Document:

SUBSCRIPTION
        AGREEMENT

      

      THIS
        SUBSCRIPTION AGREEMENT
        (this
“Agreement”),
        is
        dated as of September 12, 2007, by and among Franklin Towers Enterprises
        Inc., a
        Nevada corporation
        (the
“Company”),
        and
        the subscribers identified on the signature page hereto (each a “Subscriber”
and
        collectively “Subscribers”).

      

      WHEREAS,
        the
        Company and the Subscribers are executing and delivering this Agreement in
        reliance upon an exemption from securities registration afforded by the
        provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
        D”)
        as
        promulgated by the United States Securities and Exchange Commission (the
        “Commission”)
        under
        the Securities Act of 1933, as amended (the “1933
        Act”);
        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,
        and the Subscribers, in the aggregate, shall purchase up to $5,000,000 (the
        “Purchase
        Price”)
        of
        principal amount of promissory notes of the Company (“Note”
or
        “Notes”),
        a
        form of which is annexed hereto as Exhibit
        A,
        convertible into shares of the Company’s Common Stock, $0.0001 par value (the
“Common
        Stock”)
        at a
        per share conversion price set forth in the Note (“Conversion
        Price”);
        and
        share purchase warrants (the “Warrants”),
        in
        the form annexed hereto as Exhibit
        B,
        to
        purchase shares of Common Stock (the “Warrant
        Shares”).
        The
        Notes, shares of Common Stock issuable upon conversion of the Notes (the
        “Shares”),
        the
        Warrants and the Warrant Shares are collectively referred to herein as the
        “Securities”;
        and

      

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

      

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

      

      1. “Closing
        Date.
        Subject
        to the satisfaction or waiver of the terms and conditions of this Agreement,
        on
        the Closing Date, Subscriber shall purchase and the Company shall sell to
        Subscribers Notes in the aggregate principal amount of $2,500,000 of Purchase
        Price (“First
        Closing Date”)
        designated on the signature page hereto for the purchase price set forth
        on the
        signature page hereto. The consummation of the transactions contemplated
        herein
        shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth
        Avenue, Suite 1601, New York, New York 10176, as soon as practicable following
        the satisfaction or waiver of all conditions to closing set forth in this
        Agreement (the “Closing
        Date”).
        The
        Company shall have up to ten (10) additional days after the first Closing
        to
        close on the balance of the Closing Purchase Price in one or more closings.
        The
        Notes and Warrants to be issued on the additional closing dates will have
        the
        same Maturity Dates and exercise periods, respectively, as the Notes and
        Warrants issued on the First Closing Date. The first such Closing Date shall
        be
        the Closing Date for all amounts representing the Closing Purchase
        Price.”

      

      2. Warrants.
        On the Closing Date, the Company will issue and deliver Warrants to the
        Subscribers. One Class A and one Class B Warrant will be issued for each
        Share
        which would be issued on the Closing Date assuming the complete conversion
        of
        the Notes issued on the Closing Date at the Conversion Price in effect on
        the
        Closing Date. The per Warrant Share exercise price to acquire a Warrant Share
        upon exercise of a Class A Warrant shall be equal to $0.50. The per Warrant
        Share exercise price to acquire a Warrant Share upon exercise of a Class
        B
        Warrant shall be equal to $1.00. The Class A and Class B Warrants shall be
        exercisable until five (5) years after the Actual Effective Date (as defined
        in
        Section 11.1(iv) of this Agreement).

      

      
        
          
          

        

        
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      3. Security
        Interest. The Subscribers will be granted a security interest in the assets
        of the Company including ownership of the Subsidiaries (as defined in
        Section 5(a) of this Agreement), which security interest will be
        memorialized in one or more “Security Agreements,” a form of
        which is annexed hereto as Exhibit D. The Company will also
        execute all such documents reasonably necessary in the opinion of Subscriber
        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 E. Xinshengxiang
        Industrial Development Co., Ltd., the holder of 17,100,000 shares of Common
        Stock, and Dingliang Kuang, the majority owner of the Subsidiary and its
        manager, will pledge all of the Common Stock of the Company owned by him
        as
        additional security for the Company’s obligations to the Subscribers. The pledge
        will be memorialized in a Stock Pledge Agreement, a form of
        which is annexed hereto as Exhibit F.

      

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

      

      (a) Organization
        and Standing of the Subscribers.
        If the
        Subscriber is an entity, such Subscriber is a corporation, partnership or
        other
        entity duly incorporated or organized, validly existing and in good standing
        under the laws of the jurisdiction of its incorporation or
        organization.

      

      (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.

      

      (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 filed on March 26, 2007 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 may have 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”),
        and
        considered all factors the Subscriber deems material in deciding on the
        advisability of investing in the Securities. 

      

      
        
          
          

        

        
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      (e) Information
        on Subscriber.
        The
        Subscriber is, and will be at the time of the conversion of the Notes and
        exercise of the Warrants, an “accredited
        investor”,
        as
        such term is defined in Regulation D promulgated by the Commission under
        the
        1933 Act, is experienced in investments and business matters, has made
        investments of a speculative nature and has purchased securities of United
        States publicly-owned companies in private placements in the past and, with
        its
        representatives, has such knowledge and experience in financial, tax and
        other
        business matters as to enable the Subscriber to utilize the information made
        available by the Company to evaluate the merits and risks of and to make
        an
        informed investment decision with respect to the proposed purchase, 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.

      

      (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.”

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (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.

      

      (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.

      

      
        
          
          

        

        
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      (p) Survival.
        The
        foregoing representations and warranties shall survive the Closing Date for
        a
        period of three years.

      

      5. Company
        Representations and Warranties.
        The
        Company represents and warrants to and agrees with 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 30% 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.
        All
        issued and outstanding shares of capital stock of the Company and Subsidiary
        have been duly authorized and validly issued and are fully paid and
        non-assessable.

      

      (c) Authority;
        Enforceability.
        This
        Agreement, the Note, the Warrants, the Security Agreements, the Escrow
        Agreement, and any other agreements delivered together with this Agreement
        or in
        connection herewith (collectively “Transaction
        Documents”)
        have
        been duly authorized, executed and delivered by the Company and 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 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 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 “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.

      

      
        
          
          

        

        
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      (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

      

      (iv) will
        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, subject to restrictions upon transfer under the 1933 Act and
        any
        applicable state securities laws;

      

      (ii) have
        been, or will be, duly and validly authorized and on the date of issuance
        of the
        Shares upon conversion of the Notes and the Warrant Shares and 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 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.

      

      
        
          
          

        

        
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      (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 if adversely determined would 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 and Other Written Information 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. Since the date
        of
        the financial statements included in the Reports, and except as modified
        in the
        Other Written Information or in the Schedules hereto, there has been no Material
        Adverse Event relating to the Company’s business, financial condition or affairs
        not disclosed in the Reports. The Reports and Other Written Information 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 will not issue any stop transfer order or other order impeding the
        sale,
        resale or delivery of any of the Securities, except as may be required by
        any
        applicable federal or state securities laws and unless contemporaneous notice
        of
        such instruction is given to the Subscriber.

      

      (l) Defaults.
        The
        Company is not in violation of its articles of incorporation or bylaws. The
        Company is (i) not in default under or in violation of any other material
        agreement or instrument to which it is a party or by which it or any of its
        properties are bound or affected, which default or violation would have a
        Material Adverse Effect,
        (ii)
        not 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 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.

      

      
        
          
          

        

        
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      (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 and Other Written
        Information, other than those incurred in the ordinary course of the Company
        businesses since December 31, 2006 and which, individually or in the aggregate,
        would reasonably be expected to have a Material Adverse Effect,
        except
        as disclosed in the Reports or on Schedule
        5(o).

      

      (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 the 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.

      

      (r) 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.

      

      (s)
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 Closing Date.

      

      (t) 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.

      

      (u) 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.

      

      (v) 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.

      

      
        
          
          

        

        
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      (w) Listing.
        The Company’s Common Stock is quoted on the Bulletin Board under the symbol
        FRTW.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 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 Bulletin Board.

      

      (x) 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.

      

      (y) 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)
        as
        they mature; (ii) the Company’s assets do not constitute unreasonably small
        capital to carry on its business for the current fiscal year as now conducted
        and as proposed to be conducted including its capital needs taking into account
        the particular capital requirements of the business conducted by the Company,
        and projected capital requirements and capital availability thereof; and
        (iii)
        the current cash flow of the Company, together with the proceeds the Company
        would receive, were it to liquidate all of its assets, after taking into
        account
        all anticipated uses of the cash, would be sufficient to pay all amounts
        on or
        in respect of its debt when such amounts are required to be paid. The Company
        does not intend to incur debts beyond its ability to pay such debts as they
        mature (taking into account the timing and amounts of cash to be payable
        on or
        in respect of its debt).

      

      (z) Company
        Predecessor and Subsidiaries. The Company makes each of the representations
        contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o),
        (p),
        (q), (s), (t), and (u) of this Agreement, as same relate to the Subsidiary
        of
        the Company. All representations made by or relating to the Company of a
        historical or prospective nature and all undertakings described in Sections
        9(g)
        through 9(l) shall relate, apply and refer to the Company and its
        predecessors.

      

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

      

      (BB) Survival.
        The foregoing representations and warranties shall survive the Closing Date
        for
        a period of three years.

      

      (CC) Preferred
        Shares. The Company will convert the Series A Convertible Preferred Shares
        within thirty (30) days of Closing. 

      

      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. On the Closing
        Date,
        the Company will provide an opinion reasonably acceptable to Subscriber from
        the
        Company’s legal counsel opining on the availability of an exemption from
        registration under the 1933 Act as it relates to the offer and issuance of
        the
        Securities and other matters reasonably requested by Subscribers. A form
        of the
        legal opinion is annexed hereto as Exhibit G. The Company will
        provide, at the Company’s expense, such other legal opinions in the future as
        are reasonably necessary for the issuance and resale of the Common Stock
        issuable upon conversion of the Notes and exercise of the Warrants pursuant
        to
        an effective registration statement, Rule 144 under the 1933 Act or an exemption
        from registration.

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      7.1. Conversion
        of Note.

      

      (a) Upon
        the
        conversion of a Note or part thereof, 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 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, or for 90 days
        if
        pursuant to the other provisions of Rule 144 of the 1933 Act).

      

      (b) Subscriber
        will give notice of its decision to exercise its 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) to the Company via confirmed telecopier transmission or otherwise
        pursuant to Section 13(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 6 PM (or if received by the Company after 6 PM 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 receipt by the Company of the Notice of Conversion (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 understands that a delay in the delivery of the Shares in the form
        required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
        described in Section 7.2 hereof, respectively later than the Delivery Date
        or
        the Mandatory Redemption Payment Date (as hereinafter defined) could result
        in
        economic loss to the Subscriber. As compensation to the Subscriber for such
        loss, the Company agrees to pay (as liquidated damages and not as a penalty)
        to
        the Subscriber for late issuance of Shares in the form required pursuant
        to
        Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
        business day after the Delivery Date for each $10,000 of Note principal amount
        (and proportionately for other amounts) being converted of the corresponding
        Shares which are not timely delivered. The Company shall pay any payments
        incurred under this Section in immediately available funds upon demand.
        Furthermore, in addition to any other remedies which may be available to
        the
        Subscriber, in the event that the Company fails for any reason to effect
        delivery of the Shares within seven (7) business days after the Delivery
        Date or
        make payment within seven (7) business days after the Mandatory Redemption
        Payment Date (as defined in Section 7.2 below), the Subscriber will be entitled
        to revoke all or part of the relevant Notice of Conversion or rescind all
        or
        part of the notice of Mandatory Redemption by delivery of a notice to such
        effect to the Company whereupon the Company and the Subscriber shall each
        be
        restored to their respective positions immediately prior to the delivery
        of such
        notice, except that the liquidated damages described above shall be payable
        through the date notice of revocation or rescission is given to the
        Company.

      

      
        
          
          

        

        
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      (d) The
        Company agrees and acknowledges that despite the pendency of a 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.

      

      7.2. Mandatory
        Redemption at Subscriber’s Election. In the event (i) the Company is
        prohibited from issuing Shares, (ii) upon the occurrence of any other Event
        of
        Default (as defined in the Note or in this Agreement), that continues for
        more
        than twenty (20) business days, (iii) a Change in Control (as defined below),
        or
        (iv) of the liquidation, dissolution or winding up of the Company, then at
        the
        Subscriber’s election, the Company must pay to the Subscriber ten (10) business
        days after request by the Subscriber (“Calculation Period”), a
        sum of money determined by multiplying up to the outstanding principal amount
        of
        the Note designated by the Subscriber by 120% (“Mandatory Redemption
        Payment”). The Mandatory Redemption Payment must be received by the
        Subscriber on the same date as the Shares otherwise deliverable or within
        ten
        (10) business days after request, whichever is sooner (“Mandatory
        Redemption Payment Date”). Upon receipt of the Mandatory Redemption
        Payment, the corresponding Note principal and interest will be deemed paid
        and
        no longer outstanding. Liquidated damages calculated pursuant to Section
        7.1(c)
        hereof, that have been paid or accrued for the ten day period prior to the
        actual receipt of the Mandatory Redemption Payment by the Subscriber shall
        be
        credited against the Mandatory Redemption Payment. For purposes of this Section
        7.2, “Change in Control” shall mean (i) the Company no longer
        having a class of shares publicly traded or listed on a Principal Market,
        (ii)
        the Company becoming a Subsidiary of another entity (other than a corporation
        formed by the Company for purposes of reincorporation in another U.S.
        jurisdiction), (iii) a majority of the board of directors of the Company
        as of
        the Closing Date no longer serving as directors of the Company except due
        to
        natural causes and except due to the appointment of Dingliang Kuang to the
        board, (iv) the sale, lease or transfer of substantially all the assets of
        the
        Company or Subsidiaries, (v) if the holders of the Company’s Common Stock as of
        the Closing Date beneficially own at any time after the Closing Date less
        than
        40% of the Common Stock owned by them on the Closing Date, or (vi) if the
        Chief
        Executive Officer of the Company, as of the Closing Date, no longer serves
        as
        Chief Executive Officer of the Company unless the new Chief Executive Officer
        is
        Dingliang Kuang, who is currently the principal and majority owner of the
        Subsidiary. 

      

      7.3. Maximum
        Conversion. The Subscriber shall not be entitled to convert on a Conversion
        Date that amount of the Note in connection with that number of shares of
        Common
        Stock which would be in excess of the sum of (i) the number of shares of
        Common
        Stock beneficially owned by the Subscriber and its Affiliates on a Conversion
        Date, and (ii) the number of shares of Common Stock issuable upon the conversion
        of the Note with respect to which the determination of this provision is
        being
        made on a Conversion Date, which would result in beneficial ownership by
        the
        Subscriber and its Affiliates of more than 4.99% of the outstanding shares
        of
        Common Stock of the Company on such Conversion Date. For the purposes of
        the
        provision to the immediately preceding sentence, beneficial ownership shall
        be
        determined in accordance with Section 13(d) of the Securities Exchange Act
        of
        1934, as 

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      amended,
        and Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber
        shall
        not be limited to aggregate conversions of only 4.99% and aggregate conversions
        by the Subscriber may exceed 4.99%. The Subscriber may increase the permitted
        beneficial ownership amount up to 9.99% upon and effective after 61 days’ prior
        written notice to the Company. Such Subscriber may allocate which of the
        equity
        of the Company deemed beneficially owned by the Subscriber shall be included
        in
        the 4.99% amount described above and which shall be allocated to the excess
        above 4.99%.

      

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

      

      7.5. Buy-In.
        In addition to any other rights available to the Subscriber, if the Company
        fails to deliver to the Subscriber such shares issuable upon conversion of
        a
        Note by the Delivery Date and if after seven (7) business days after the
        Delivery Date the Subscriber or a broker on the Subscriber’s behalf purchases
        (in an open market transaction or otherwise) shares of Common Stock to deliver
        in satisfaction of a sale by such Subscriber of the Common Stock which the
        Subscriber was entitled to receive upon such conversion (a
“Buy-In”), then the Company shall pay in cash to the Subscriber
        (in addition to any remedies available to or elected by the Subscriber) the
        amount by which (A) the Subscriber’s total purchase price (including brokerage
        commissions, if any) for the shares of Common Stock so purchased exceeds
        (B) the
        aggregate principal and/or interest amount of the Note for which such conversion
        was not timely honored together with interest thereon at a rate of 15% per
        annum, accruing until such amount and any accrued interest thereon is paid
        in
        full (which amount shall be paid as liquidated damages and not as a penalty.
        For
        example, if the Subscriber purchases shares of Common Stock having a total
        purchase price of $11,000 to cover a Buy-In with respect to an attempted
        conversion of $10,000 of note principal and/or interest, the Company shall
        be
        required to pay the Subscriber $1,000 plus interest. The Subscriber shall
        provide the Company written notice and evidence indicating the amounts payable
        to the Subscriber in respect of the Buy-In.

      

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

      

      7.7. Redemption.
        The Notes and Warrants shall not be redeemable or callable by the Company
        except
        as described in the Notes, Warrants and Subscription Agreement. 

      

      8. Commissions/Due
        Diligence/Legal Fees.

      

      (a) Commissions.
        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 in connection with the Offering
        except as identified on Schedule 8(a) who will receive the
        amount of compensation described in Schedule 8(a). The Company
        is solely responsible for payment to the broker(s) identified on
Schedule 8(a).

      

      
        
          
          

        

        
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      (b) Subscriber’s
        Legal Fees. The Company shall pay to Grushko & Mittman, P.C., a fee of
        $25,000 (“Subscriber’s Legal Fees”) (of which $5,000 has been
        paid) as reimbursement for services rendered to the Subscribers in connection
        with this Agreement and the purchase and sale of the Notes and Warrants (the
        “Offering”). The Subscriber’s Legal Fees and expenses will be
        payable out of funds held pursuant to the Escrow Agreement. Grushko &
Mittman, P.C. will be reimbursed at Closing for all lien searches, filing
        fees,
        and printing and shipping costs for the closing statements to be delivered
        to
        Subscribers.

      

      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.
        The Company shall promptly secure the quotation or listing of the Shares
        and
        Warrant Shares upon each national securities exchange, or automated quotation
        system upon which they are or become eligible for quotation or listing (subject
        to official notice of issuance) and shall maintain same so long as any Warrants
        are outstanding. The Company will maintain the quotation or listing of its
        Common Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq
        Global Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock
        Exchange (whichever of the foregoing is at the time the principal trading
        exchange or market for the Common Stock [the “Principal
        Market”]), and will comply in all respects with the Company’s
        reporting, filing and other obligations under the bylaws or rules of the
        Principal Market, as applicable. The Company will provide the Subscribers
        copies
        of all notices it receives notifying the Company of the threatened and actual
        delisting of the Common Stock from any Principal Market. As of the date of
        this
        Agreement and the Closing Date, the 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 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 continue the listing or quotation of the Common Stock on a Principal
        Market
        and will comply in all respects with the Company’s reporting, filing and other
        obligations under the bylaws or rules of the Principal Market. The Company
        agrees to timely file a Form D with respect to the Securities if required
        under
        Regulation D and to provide a copy thereof to each Subscriber promptly after
        such filing.

      

      
        
          
          

        

        
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      (e) Use
        of
        Proceeds. The proceeds of the Offering will be employed by the Company for
        working capital and general corporate purposes. The Purchase Price may not
        and
        will not be used for accrued and unpaid officer and director salaries, payment
        of financing related debt, redemption of outstanding notes or equity instruments
        of the Company nor non-trade obligations outstanding on a Closing Date. For
        so
        long as any Notes are outstanding, the Company will not prepay any financing
        related debt obligations nor redeem any equity instruments of the
        Company.

      

      (f) Reservation.
        Prior to the Closing Date, and at all times thereafter, the Company shall
        have
        reserved, pro rata, on behalf of each holder of a Note or Warrant, from its
        authorized but unissued Common Stock, a number of common shares equal to
        150%
        of
        the amount of Common Stock necessary to allow each holder of a Note to be
        able
        to convert all such outstanding Notes and interest and reserve the amount
        of
        Warrant Shares issuable upon exercise of the Warrants. 

      

      (g)
        DTC
        Program. At all times that Notes or Warrants are outstanding, the Company
        will employ as the transfer agent for the Common Stock, Shares and Warrant
        Shares a participant in the Depository Trust Company Automated Securities
        Transfer Program.

      

      (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.

      

      (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 to be necessary to the conduct
        of
        its business, unless it is sold for value.

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      (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. From the date of this Agreement and until the End Date, the
        Company agrees that except in connection with a Form 8-K and the registration
        statement or statements regarding the Subscribers’ securities or in
        correspondence with the SEC regarding same, it will not disclose publicly
        or
        privately the identity of the Subscribers unless expressly agreed to in writing
        by a Subscriber or only to the extent required by law and then only upon
        five
        days prior notice to Subscriber. In any event and subject to the foregoing,
        the
        Company 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.
        Prior to filing or announcement, such Form 8-K or public announcement will
        be
        provided to Subscribers for their review and approval. In the Form 8-K or
        public
        announcement, the Company will specifically disclose the amount of Common
        Stock
        outstanding immediately after the Closing. Upon  delivery by the
        Company to Subscriber after the Closing Date of any notice or information,
        in
        writing, electronically or otherwise, and while a Note, Shares, Warrants,
        or
        Warrant Shares are held by Subscriber, unless the  Company has in good
        faith determined that the matters relating to such notice do not
        constitute material, nonpublic information relating to
        the Company or Subsidiaries, the Company  shall within one
        business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
        Report on Form 8-K or otherwise.  In
        the event that the Company believes that a
        notice or communication to Subscriber contains material, nonpublic
        information, relating to the Company or Subsidiaries, the Company shall so
        indicate to the Subscriber contemporaneously with delivery of such notice
        or
        information. In the absence of any such indication, the Subscriber shall be
        allowed to presume that all matters relating to such notice and information
        do
        not constitute material, nonpublic information relating to the Company or
        Subsidiaries.

      

      (o) Non-Public
        Information. The Company covenants and agrees that except for the Reports,
        Other Written Information and schedules and exhibits to this Agreement, neither
        it nor any other person acting on its behalf will at any time provide any
        Subscriber or its agents or counsel with any information that the Company
        believes constitutes material non-public information, unless prior thereto
        such
        Subscriber shall have agreed in writing to keep such information in confidence.
        The Company understands and confirms that each Subscriber shall be relying
        on
        the foregoing representations in effecting transactions in securities of
        the
        Company.

      

      (p) Negative
        Covenants. So long as a Note is outstanding, without the consent of the
        Subscriber, the Company will not and will not permit any of its Subsidiaries
        to
        directly or indirectly:

      

      (i) create,
        incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
        arrangement, lien, charge, claim, security interest, security title, mortgage,
        security deed or deed of trust, easement or encumbrance, or preference, priority
        or other security agreement or preferential arrangement of any kind or nature
        whatsoever (including any lease or title retention agreement, any financing
        lease having substantially the same economic effect as any of the foregoing,
        and
        the filing of, or agreement to give, any financing statement perfecting a
        security interest under the Uniform Commercial Code or comparable law of
        any
        jurisdiction) (each, a “Lien”)
        upon
        any of its property, whether now owned or hereafter acquired except for:
        (A) the
        Excepted Issuances (as defined in Section 12 hereof), (B) (a) Liens imposed
        by
        law for taxes that are not yet due or are being contested in good 

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      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 30 days or that are being contested in good faith and by appropriate
        proceedings; (c) pledges and deposits made in the ordinary course of business
        in
        compliance with workers’ compensation, unemployment insurance and other social
        security laws or regulations; (d) deposits to secure the performance of bids,
        trade contracts, leases, statutory obligations, surety and appeal bonds,
        performance bonds and other obligations of a like nature, in each case in
        the
        ordinary course of business; (e) Liens created with respect to the financing
        of
        the purchase of new property in the ordinary course of the Company’s business up
        to the amount of the purchase price of such property; 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”),
        (C)
        indebtedness for borrowed money which is not senior or pari passu in right
        of
        payment to the payment of the Notes or distribution of the Company’s assets and
        (D) indebtedness which shall be used to repay the Notes;

      

      (ii) 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,
        (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) prepay
        or
        redeem any financing related debt or past due obligations outstanding as
        of the
        Closing Date.

      

      (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 one
        hundred and eighty (180) 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.

       

      (r) Blackout.
        The Company undertakes and covenants that, until the end of the Exclusion
        Period, the Company will not enter into any acquisition, merger, exchange
        or
        sale or other transaction or fail to take any action that could have the
        effect
        of delaying the effectiveness of any pending Registration Statement or causing
        an already effective Registration Statement to no longer be effective or
        current
        for a period of forty or more days in the aggregate during any three hundred
        and
        sixty-five day period.

      
        

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

      

      (s) Offering
        Restrictions. Until the expiration of the Exclusion Period and/or during the
        pendency of an Event of Default, except for the Excepted Issuances, the Company
        will not enter into an agreement to issue nor issue any equity, convertible
        debt
        or other securities convertible into Common Stock or equity of the Company
        nor
        modify any of the foregoing which may be outstanding at anytime, without
        the
        prior written consent of the Subscriber, which consent may be withheld for
        any
        reason. For so long as the Notes are outstanding, the Company will not enter
        into any Equity Line of Credit or similar agreement, nor issue nor agree
        to
        issue any floating or Variable Priced Equity Linked Instruments nor any of
        the
        foregoing or equity with price reset rights (collectively, the “Variable
        Rate Restrictions”). For purposes hereof, “Equity Line of
        Credit” shall include any transaction involving a written agreement
        between the Company and an investor or underwriter whereby the Company has
        the
        right to “put” its securities to the investor or underwriter over an agreed
        period of time and at an agreed price or price formula, and “Variable
        Priced Equity Linked Instruments” shall include: (A) any debt or equity
        securities which are convertible into, exercisable or exchangeable for, or
        carry
        the right to receive additional shares of Common Stock either (1) at any
        conversion, exercise or exchange rate or other price that is based upon and/or
        varies with the trading prices of or quotations for Common Stock at any time
        after the initial issuance of such debt or equity security, or (2) with a
        fixed
        conversion, exercise or exchange price that is subject to being reset at
        some
        future date at any time after the initial issuance of such debt or equity
        security due to a change in the market price of the Company’s Common Stock since
        date of initial issuance, and (B) any amortizing convertible security which
        amortizes prior to its maturity date, where the Company is required or has
        the
        option to (or the investor in such transaction has the option to require
        the
        Company to) make such amortization payments in shares of Common Stock which
        are
        valued at a price that is based upon and/or varies with the trading prices
        of or
        quotations for Common Stock at any time after the initial issuance of such
        debt
        or equity security (whether or not such payments in stock are subject to
        certain
        equity conditions). The only officer, director, employee and consultant stock
        option or stock incentive plan currently in effect or contemplated by the
        Company is described on Schedule 5(d).

      

      (t) Limited
        Standstill. The Company will deliver to the Subscribers on or before the
        Closing Date and enforce the provisions of an irrevocable lock up agreement
        (“Lock Up Agreement”) in the form annexed hereto as
Exhibit H, with the parties identified on Schedule
        9(t) hereto.

      

      (u) Seniority.
        Except for Permitted Liens and as otherwise provided for herein, 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.

      

      (v) 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. 

      

      10. Covenants
        of the Company and Subscriber Regarding Indemnification.

      

      (a) The
        Company agrees to indemnify, hold harmless, reimburse and defend the
        Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control
        persons, and principal shareholders, against any claim, cost, expense,
        liability, obligation, loss or damage (including reasonable legal fees) of
        any
        nature, incurred by or imposed upon the Subscriber or any such person which
        results, arises out of or is based upon (i) any material misrepresentation
        by
        Company or 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.

      

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

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

      

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

      

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

      

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

      

      (i) On
        one
        occasion, for a period commencing one hundred and 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,
        the
        Company shall prepare and file with the Commission a registration statement
        under the 1933 Act registering the Registrable Securities, as defined in
        Section
        11.1(iv) hereof, which are the subject of such request for unrestricted public
        resale by the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii),
        Registrable Securities shall not include Securities which are (A) registered
        for
        resale in an effective registration statement, (B) included for registration
        in
        a pending registration statement, or (C) which have been issued without further
        transfer restrictions after a sale or transfer pursuant to Rule 144 under
        the
        1933 Act. Upon the receipt of such request, the Company shall promptly give
        written notice to all other record holders of the Registrable Securities
        that
        such registration statement is to be filed and shall include in such
        registration statement Registrable Securities for which it has received written
        requests within ten days after the Company gives such written notice. Such
        other
        requesting record holders shall be deemed to have exercised their demand
        registration right under this Section 11.1(i).

      

      (ii) If
        the
        Company at any time proposes to register any of its securities under the
        1933
        Act for sale to the public, whether for its own account or for the account
        of
        other security holders or both, except with respect to registration statements
        on Forms S-4, S-8 or another form not available for registering the Registrable
        Securities for sale to the public, provided the Registrable Securities are
        not
        otherwise registered for resale by the Subscribers or Holder pursuant to
        an
        effective registration statement, each such time it will give at least fifteen
        (15) days’ prior written notice to the record holder of the Registrable
        Securities of its intention so to do. Upon the written request of the holder,
        received by the Company within ten (10) days after the giving of any such
        notice
        by the Company, to register any of the Registrable Securities not previously
        registered, the Company will cause such Registrable Securities as to which
        registration shall have been so requested to be included with the securities
        to
        be covered by the registration statement proposed to be filed by the Company,
        all to the extent required to permit the sale or other 

      
        

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

      

      disposition
        of the Registrable Securities so registered by the holder of such Registrable
        Securities (the “Seller”
or
        “Sellers”).
        In
        the event that any registration pursuant to this Section 11.1(ii) shall be,
        in
        whole or in part, an underwritten public offering of common stock of the
        Company, the number of shares of Registrable Securities to be included in
        such
        an underwriting may be reduced by the managing underwriter if and to the
        extent
        that the Company and the underwriter shall reasonably be of the opinion that
        such inclusion would adversely affect the marketing of the securities to
        be sold
        by the Company therein; provided, however, that the Company shall notify
        the
        Seller in writing of any such reduction. Notwithstanding the foregoing
        provisions, or Section 11.4 hereof, the Company may withdraw or delay or
        suffer
        a delay of any registration statement referred to in this Section 11.1(ii)
        without thereby incurring any liability to the Seller.

       

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

      

      (iv) The
        Company shall file with the Commission a Form SB-2 registration statement
        (the
“Registration
        Statement”)
        (or
        such other form that it is eligible to use) in order to register the Registrable
        Securities for resale and distribution under the 1933 Act within sixty (60)
        calendar days after the Closing Date (the
        “Filing
        Date”),
        and
        cause the Registration Statement to be declared effective not
        later
        than one hundred and fifty (150) calendar days after the Closing Date
(the
        “Effective
        Date”).
        The
        Company will register not less than a number of shares of common stock in
        the
        aforedescribed registration statement that is equal to 150%
        of
        the Shares issued and issuable upon conversion of all of the Notes ( the
        “Registrable
        Securities”).
        The
        Registrable Securities shall be reserved and set aside exclusively for the
        benefit of each Subscriber and Warrant holder, pro rata,
        and not
        issued, employed or reserved for anyone other than each such Subscriber and
        Warrant holder. The Registration Statement will immediately be amended or
        additional registration statements will be immediately filed by the Company
        as
        necessary to register additional shares of Common Stock to allow the public
        resale of all Common Stock included in and issuable by virtue of the Registrable
        Securities. Except with the written consent of the Subscriber, 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(v)) 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 lees 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.

      

      (v) The
        amount of Registrable Securities required to be included in the initial
        Registration Statement as described in Section 11.1(iv) (“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”),
        but
        in any event not less than 26,000,000 shares of Common Stock. 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(v),
        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, fourteen (14) and forty-five (45) 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.

      

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      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) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com)
        on or
        before the first business day thereafter that the Company receives notice
        that
        (i) the Commission has no comments or no further comments on the Registration
        Statement, and (ii) the registration statement has been declared effective
        (failure to timely provide notice as required by this Section 11.2(a) shall
        be a
        material breach of the Company’s obligation and an Event of Default as defined
        in the Notes
        and
        a Non-Registration Event as defined in Section 11.4 of this Agreement);

      

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

      

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

      

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

      

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

      

      (f) notify
        the Subscribers within 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, all publicly available,
        non-confidential financial and other records, pertinent corporate documents
        and
        properties of the Company, and cause the Company’s officers, directors and
        employees to supply all publicly available, non-confidential information
        reasonably requested by the seller, attorney, accountant or agent in connection
        with such registration statement; and 

      

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      (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(i)
        or
        11.1(ii) is not filed within 60 days after written request and declared
        effective by the Commission within 120 days after such request, and maintained
        in the manner and within the time periods contemplated by Section 11 hereof,
        and
        it would not be feasible to ascertain the extent of such damages with precision.
        Accordingly, if (A) any Registration Statement filed by the Filing Date or
        is
        not declared effective on or before the required Effective Date, (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(i) or 11.1(ii) is not filed within 60 days after such written request,
        or
        is not declared effective within 120 days after such written request, or
        (D) any
        registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv)
        is
        filed and declared effective but shall thereafter cease to be effective without
        being succeeded within forty (40) business days by an effective replacement
        or
        amended registration statement or for a period of time which shall exceed
        sixty
        (60) days in the aggregate per year (defined as every rolling period of 365
        consecutive days commencing on the Actual Effective Date (each such event
        referred to in clauses A through 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 two percent (2%) for each thirty (30) days (or such lesser
        pro-rata amount for any period of less than thirty (30) days) of the 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. The Company must pay the
        Liquidated Damages in cash, or at the Company’s election, with registered shares
        of the Common Stock valued at 75% of the average of the closing bid prices
        of
        the Common Stock for the five trading days preceding such payment. The
        Liquidated Damages must be paid within ten (10) days after the end of each
        thirty (30) day period or shorter part thereof for which Liquidated Damages
        are
        payable. In the event a Registration Statement is filed by the Filing Date
        but
        is withdrawn prior to being declared effective by the Commission, then such
        Registration Statement will be deemed to have not been filed and Liquidated
        Damages will be calculated accordingly. All
        oral
        or written comments received from the Commission relating to the Registration
        Statement must be satisfactorily responded to within
        ten (10) days after receipt of comments from the Commission. Failure
        to
        timely respond to Commission comments is a Non-Registration Event for which
        Liquidated Damages shall accrue and be payable by the Company to the holders
        of
        Registrable Securities at the same rate and amounts set forth above calculated
        from the date the response was required to have been made.

      

      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 or alleged
        untrue statement of any material fact contained in the registration statement
        under which such Registrable Securities were registered under the 1933 Act
        pursuant to Section 11, any preliminary prospectus or final prospectus contained
        therein, or any amendment or supplement thereof, or arise out of or are based
        upon the omission or alleged omission to state therein a material fact required
        to be stated therein or necessary to make the statements therein not misleading,
        and will reimburse the Company and each such officer, director, underwriter
        and
        controlling person for any legal or other expenses reasonably incurred by
        them
        in connection with investigating or defending any such loss, claim, damage,
        liability or action, provided, however, that the Seller will be liable hereunder
        in any such case if and only to the extent that any such loss, claim, damage
        or
        liability arises out of or is based upon an untrue statement or alleged untrue
        statement or omission or alleged omission made in reliance upon and in
        conformity with information pertaining to such Seller, as such, furnished
        in
        writing to the Company by such Seller specifically for use in such registration
        statement or prospectus, and provided, further, however, that the liability
        of
        the Seller hereunder shall be limited to the net proceeds actually received
        by
        the Seller from the sale of Registrable Securities pursuant to such registration
        statement.

      

      
        
          
          

        

        
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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
        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
        three (3) business days (such third 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

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      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.

      

      (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 Agent Commission system. Such delivery must be made on or before
        the
        Unlegended Shares Delivery Date.

      

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

      

      (d) In
        addition to any other rights available to a Subscriber, if the Company fails
        to
        deliver to a Subscriber Unlegended Shares as required pursuant to this
        Agreement, within seven (7) business days after the Unlegended Shares Delivery
        Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
        open market transaction or otherwise) shares of common stock to deliver in
        satisfaction of a sale by such Subscriber of the shares of Common Stock which
        the Subscriber was entitled to receive from the Company (a “Buy-In”),
        then
        the Company shall pay in cash to the Subscriber (in addition to any remedies
        available to or elected by the Subscriber) the amount by which (A) the
        Subscriber’s total purchase price (including brokerage commissions, if any) for
        the shares of common stock so purchased exceeds (B) the aggregate purchase
        price
        of the shares of Common Stock delivered to the Company for reissuance as
        Unlegended Shares together
        with interest thereon at a rate of 15% per annum accruing until such amount
        and
        any accrued interest thereon is paid in full (which amount shall be paid
        as
        liquidated damages and not as a penalty). For
        example, if a Subscriber purchases shares of Common Stock having a total
        purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
        price of shares of Common Stock delivered to the Company for reissuance as
        Unlegended Shares, the Company shall be required to pay the Subscriber
        $1,000,
        plus interest. The
        Subscriber shall provide the Company written notice indicating the amounts
        payable to the Subscriber in respect of the Buy-In.

      

      
        
          
          

        

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

      

      12. (a) Right
        of First Refusal.
        Until
        six months after the Actual Effective Date, the Subscribers shall be given
        not
        less than ten business days prior written notice of any proposed sale by
        the
        Company of its Common Stock or other securities or equity linked debt
        obligations, except in connection with (i) full or partial consideration
        in
        connection with a strategic merger, acquisition, consolidation or purchase
        of
        substantially all of the securities
        or assets of corporation or other entity which holders of such securities
        or
        debt are not at any time granted registration rights, (ii)
        the
        Company’s issuance of securities in connection with strategic license agreements
        and other partnering arrangements so long as such issuances are not for the
        purpose of raising capital and which holders of such securities or debt are
        not
        at any time granted registration rights, (iii) the Company’s issuance of Common
        Stock or the issuances or grants of options to purchase Common Stock to
        employees, directors, and consultants, as described on Schedule
        5(d),
        (iv)
        attorney’s fees which may be paid with Common Stock and included for
        registration on Form S-8, and (v) 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 as of the Closing Date
        (collectively the foregoing are “Excepted
        Issuances”).
        The
        Subscribers who exercise their rights pursuant to this
        Section
        12(a) shall have the right during the ten business days following receipt
        of the
        notice to purchase in cash or by using the outstanding balance including
        principle, interest, liquidated damages and any other amount then owing to
        such
        Subscriber by the Company, in the aggregate up to all of such offered Common
        Stock, debt or other securities in accordance with the terms and conditions
        set
        forth in the notice of sale in the same proportion to each other as their
        purchase of Notes in the Offering. In the event such terms and conditions
        are
        modified during the notice period, the Subscribers shall be given prompt
        notice
        of such modification and shall have the right during the ten business days
        following the notice of modification to exercise such right.

      

      (b) Favored
        Nations Provision.
        Other
        than in connection with the Excepted Issuances, if at any time the Notes
        or
        Warrants are outstanding, the Company shall offer, issue or agree to issue
        (the
“Lower Price Issuance”) any Common Stock or securities convertible into or
        exercisable for shares of Common Stock (or modify any of the foregoing which
        may
        be outstanding) to any person or entity at a price per share or conversion
        or
        exercise price per share which shall be less than the Conversion Price in
        respect of the Shares , or if less than the Warrant exercise price in respect
        of
        the Warrant Shares, without the consent of each Subscriber, then the Company
        shall issue, for each such occasion, additional shares of Common Stock to
        each
        Subscriber respecting those Notes, Warrants and Shares that remain outstanding
        at the time of the Lower Price Issuance so that the average per share purchase
        price of the shares of Common Stock issued to the Subscriber (of only the
        Common
        Stock or Warrant Shares still owned by the Subscriber) is equal to such other
        lower price per share and the Conversion Price and Warrant exercise price
        shall
        automatically be reduced to such other lower price. The average Purchase
        Price
        of the Shares and average exercise price in relation to the Warrant Shares
        shall
        be calculated separately for the Shares and Warrant Shares. The foregoing
        calculation and issuance shall be made separately for Shares received upon
        conversion of the Notes and separately for Warrant Shares. The delivery to
        the
        Subscriber of the additional shares of Common Stock shall be not later than
        the
        closing date of the transaction giving rise to the requirement to issue
        additional shares of Common Stock. The Subscriber is granted the registration
        rights described in Section 11 hereof in relation to such 

       

      
        
          
          

        

        
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      additional
        shares of Common Stock. For purposes of the issuance and adjustment described
        in
        this paragraph, the issuance of any security of the Company carrying the
        right
        to convert such security into shares of Common Stock or of any warrant, right
        or
        option to purchase Common Stock shall result in the issuance of the additional
        shares of Common Stock upon the sooner of the agreement to or actual issuance
        of
        such convertible security, warrant, right or option and again at any time
        upon
        any subsequent issuances of shares of Common Stock upon exercise of such
        conversion or purchase rights if such issuance is at a price lower than the
        Conversion Price or Warrant exercise price in effect upon such issuance.
        The
        rights of the Subscriber set forth in this Section 12 are in addition to
        any
        other rights the Subscriber has pursuant to this Agreement, the Note, any
        Transaction Document, and any other agreement referred to or entered into
        in
        connection herewith or to which the Subscriber and Company are parties. The
        Subscriber is also given the right to elect to substitute any term or terms
        of
        any other offering in connection with which the Subscriber has rights as
        described in Section 12(a), for any term or terms of the Offering in connection
        with Securities owned by Subscriber as of the date the notice described in
        Section 12(a) is required to be given to Subscriber.

      

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

      

      13. 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: Franklin Towers Enterprises
        Inc., 5 Ash Drive, Center Barnstead, New Hampshire 03225, Attn: Kelly Fan,
        telecopier:
        (702) 943-0714, with a copy by telecopier only to: David Lubin & Associates,
        26 East Hawthorne Avenue, Valley Stream, NY 11580, Attn: David Lubin, Esq.,
        telecopier: (516) 887-8250, (ii) if to the Subscriber, to: the one or more
        addresses and telecopier numbers indicated on the signature pages hereto,
        with
        an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth
        Avenue, Suite 1601, New York, New York 10176, telecopier: (212) 697-3575,
        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. 

      

      
        
          
          

        

        
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      (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 and Federal
        courts located in the State and county of New York. 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) Specific
        Enforcement, Consent to Jurisdiction.
        The
        Company and Subscriber acknowledge and agree that irreparable damage would
        occur
        in the event that any of the provisions of this Agreement were not performed
        in
        accordance with their specific terms or were otherwise breached. It is
        accordingly agreed that the parties shall be entitled to seek an injunction
        or
        injunctions to prevent or cure breaches of the provisions of this Agreement
        and
        to enforce specifically the terms and provisions hereof, this being in addition
        to any other remedy to which any of them may be entitled by law or equity.
        Subject to Section 13(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.

      

      (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 

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

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

      

      (h) Consent.
        As used
        in the Agreement, “consent of the Subscribers” or similar language means the
        consent of holders of not less than 75% of the total of the Shares issued
        and
        issuable upon conversion of outstanding Notes owned by Subscribers on the
        date
        consent is requested.

      

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

      

      (j) 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.

      

      (k) Calendar
        Days/Time Periods.
        All
        references to “days” in the Transaction Documents shall mean calendar days
        unless otherwise stated. The terms “business days” and “trading 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.

      

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

         

        
          	 	 	 
	 	
                  FRANKLIN
                    TOWERS
                    ENTERPRISES INC.

                  a Nevada corporation

                
	 
 	 
 	 
 
	
                	By:  	/s/
                  Kelly Fan 
	 	
                  
Name:
                  Kelly Fan
	 	Title:
                  Chief Executive Officer 
	 	 
	 	Dated:
                  September 12, 2007

        

         

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  First
                    Mirage, Inc.

                  __________________________________________________________

                   

                            333
                    Sandy Springs
                    Circle

                            Ste.
                    230

                            Atlanta,
                    GA
                    30328

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    David A. Rapaport

                  _________________________________________________________

                  (Signature)

                  By:
                    David A. Rapaport

                	
                   

                  $100,000

                

        

        

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

           

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Generation
                    Capital Associates

                  __________________________________________________________

                   

                            1085
                    Riverside
                    Trace

                            Atlanta,
                    GA
                    30328

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    David A. Rapaport

                  _________________________________________________________

                  (Signature)

                  By:
                    David A. Rapaport

                	
                   

                  $100,000

                

        

        

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

           

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Truk
                    Opportunity Fund, LLC by: Atoll Asset Management, LLC

                  __________________________________________________________

                   

                            One
                    East
                    52nd
                    Street

                            Sixth
                    Floor

                            New
                    York, New York
                    10022

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    Stephen Saltzstein

                  _________________________________________________________

                  (Signature)

                  By:
                    Stephen Saltzstein

                	
                   

                  $860,000

                

        

        

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

        

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Truk
                    International Fund LP by: Atoll Asset Management, LLC

                  __________________________________________________________

                   

                            One
                    East
                    52nd
                    Street

                            Sixth
                    Floor

                            New
                    York, New York
                    10022

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    Stephen Saltzstein

                  _________________________________________________________

                  (Signature)

                  By:
                    Stephen Saltzstein

                	
                   

                  $140,000

                

        

        

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

           

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  The
                    Hart Organization Corp.

                  __________________________________________________________

                   

                            1085
                    Riverside
                    Trace

                            Atlanta,
                    GA
                    30328

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    David A. Rapaport

                  _________________________________________________________

                  (Signature)

                  By:
                    David A. Rapaport

                	
                   

                  $50,000

                

        

        

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

           

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Alpha
                    Capital Anstalt

                  __________________________________________________________

                   

                            150
                    Central Park
                    South

                            Second
                    Floor

                            New
                    York, New York
                    10019

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    Konrad Ackerman

                  _________________________________________________________

                  (Signature)

                  By:
                    Konrad Ackerman

                	
                   

                  $300,000

                

        

        

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

        

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Whalehaven
                    Capital Fund Limited

                  __________________________________________________________

                   

                  14
                    Parila Ville Road

                  3rd
                    Floor

                  Hamilton
                    Bermuda HM08

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    Brian Mazzella

                  _________________________________________________________

                  (Signature)

                  By:
                    Brian Mazella

                	
                   

                  $500,000

                

        

        

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

         

        SIGNATURE
          PAGE TO SUBSCRIPTION AGREEMENT

        

        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.

        
           

          
            	 	 	 
	 	
                    FRANKLIN
                      TOWERS
                      ENTERPRISES INC.

                    a Nevada corporation

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Kelly Fan 
	 	
                    
Name:
                    Kelly Fan
	 	Title:
                    Chief Executive Officer 
	 	 
	 	Dated:
                    September 12, 2007

          

        

        

        
          	
                  SUBSCRIBER

                	
                  PURCHASE
                    PRICE AND NOTE PRINCIPAL 

                
	
                  Name
                    of Subscriber: 

                  Professional
                    Offshore Opportunity Fund, Ltd

                  __________________________________________________________

                   

                  1400
                    Old Country Road

                  Suite
                    208

                  Westbury
                    New York 11590

                  Address:
                    __________________________________________________

                   

                  _________________________________________________________

                   

                  Fax
                    No.: __________________________________________________

                   

                  Taxpayer
                    ID# (if applicable): __________________________________

                   

                   

                  /s/
                    Marc K. Swickle

                  _________________________________________________________

                  (Signature)

                  By:
                    Marc K. Swickle

                	
                   

                  $500,000

                

        

      

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      LIST
        OF EXHIBITS AND SCHEDULES

       

      
        	
                Exhibit
                  A

              	
                     

              	
                Form
                  of Note

              
	 	 	 
	
                Exhibit
                  B

              	 	
                Form
                  of Warrant

              
	
                 

              	 	 
	
                Exhibit
                  C

              	 	
                Escrow
                  Agreement

              
	 	 	 
	
                Exhibit
                  D

              	 	
                Form
                  of Security Agreement

              
	 	 	 
	
                Exhibit
                  E

              	 	
                Form
                  of Collateral Agent Agreement

              
	 	 	 
	
                Exhibit
                  F

              	 	
                Form
                  of Stock Pledge Agreement

              
	 	 	 
	
                Exhibit
                  G

              	 	
                Form
                  of Legal Opinion

              
	 	 	 
	
                Exhibit
                  H

              	 	
                Form
                  of Lockup Agreement

              
	 	 	 
	
                Schedule
                  5(a)

              	 	
                Subsidiaries

              
	 	 	 
	
                Schedule
                  5(d)

              	 	
                Additional
                  Issuances / Capitalization / Reset Rights

              
	 	 	 
	
                Schedule
                  5(o)

              	 	
                Undisclosed
                  Liabilities

              
	 	 	 
	
                Schedule
                  5(x)

              	 	
                Transfer
                  Agent

              
	 	 	 
	
                Schedule
                  8(a)

              	 	
                Brokerage
                  Fee

              
	 	 	 
	
                Schedule
                  9(t)

              	 	
                Lockup
                  Agreement Providers

              
	 	 	 
	
                Schedule
                  11.1

              	 	
                Other
                  Registrable Shares

              

      

       

      
        
          
          

        

        
          37SECURITY
      AGREEMENT

    1. Identification.

    

    This
      Security Agreement (the "Agreement"), dated as of September 12, 2007, is entered
      into by and between Franklin Towers Enterprises Inc., a Nevada corporation
      ("Parent"), Chongqing Qiluo Textile Co., Ltd., a People’s Republic of China
      corporation ("Guarantor" and together with Parent, each a “Debtor” and
      collectively the "Debtors"), and Eliezer Drew, as collateral agent acting in
      the
      manner and to the extent described in the Collateral Agent Agreement defined
      below (the "Collateral Agent"), for the benefit of the parties identified on
      Schedule A hereto (collectively, the "Lenders").

    

    2. Recitals.

    

    2.1 The
      Lenders have made, are making and will be making loans to Parent (the "Loans").
      It is beneficial to each Debtor that the Loans were made and are being
      made.

    

    2.2 The
      Loans
      are and will be evidenced by certain promissory notes (each a “Note”) issued by
      Parent on or about the date of and after the date of this Agreement pursuant
      to
      subscription agreements (each a “Subscription Agreement”) to which Parent and
      Lenders are parties. The Notes are further identified on Schedule A hereto
      and
      were and will be executed by Parent as “Borrower” or “Debtor” for the benefit of
      each Lender as the “Holder” or “Lender” thereof.

    

    2.3 In
      consideration of the Loans made and to be made by Lenders to Parent and for
      other good and valuable consideration, and as security for the performance
      by
      Parent of its obligations under the Notes and as security for the repayment
      of
      the Loans and all other sums due from Debtors to Lenders arising under the
      Transaction Documents (as defined in the Subscription Agreement), and any other
      agreement between or among them (collectively, the "Obligations"), each Debtor,
      for good and valuable consideration, receipt of which is acknowledged, has
      agreed to grant to the Collateral Agent, for the benefit of the Lenders, a
      security interest in the Collateral (as such term is hereinafter defined),
      on
      the terms and conditions hereinafter set forth. Obligations include all future
      advances by Lenders to Debtor made pursuant to the Subscription
      Agreement.

    

    2.4 The
      Lenders have appointed the Collateral Agent pursuant to that certain Collateral
      Agent Agreement dated at or about the date of this Agreement (“Collateral Agent
      Agreement”), among the Lenders and Collateral Agent.

    

    2.5 The
      following defined terms which are defined in the Uniform Commercial Code in
      effect in the State of New York on the date hereof are used herein as so
      defined: Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
      Instruments, Inventory and Proceeds. Other capitalized terms employed herein
      shall have the meanings attributed to them in the Subscription
      Agreement.

    

    3. Grant
      of General Security Interest in Collateral.

    

    3.1
      As
      security for the Obligations of Debtors, each Debtor hereby grants the
      Collateral Agent, for the benefit of the Lenders, a security interest in the
      Collateral.

    

    3.2
      “Collateral”
      shall mean all of the following property of Debtors:

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    (A) All
      now
      owned and hereafter acquired right, title and interest of Debtors in, to and
      in
      respect of all Accounts, Goods, real or personal property, all present and
      future books and records relating to the foregoing and all products and Proceeds
      of the foregoing, and as set forth below:

    

    (i) All
      now
      owned and hereafter acquired right, title and interest of Debtors in, to and
      in
      respect of all: Accounts, interests in goods represented by Accounts, returned,
      reclaimed or repossessed goods with respect thereto and rights as an unpaid
      vendor; contract rights; Chattel Paper; investment property; General Intangibles
      (including but not limited to, tax and duty claims and refunds, registered
      and
      unregistered patents (including but not limited to the patents, patents pending
      and applications set forth on Schedule B hereto), trademarks, service marks,
      certificates, copyrights trade names, applications for the foregoing, trade
      secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
      whether as licensor or licensee, chooses in action and other claims, and
      existing and future leasehold interests in equipment, real estate and fixtures);
      Documents; Instruments; letters of credit, bankers’ acceptances or guaranties;
      cash moneys, deposits; securities, bank accounts, deposit accounts, credits
      and
      other property now or hereafter owned or held in any capacity by Debtors, as
      well as agreements or property securing or relating to any of the items referred
      to above;

    

    (ii) Goods:
      All now
      owned and hereafter acquired right, title and interest of Debtors in, to and
      in
      respect of goods, including, but not limited to:

    

    (a) All
      Inventory, wherever located, whether now owned or hereafter acquired, of
      whatever kind, nature or description, including all raw materials,
      work-in-process, finished goods, and materials to be used or consumed in
      Debtors’ business; finished goods, timber cut or to be cut, oil, gas,
      hydrocarbons, and minerals extracted or to be extracted, and all names or marks
      affixed to or to be affixed thereto for purposes of selling same by the seller,
      manufacturer, lessor or licensor thereof and all Inventory which may be returned
      to any Debtor by its customers or repossessed by any Debtor and all of Debtors’
right, title and interest in and to the foregoing (including all of a Debtor’s
      rights as a seller of goods);

    

    (b) All
      Equipment and fixtures, wherever located, whether now owned or hereafter
      acquired, including, without limitation, all machinery, furniture and fixtures,
      and any and all additions, substitutions, replacements (including spare parts),
      and accessions thereof and thereto (including, but not limited to Debtors’
rights to acquire any of the foregoing, whether by exercise of a purchase option
      or otherwise);

    

    (iii) Property:
      All now
      owned and hereafter acquired right, title and interests of Debtors in, to and
      in
      respect of any other personal property in or upon which a Debtor has or may
      hereafter have a security interest, lien or right of setoff; 

    

    (iv) Books
      and Records:
      All
      present and future books and records relating to any of the above including,
      without limitation, all computer programs, printed output and computer readable
      data in the possession or control of the Debtors, any computer service bureau
      or
      other third party; and

    

    (v) Products
      and Proceeds:
      All
      products and Proceeds of the foregoing in whatever form and wherever located,
      including, without limitation, all insurance proceeds and all claims against
      third parties for loss or destruction of or damage to any of the
      foregoing.

    

    (B) All
      now
      owned and hereafter acquired right, title and interest of Debtors in, to and
      in
      respect of the following:

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (i) the
      shares of stock of the Guarantor, which the Debtor represents equal 100% of
      the
      equity ownership interest in the Guarantor, the certificates representing such
      shares together with an executed stock power, and other rights, contractual
      or
      otherwise, in respect thereof and all dividends, distributions, cash,
      instruments, investment property and other property from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any or
      all
      of such shares;

     

    (ii) all
      additional shares of stock, partnership interests, member interests or other
      equity interests from time to time acquired by Debtor, in any Subsidiary (as
      defined in the Subscription Agreement) not a Subsidiary of the Debtor on the
      date hereof (“Future Subsidiaries”), the certificates representing such
      additional shares, and other rights, contractual or otherwise, in respect
      thereof and all dividends, distributions, cash, instruments, investment property
      and other property from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all of such additional
      shares, interests or equity; and 

    

    (iii) all
      security entitlements of Debtor in, and all Proceeds of any and all of the
      foregoing in each case, whether now owned or hereafter acquired by Debtor and
      howsoever its interest therein may arise or appear (whether by ownership,
      security interest, lien, claim or otherwise).

    

    3.3 The
      Collateral Agent is hereby specifically authorized, after the Maturity Date
      (defined in the Notes) accelerated or otherwise, or after the occurrence of
      an
      Event of Default (as defined herein) and the expiration of any applicable cure
      period, to transfer any Collateral into the name of the Collateral Agent and
      to
      take any and all action deemed advisable to the Collateral Agent to remove
      any
      transfer restrictions affecting the Collateral.

    

    4. Perfection
      of Security Interest.

    

    4.1 Each
      Debtor shall prepare, execute and deliver to the Collateral Agent UCC-1
      Financing Statements. The Collateral Agent is instructed to prepare and file
      at
      each Debtor’s cost and expense, financing statements in such jurisdictions
      deemed advisable to the Collateral Agent, including but not limited to the
      State
      of Nevada. The Financing Statements are deemed to have been filed for the
      benefit of the Collateral Agent and Lenders identified on Schedule A
      hereto.

    

    4.2 Upon
      the
      execution of this Agreement, Parent shall deliver to Collateral Agent stock
      certificates representing all of the shares of outstanding capital stock of
      the
      Guarantor (the "Securities"). All such certificates shall be held by or on
      behalf of Collateral Agent pursuant hereto and shall be delivered in suitable
      form for transfer by delivery, or shall be accompanied by duly executed
      instruments of transfer or assignment or undated stock powers executed in blank,
      all in form and substance satisfactory to Collateral Agent. 

     

    4.3
      All
      other
      certificates and instruments constituting Collateral from time to time required
      to be pledged to Collateral Agent pursuant to the terms hereof (the "Additional
      Collateral") shall be delivered to Collateral Agent promptly upon receipt
      thereof by or on behalf of Debtors. All such certificates and instruments shall
      be held by or on behalf of Collateral Agent pursuant hereto and shall be
      delivered in suitable form for transfer by delivery, or shall be accompanied
      by
      duly executed instruments of transfer or assignment or undated stock powers
      executed in blank, all in form and substance satisfactory to Collateral Agent.
      If any Collateral consists of uncertificated securities, unless the immediately
      following sentence is applicable thereto, Debtors shall cause Collateral Agent
      (or its custodian, nominee or other designee) to become the registered holder
      thereof, or cause each issuer of such securities to agree that it will comply
      with instructions originated by Collateral Agent with respect to such securities
      without further consent by Debtors. If any Collateral consists of security
      entitlements, Debtors shall transfer such security entitlements to Collateral
      Agent (or its custodian, nominee or other designee) or cause the applicable
      securities intermediary to agree that it will comply with entitlement orders
      by
      Collateral Agent without further consent by Debtors. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4.4 Within
      five (5) days after the receipt by a Debtor of any Additional Collateral, a
      Pledge Amendment, duly executed by such Debtor, in substantially the form of
      Annex I hereto (a "Pledge Amendment"), shall be delivered to Collateral Agent
      in
      respect of the Additional Collateral to be pledged pursuant to this Agreement.
      Each Debtor hereby authorizes Collateral Agent to attach each Pledge Amendment
      to this Agreement and agrees that all certificates or instruments listed on
      any
      Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder
      constitute Collateral.

     

    4.5 If
      Debtor
      shall receive, by virtue of Debtor being or having been an owner of any
      Collateral, any (i) stock certificate (including, without limitation, any
      certificate representing a stock dividend or distribution in connection with
      any
      increase or reduction of capital, reclassification, merger, consolidation,
      sale
      of assets, combination of shares, stock split, spin-off or split-off),
      promissory note or other instrument, (ii) option or right, whether as an
      addition to, substitution for, or in exchange for, any Collateral, or otherwise,
      (iii) dividends payable in cash (except such dividends permitted to be retained
      by Debtor pursuant to Section 5.2 hereof) or in securities or other property
      or
      (iv) dividends or other distributions in connection with a partial or total
      liquidation or dissolution or in connection with a reduction of capital, capital
      surplus or paid-in surplus, Debtor shall receive such stock certificate,
      promissory note, instrument, option, right, payment or distribution in trust
      for
      the benefit of Collateral Agent, shall segregate it from Debtor's other property
      and shall deliver it forthwith to Collateral Agent, in the exact form received,
      with any necessary endorsement and/or appropriate stock powers duly executed
      in
      blank, to be held by Collateral Agent as Collateral and as further collateral
      security for the Obligations.

    

    5. Distribution.

    

    5.1 So
      long
      as an Event of Default does not exist, Debtors shall be entitled to exercise
      all
      voting power pertaining to any of the Collateral, provided such exercise is
      not
      contrary to the interests of the Lenders and does not impair the
      Collateral.

    

    5.2. At
      any
      time an Event of Default exists or has occurred, all rights of Debtors, upon
      notice given by Collateral Agent, to exercise the voting power and receive
      payments, which it would otherwise be entitled to pursuant to Section 5.1,
      shall
      cease and all such rights shall thereupon become vested in Collateral Agent,
      which shall thereupon have the sole right to exercise such voting power and
      receive such payments.

    

    5.3 All
      dividends, distributions, interest and other payments which are received by
      Debtors contrary to the provisions of Section 5.2 shall be received in trust
      for
      the benefit of Collateral Agent as security and Collateral for payment of the
      Obligations shall be segregated from other funds of Debtors, and shall be
      forthwith paid over to Collateral Agent as Collateral in the exact form received
      with any necessary endorsement and/or appropriate stock powers duly executed
      in
      blank, to be held by Collateral Agent as Collateral and as further collateral
      security for the Obligations.

    

    6. Further
      Action By Debtors; Covenants and Warranties.

    

    6.1 Except
      for Permitted Liens, Collateral Agent at all times shall have a perfected
      security interest in the Collateral. Each Debtor represents that it has and
      will
      continue to have full title to the Collateral free from any liens, leases,
      encumbrances, judgments or other claims. The Collateral Agent's security
      interest in the Collateral constitutes and will continue to constitute a first,
      prior and indefeasible security interest in favor of Collateral Agent. Each
      Debtor will do all acts and things, and will execute and file all instruments
      (including, but not limited to, security agreements, financing statements,
      continuation statements, etc.) reasonably requested by Collateral Agent to
      establish, maintain and continue the perfected security interest of Collateral
      Agent in the perfected Collateral, and will promptly on demand, pay all costs
      and expenses of filing and recording, including the costs of any searches
      reasonably deemed necessary by Collateral Agent from time to time to establish
      and determine the validity and the continuing priority of the security interest
      of Collateral Agent, and also pay all other claims and charges that, in the
      opinion of Collateral Agent, exercised in good faith, are reasonably likely
      to
      materially prejudice, imperil or otherwise affect the Collateral or Collateral
      Agent’s or Lenders’ security interests therein.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    6.2 Except
      in
      connection with sales of Collateral, subject to Permitted Liens or other than
      in
      the ordinary course of business, for fair value and in cash, and except for
      Collateral which is substituted by assets of identical or greater value (with
      the consent of the Collateral Agent) or which is inconsequential in value,
      each
      Debtor will not sell, transfer, assign or pledge those items of Collateral
      (or
      allow any such items to be sold, transferred, assigned or pledged), without
      the
      prior written consent of Collateral Agent other than a transfer of the
      Collateral to a wholly-owned United States formed and located subsidiary or
      to
      another Debtor on prior notice to Collateral Agent, and provided the Collateral
      remains subject to the security interest herein described. Although Proceeds
      of
      Collateral are covered by this Agreement, this shall not be construed to mean
      that Collateral Agent consents to any sale of the Collateral, except as provided
      herein. Sales of Collateral in the ordinary course of business shall be free
      of
      the security interest of Lenders and Collateral Agent and Lenders and Collateral
      Agent shall promptly execute such documents (including without limitation
      releases and termination statements) as may be required by Debtors to evidence
      or effectuate the same.

    

    6.3 Debtor
      will, at all reasonable times during regular business hours and upon reasonable
      notice, allow Collateral Agent or its representatives free and complete access
      to the Collateral and all of such Debtor's records which in any way relate
      to
      the Collateral, for such inspection and examination as Collateral Agent
      reasonably deems necessary.

    

    6.4 Debtor,
      at its sole cost and expense, will protect and defend this Security Agreement,
      all of the rights of Collateral Agent and Lenders hereunder, and the Collateral
      against the claims and demands of all other persons.

    

    6.5 Debtor
      will promptly notify Collateral Agent of any levy, distraint or other seizure
      by
      legal process or otherwise of any part of the Collateral, and of any threatened
      or filed claims or proceedings that are reasonably likely to affect or impair
      any of the rights of Collateral Agent under this Security Agreement in any
      material respect.

    

    6.6 Debtor,
      at its own expense, will obtain and maintain in force insurance policies
      covering losses or damage to those items of Collateral which constitute physical
      personal property, which insurance shall be of the types customarily insured
      against by companies in the same or similar business, similarly situated, in
      such amounts (with such deductible amounts) as is customary for such companies
      under the same or similar circumstances, similarly situated. Debtor shall make
      the Collateral Agent a loss payee thereon to the extent of its interest in
      the
      Collateral. Collateral Agent is hereby irrevocably (until the Obligations are
      paid in full) appointed each Debtor’s attorney-in-fact to endorse any check or
      draft that may be payable to such Debtor so that Collateral Agent may collect
      the proceeds payable for any loss under such insurance. The proceeds of such
      insurance, less any costs and expenses incurred or paid by Collateral Agent
      in
      the collection thereof, shall be applied either toward the cost of the repair
      or
      replacement of the items damaged or destroyed, or on account of any sums secured
      hereby, whether or not then due or payable.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    6.7 Collateral
      Agent may, at its option, and without any obligation to do so, pay, perform
      and
      discharge any and all amounts, costs, expenses and liabilities herein agreed
      to
      be paid or performed by Debtor upon
      Debtor’s
      failure
      to do
      so. All
      amounts expended by Collateral Agent in so doing shall become part of the
      Obligations secured hereby, and shall be immediately due and payable by Debtor
      to Collateral Agent upon demand
      and
      shall
      bear interest at the lesser of 15% per annum or the highest legal amount from
      the dates of such expenditures until paid.

    

    6.8 Upon
      the
      request of Collateral Agent, Debtors will furnish to Collateral Agent within
      five (5) business days thereafter, or to any proposed assignee of this Security
      Agreement, a written statement in form reasonably satisfactory to Collateral
      Agent, duly acknowledged, certifying the amount of the principal and interest
      and any other sum then owing under the Obligations, whether to its knowledge
      any
      claims, offsets or defenses exist against the Obligations or against this
      Security Agreement, or any of the terms and provisions of any other agreement
      of
      Debtors securing the Obligations. In connection with any assignment by
      Collateral Agent of this Security Agreement, each Debtor hereby agrees to cause
      the insurance policies required hereby to be carried by such Debtor, if any,
      to
      be endorsed in form satisfactory to Collateral Agent or to such assignee, with
      loss payable clauses in favor of such assignee, and to cause such endorsements
      to be delivered to Collateral Agent within ten (10) calendar days after request
      therefor by Collateral Agent.

    

    6.9 Each
      Debtor will, at its own expense, make, execute, endorse, acknowledge, file
      and/or deliver to the Collateral Agent from time to time such vouchers,
      invoices, schedules, confirmatory assignments, conveyances, financing
      statements, transfer endorsements, powers of attorney, certificates, reports
      and
      other reasonable assurances or instruments and take further steps relating
      to
      the Collateral and other property or rights covered by the security interest
      hereby granted, as the Collateral Agent may reasonably require to perfect its
      security interest hereunder.

    

    6.10 Debtors
      represent and warrant that they are the true and lawful exclusive owner of
      the
      Collateral, free and clear of any liens and encumbrances.

    

    6.11 Each
      Debtor hereby agrees not to divest itself of any right under the Collateral
      except as permitted herein absent prior written approval of the Collateral
      Agent, except to a subsidiary organized and located in the United States on
      prior notice to Collateral Agent provided the Collateral remains subject to
      the
      security interest herein described.

     

    6.12 Each
      Debtor shall cause each Subsidiary of such Debtor in existence on the date
      hereof and each Subsidiary not in existence on the date hereof to execute and
      deliver to Collateral Agent promptly and in any event within 10 days after
      the
      formation, acquisition or change in status thereof (A) a guaranty guaranteeing
      the Obligations and (B) if requested by Collateral Agent, a security and pledge
      agreement substantially in the form of this Agreement together with (x)
      certificates evidencing all of the capital stock of each Subsidiary of and
      any
      entity owned by such Subsidiary, (y) undated stock powers executed in blank
      with
      signatures guaranteed, and (z) such opinion of counsel and such approving
      certificate of such Subsidiary as Collateral Agent may reasonably request in
      respect of complying with any legend on any such certificate or any other matter
      relating to such shares and (C) such other agreements, instruments, approvals,
      legal opinions or other documents reasonably requested by Collateral Agent
      in
      order to create, perfect, establish the first priority of or otherwise protect
      any lien purported to be covered by any such pledge and security agreement
      or
      otherwise to effect the intent that all property and assets of such Subsidiary
      shall become Collateral for the Obligations. 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 30% of (A) 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, (B) 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 (C) 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. Annex
      I annexed hereto contains a list of all Subsidiaries of the Debtors as of the
      date of this Agreement.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    7. Power
      of Attorney.

    

    At
      any
      time an Event of Default has occurred and is continuing, each Debtor hereby
      irrevocably constitutes and appoints the Collateral Agent as the true and lawful
      attorney of such Debtor, with full power of substitution, in the place and
      stead
      of such Debtor and in the name of such Debtor or otherwise, at any time or
      times, in the discretion of the Collateral Agent, to take any action and to
      execute any instrument or document which the Collateral Agent may deem necessary
      or advisable to accomplish the purposes of this Agreement. This power of
      attorney is coupled with an interest and is irrevocable until the Obligations
      are satisfied.

    

    8. Performance
      By The Collateral Agent.

    

    If
      a
      Debtor fails to perform any material covenant, agreement, duty or obligation
      of
      such Debtor under this Agreement, the Collateral Agent may, after any applicable
      cure period, at any time or times in its discretion, take action to effect
      performance of such obligation. All reasonable expenses of the Collateral Agent
      incurred in connection with the foregoing authorization shall be payable by
      Debtors as provided in Paragraph 12.1 hereof. No discretionary right, remedy
      or
      power granted to the Collateral Agent under any part of this Agreement shall
      be
      deemed to impose any obligation whatsoever on the Collateral Agent with respect
      thereto, such rights, remedies and powers being solely for the protection of
      the
      Collateral Agent.

    

    9. Event
      of Default.

    

    An
      event
      of default ("Event of Default") shall be deemed to have occurred hereunder
      upon
      the occurrence of any event of default as defined and described in this
      Agreement, in the Notes, the Subscription Agreement, and any other agreement
      to
      which Debtor and a Lender are parties. Upon and after any Event of Default,
      after the applicable cure period, if any, any or all of the Obligations shall
      become immediately due and payable at the option of the Collateral Agent, for
      the benefit of the Lenders, and the Collateral Agent may dispose of Collateral
      as provided below. A default by Debtor of any of its material obligations
      pursuant to this Agreement and any of the Transaction Documents (as defined
      in
      the Subscription Agreement) shall be an Event of Default hereunder and an “Event
      of Default” as defined in the Notes, and Subscription Agreement.

    

    10. Disposition
      of Collateral.

    

    Upon
      and
      after any Event of Default which is then continuing,

    

    10.1 The
      Collateral Agent may exercise its rights with respect to each and every
      component of the Collateral, without regard to the existence of any other
      security or source of payment for the Obligations. In addition to other rights
      and remedies provided for herein or otherwise available to it, the Collateral
      Agent shall have all of the rights and remedies of a lender on default under
      the
      Uniform Commercial Code then in effect in the State of New York.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    10.2 If
      any
      notice to Debtors of the sale or other disposition of Collateral is required
      by
      then applicable law, five business (5) days prior written notice (which Debtors
      agree is reasonable notice within the meaning of Section 9.612(a) of the Uniform
      Commercial Code) shall be given to Debtors of the time and place of any sale
      of
      Collateral which Debtors hereby agree may be by private sale. The rights granted
      in this Section are in addition to any and all rights available to Collateral
      Agent under the Uniform Commercial Code.

    

    10.3 The
      Collateral Agent is authorized, at any such sale, if the Collateral Agent deems
      it advisable to do so, in order to comply with any applicable securities laws,
      to restrict the prospective bidders or purchasers to persons who will represent
      and agree, among other things, that they are purchasing the Collateral for
      their
      own account for investment, and not with a view to the distribution or resale
      thereof, or otherwise to restrict such sale in such other manner as the
      Collateral Agent deems advisable to ensure such compliance. Sales made subject
      to such restrictions shall be deemed to have been made in a commercially
      reasonable manner.

    

    10.4 All
      proceeds received by the Collateral Agent for the benefit of the Lenders in
      respect of any sale, collection or other enforcement or disposition of
      Collateral, shall be applied (after deduction of any amounts payable to the
      Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations
      pro
      rata among the Lenders in proportion to their interests in the Obligations.
      Upon
      payment in full of all Obligations, Debtors shall be entitled to the return
      of
      all Collateral, including cash, which has not been used or applied toward the
      payment of Obligations or used or applied to any and all costs or expenses
      of
      the Collateral Agent incurred in connection with the liquidation of the
      Collateral (unless another person is legally entitled thereto). Any assignment
      of Collateral by the Collateral Agent to Debtors shall be without representation
      or warranty of any nature whatsoever and wholly without recourse. To the extent
      allowed by law, each Lender may purchase the Collateral and pay for such
      purchase by offsetting up to such Lender’s pro rata portion of the purchase
      price with sums owed to such Lender by Debtors arising under the Obligations
      or
      any other source.

    

    11. Waiver
      of Automatic Stay.
      Debtor
      acknowledges and agrees that should a proceeding under any bankruptcy or
      insolvency law be commenced by or against Debtor, or if any of the Collateral
      should become the subject of any bankruptcy or insolvency proceeding, then
      the
      Collateral Agent should be entitled to, among other relief to which the
      Collateral Agent or Lenders may be entitled under the Note, Subscription
      Agreement and any other agreement to which the Debtor, Lenders or Collateral
      Agent are parties, (collectively "Loan Documents") and/or applicable law, an
      order from the court granting immediate relief from the automatic stay pursuant
      to 11 U.S.C. Section 362 to permit the Collateral Agent to exercise all of
      its
      rights and remedies pursuant to the Loan Documents and/or applicable law. Debtor
      EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
      362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
      U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
      OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
      INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL
      AGENT TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
      APPLICABLE LAW. Debtor hereby consents to any motion for relief from stay which
      may be filed by the Collateral Agent in any bankruptcy or insolvency proceeding
      initiated by or against Debtor, and further agrees not to file any opposition
      to
      any motion for relief from stay filed by the Collateral Agent. Debtor
      represents, acknowledges and agrees that this provision is a specific and
      material aspect of this Agreement, and that the Collateral Agent would not
      agree
      to the terms of this Agreement if this waiver were not a part of this Agreement.
      Debtor further represents, acknowledges and agrees that this waiver is
      knowingly, intelligently and voluntarily made, that neither the Collateral
      Agent
      nor any person acting on behalf of the Collateral Agent has made any
      representations to induce this waiver, that Debtor has been represented (or
      has
      had the opportunity to be represented) in the signing of this Agreement and
      in
      the making of this waiver by independent legal counsel selected by Debtor and
      that Debtor has had the opportunity to discuss this waiver with counsel. Debtor
      further agrees that any bankruptcy or insolvency proceeding initiated by Debtor
      will only be brought in the Federal Court within the Southern District of New
      York.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    12. Miscellaneous.

    

    12.1 Expenses.
      Debtors
      shall pay to the Collateral Agent, on demand, the amount of any and all
      reasonable expenses, including, without limitation, attorneys' fees, legal
      expenses and brokers' fees, which the Collateral Agent may incur in connection
      with (a) sale, collection or other enforcement or disposition of Collateral;
      (b)
      exercise or enforcement of any the rights, remedies or powers of the Collateral
      Agent hereunder or with respect to any or all of the Obligations upon breach
      or
      threatened breach; or (c) failure by Debtors to perform and observe any
      agreements of Debtors contained herein which are performed by the Collateral
      Agent.

    

    12.2 Waivers,
      Amendment and Remedies.
      No
      course of dealing by the Collateral Agent and no failure by the Collateral
      Agent
      to exercise, or delay by the Collateral Agent in exercising, any right, remedy
      or power hereunder shall operate as a waiver thereof, and no single or partial
      exercise thereof shall preclude any other or further exercise thereof or the
      exercise of any other right, remedy or power of the Collateral Agent. No
      amendment, modification or waiver of any provision of this Agreement and no
      consent to any departure by Debtors therefrom, shall, in any event, be effective
      unless contained in a writing signed by the Collateral Agent, and then such
      waiver or consent shall be effective only in the specific instance and for
      the
      specific purpose for which given. The rights, remedies and powers of the
      Collateral Agent, not only hereunder, but also under any instruments and
      agreements evidencing or securing the Obligations and under applicable law
      are
      cumulative, and may be exercised by the Collateral Agent from time to time
      in
      such order as the Collateral Agent may elect.

    

    12.3 Notices.
      All
      notices or other communications given or made hereunder shall be in writing
      and
      shall be personally delivered or deemed delivered the first business day after
      being faxed (provided that a copy is delivered by first class mail) to the
      party
      to receive the same at its address set forth below or to such other address
      as
      either party shall hereafter give to the other by notice duly made under this
      Section:

     

    
      
        	
                  

              	
                To
                  Debtors:

              	
                Franklin
                  Towers Enterprises Inc.

              
	 	 	
                5
                  Ash Drive

              
	 	 	
                Center
                  Barnstead, New Hampshire 03225

              
	 	 	
                Attn:
                  Kelly Fan, CEO

              
	 	 	
                Fax:
                  (702) 943-0714

              
	 	 	 
	 	
                With
                  a copy by telecopier only to:  

              
	 	 	 
	 	 	
                David
                  Lubin & Associates

              
	 	 	
                26
                  East Hawthorne Avenue

              
	 	 	
                Valley
                  Stream, NY 11580

              
	 	 	
                Attn:
                  David Lubin, Esq.

              
	 	 	
                Fax:
                  (516) 887-8250

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      
        	 	
                To
                  Lenders:

              	
                To
                  the addresses and telecopier numbers set forth on Schedule
                  A

              
	 	 	 
	 	 	 
	 	
                To
                  the Collateral Agent:

              	
                Eliezer
                  Drew, Esq.

              
	 	 	
                c/o
                  Grushko & Mittman, P.C.

              
	 	 	
                551
                  Fifth Avenue, Suite 1601

              
	 	 	
                New
                  York, New York 10176

              
	 	 	
                Fax:
                  (212) 697-3575

              
	 	 	 
	 	 	 
	 	
                If
                  to Debtor, Lender or Collateral Agent,

              	 
	 	
                with
                  a copy by telecopier only to:

              	 
	 	 	 
	 	 	
                Grushko
                  & Mittman, P.C.

              
	 	 	
                551
                  Fifth Avenue, Suite 1601

              
	 	 	
                New
                  York, New York 10176

              
	 	 	
                Fax:
                  (212) 697-3575

              

      

       

    

    Any
      party
      may change its address by written notice in accordance with this
      paragraph.

    

    12.4 Term;
      Binding Effect.
      This
      Agreement shall (a) remain in full force and effect until payment and
      satisfaction in full of all of the Obligations; (b) be binding upon each Debtor,
      and its successors and permitted assigns; and (c) inure to the benefit of the
      Collateral Agent, for the benefit of the Lenders and their respective successors
      and assigns. 

    

    12.5 Captions.
      The
      captions of Paragraphs, Articles and Sections in this Agreement have been
      included for convenience of reference only, and shall not define or limit the
      provisions hereof and have no legal or other significance
      whatsoever.

    

    12.6 Governing
      Law; Venue; Severability.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without
      regard to conflicts
      of laws principles
      that
      would result in the application of the substantive laws of another
      jurisdiction,
      except
      to the extent that the perfection of the security interest granted hereby in
      respect of any item of Collateral may be governed by the law of another
      jurisdiction. Any legal action or proceeding against a Debtor with respect
      to
      this Agreement may be brought in the state and federal courts located in the
      State and county of New York,
      and, by
      execution and delivery of this Agreement, each Debtor hereby irrevocably accepts
      for itself and in respect of its property, generally and unconditionally, the
      jurisdiction of the aforesaid courts. Each Debtor hereby irrevocably waives
      any
      objection which they may now or hereafter have to the laying of venue of any
      of
      the aforesaid actions or proceedings arising out of or in connection with this
      Agreement brought in the aforesaid courts and hereby further irrevocably waives
      and agrees not to plead or claim in any such court that any such action or
      proceeding brought in any such court has been brought in an inconvenient forum.
      If any provision of this Agreement, or the application thereof to any person
      or
      circumstance, is held invalid, such invalidity shall not affect any other
      provisions which can be given effect without the invalid provision or
      application, and to this end the provisions hereof shall be severable and the
      remaining, valid provisions shall remain of full force and effect.

    

    12.7 Entire
      Agreement.
      This
      Agreement contains the entire agreement of the parties and supersedes all other
      agreements and understandings, oral or written, with respect to the matters
      contained herein.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    12.8 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.

    

    13. Intercreditor
      Terms.
      As
      between the Lenders, any distribution under paragraph 10.4 shall be made
      proportionately based upon the remaining principal amount (plus accrued and
      unpaid interest) to each as to the total amount then owed to the Lenders as
      a
      whole. The rights of each Lender hereunder are pari
      passu
      to the
      rights of the other Lenders hereunder. Any recovery hereunder shall be shared
      ratably among the Lenders according to the then remaining principal amount
      owed
      to each (plus accrued and unpaid interest) as to the total amount then owed
      to
      the Lenders as a whole. 

    

    14. Termination;
      Release.
      When
      the Obligations have been indefeasibly paid and performed in full or
      all
      outstanding Convertible Notes have been converted to common stock pursuant
      to
      the terms of the Convertible Notes and the Subscription Agreements,
      this
      Agreement shall terminated, and the Collateral Agent, at the request and sole
      expense of the Debtors, will execute and deliver to the Debtors the proper
      instruments (including UCC termination statements) acknowledging the termination
      of the Security Agreement, and duly assign, transfer and deliver to the Debtors,
      without recourse, representation or warranty of any kind whatsoever, such of
      the
      Collateral, including, without limitation, Securities and any Additional
      Collateral, as may be in the possession of the Collateral Agent.

    

    15. Collateral
      Agent.

    

    15.1 Collateral
      Agent Powers.
      The
      powers conferred on the Collateral Agent hereunder are solely to protect its
      interest (on behalf of the Lenders) in the Collateral and shall not impose
      any
      duty on it to exercise any such powers.

    

    15.2 Reasonable
      Care.
      The
      Collateral Agent is required to exercise reasonable care in the custody and
      preservation of any Collateral in its possession; provided, however, that the
      Collateral Agent shall be deemed to have exercised reasonable care in the
      custody and preservation of any of the Collateral if it takes such action for
      that purposes as any owner thereof reasonably requests in writing at times
      other
      than upon the occurrence and during the continuance of any Event of Default,
      but
      failure of the Collateral Agent, to comply with any such request at any time
      shall not in itself be deemed a failure to exercise reasonable
      care.

    

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      undersigned have executed and delivered this Security Agreement, as of the
      date
      first written above.

     

    
      	“DEBTOR”
FRANKLIN
              TOWERS ENTERPRISES INC.
a
              Nevada corporation	 	 	“THE COLLATERAL
              AGENT”
ELIEZER DREW
	 	 	 	 	 
	
              By: 
                

            	/s/
              Kelly Fan	 	
              
              

            	/s/
              Eliezer Drew
	 Its:	
              
Chief
              Executive Officer	 	 	
              
Eliezer
              Drew

    

    
       

      
        	
                “SUBSIDIARY”     

                CHONGQING
                  QILUO TEXTILE CO., LTD.

                a
                  People’s Republic of China corporation

              	 	 	 
	 	 	 	 	 
	
                By: 

              	/s/
                Ding Liang Kuang	 	
                
                

              	 
	 Its:	
                
Chief
                Executive Officer	 	 	
              

      

       

      
        APPROVED
          BY “LENDERS”:

        

          
            	
                    First
                      Mirage, Inc.

                     

                    /s/
                      David A. Rapaport
                      
                      

                    

                    Name:
                      David A. Rapaport

                    Title:
                      President

                  	 	
                    Generation
                      Capital Associates

                     

                    /s/
                      David A. Rapaport
                      
                      

                    

                    Name:
                      David A. Rapaport

                    Title:
                      Executive Vice President

                  
	 	 	 
	
                    The
                      Hart Organization Corp.

                     

                    /s/
                      David A. Rapaport
                      
                      
Name:
                      David A. Rapaport

                    Title:
                      Executive Vice President

                  	 	
                    Truk
                      Opportunity Fund, LLC

                    By:
                      Atoll Asset Management, LLC

                     

                    /s/
                      Stephen Saltzstein
                      
                      

                    

                    Name:
                      Stephen Saltzstein

                    Title:
                      

                  
	 	 	 
	
                    Truk
                      International Fund, LP

                    By:
                      Atoll Asset Management, LLC

                     

                    /s/
                      Stephen Saltzstein
                      
                      

                    

                    Name:
                      Stephen Saltzstein

                    Title:

                  	 	
                    Alpha
                      Capital Anstalt

                     

                    /s/
                      Konrad Ackerman
                      
                      

                    

                    Name:
                      Konrad Ackerman

                    Title:
                      Director

                  
	 	 	 
	
                    Whalehaven
                      Capital Fund Limited

                     

                    /s/
                      Brian Mazzella
                      
                      
Name:
                      Brian Mazzella

                    Title:
                      President

                  	 	
                    Professional
                      Offshore Opportunity Fund, Ltd.

                     

                    /s/
                      Marc K. Swickle
                      
                      

                    

                    Name:
                      Marc K. Swickle

                    Title:
                      Manager

                  

          

        

        
 

        

        This
          Security Agreement may be signed by facsimile signature
          and

        delivered
          by confirmed facsimile transmission.

         

      

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    SCHEDULE
      A TO SECURITY AGREEMENT

    

    
      	
              LENDER

            	 	
              PRINCIPAL
                AMOUNT OF NOTE TO BE ISSUED ON THE CLOSING
                DATE

            
	 	 	 
	 	 	 
	 	 	 

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    SCHEDULE
      B TO SECURITY AGREEMENT

    

    PATENTS,
      PATENTS PENDING, APPLICATIONS

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    ANNEX
      I

     

    TO

     

    SECURITY
      AGREEMENT

     

    PLEDGE
      AMENDMENT

     

    This
      Pledge Amendment, dated _________ __ 200_, is delivered pursuant to Section
      4.3
      of the Security Agreement referred to below. The undersigned hereby agrees
      that
      this Pledge Amendment may be attached to the Security Agreement, dated September
      ___, 2007, as it may heretofore have been or hereafter may be amended, restated,
      supplemented or otherwise modified from time to time and that the shares listed
      on this Pledge Amendment shall be hereby pledged and assigned to Collateral
      Agent and become part of the Collateral referred to in such Security Agreement
      and shall secure all of the Obligations referred to in such Security
      Agreement.

     

    
      	
              Name
                of Issuer

            	 	
              Number

              of
                Shares

            	 	
              Class

            	 	
              Certificate

              Number(s)

            
	
              CHONGQING
                QILUO TEXTILE CO., LTD.

            	 	
              DAVID

            	 	
              PLEASE

            	 	
              FILL
                IN

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

    

    

    
      	 	 	 
	 	FRANKLIN
              TOWERS ENTERPRISES INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

            

    

     

    
      
        
        

      

      
        15

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