (by acceleration or otherwise) under any other debts of Borrower to Bridge Note Purchaser (to be applied in whatever order Bridge Note Purchaser may in their sole discretion determine); (d) indebtedness of Borrower to other secured parties, provided written notice of demand therefore is received by Bridge Note Purchaser before the sale (to be applied in the order Bridge Note Purchaser receives the written notices); and (e) the balance, if any, to Borrower.

5

11.

Actions by Bridge Note Purchaser.  Any notice, action or right provided herein may only be taken by Bridge Note Purchaser if agreed upon by holders of at least fifty percent (50%) of the aggregate principal amount of the Bridge Note, then outstanding, including High Capital Funding, LLC.

12.

Notice.  Any and all notices, requests, consents and demands required or permitted to be given hereunder shall be in writing and shall be deemed given and received (i) upon personal delivery, (ii) upon the first business day following the receipt of confirmation of facsimile transmission with receipt confirmation, or (iii) upon the third business day after deposit in the United States mall, by certified or registered mall, postage prepaid and addressed to the appropriate party at the address provided for in the Bridge Note. Any party may change by notice the address to which notices to that party are to be addressed.

13.

Miscellaneous.  The following provisions are additional terms of this Agreement:

(a)

Bridge Note Purchaser has no duty to maintain, repair or protect the Collateral.

(b)

No waiver by Bridge Note Purchaser of any default shall operate as a waiver of any other default or of the same default on a future occasion.

(c)

All rights and remedies of Bridge Note Purchaser are cumulative and may be exercised successively or concurrently, and shall inure to the benefit of Bridge Note Purchaser’s assigns.

(d)

All obligations of Borrower shall bind his trustees, custodians, general partners, successors and assigns.

(e)

The captions of the sections of this Agreement are inserted for convenience only and shall not be used in the interpretation or construction of any provisions hereof.

(f)

If any provisions of this Agreement is held invalid or unenforceable, the holding shall affect only the provision in question and all other provisions on this Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, Borrower has executed this Agreement the day and year first above written.

			
	 
	THE QUANTUM GROUP, INC.

A Nevada Corporation

	  

	 
	 

	  

	 
	 

	                                                                             

	By:

	/s/ DONALD B. COHEN

	 
	 
	Donald B. Cohen

Vice President, CFO

6

SCHEDULE “1”

BRIDGE NOTE PURCHASERS

SCHEDULE “2”

PATENTS, TRADEMARKS AND APPLICATIONS

None

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