Document:

SECURITIES PURCHASE AGREEMENT

 Exhibit 4.6 
  

INNOVATIVE COMPANIES, INC. 
  
 SECURITIES PURCHASE AGREEMENT 
  
 February 10, 2004 

 TABLE OF CONTENTS 
  

							
	 	  	 	  	Page

			
	 1.
	  	 Agreement to Sell and Purchase
	  	1
			
	 2.
	  	 Fees and Warrant. On the Closing Date:
	  	1
			
	 3.
	  	 Closing, Delivery and Payment.
	  	2
	 	  	 3.1
	  	 Closing
	  	2
	 	  	 3.2
	  	 Delivery
	  	2
			
	 4.
	  	 Representations and Warranties of the Company
	  	2
	 	  	 4.1
	  	 Organization, Good Standing and Qualification
	  	3
	 	  	 4.2
	  	 Subsidiaries
	  	3
	 	  	 4.3
	  	 Capitalization; Voting Rights
	  	3
	 	  	 4.4
	  	 Authorization; Binding Obligations
	  	4
	 	  	 4.5
	  	 Liabilities
	  	4
	 	  	 4.6
	  	 Agreements; Action
	  	4
	 	  	 4.7
	  	 Obligations to Related Parties
	  	5
	 	  	 4.8
	  	 Changes
	  	6
	 	  	 4.9
	  	 Title to Properties and Assets; Liens, Etc.
	  	7
	 	  	 4.10
	  	 Intellectual Property
	  	7
	 	  	 4.11
	  	 Compliance with Other Instruments
	  	8
	 	  	 4.12
	  	 Litigation
	  	8
	 	  	 4.13
	  	 Tax Returns and Payments
	  	8
	 	  	 4.14
	  	 Employees
	  	9
	 	  	 4.15
	  	 Registration Rights and Voting Rights
	  	9
	 	  	 4.16
	  	 Compliance with Laws; Permits
	  	9
	 	  	 4.17
	  	 Environmental and Safety Laws
	  	10
	 	  	 4.18
	  	 Valid Offering
	  	10
	 	  	 4.19
	  	 Full Disclosure
	  	10
	 	  	 4.20
	  	 Insurance
	  	10
	 	  	 4.21
	  	 SEC Reports
	  	10
	 	  	 4.22
	  	 Listing
	  	11
	 	  	 4.23
	  	 No Integrated Offering
	  	11
	 	  	 4.24
	  	 Stop Transfer
	  	11
	 	  	 4.25
	  	 Dilution
	  	11
			
	 5.
	  	 Representations and Warranties of the Purchaser
	  	11
	 	  	 5.1
	  	 No Shorting
	  	11
	 	  	 5.2
	  	 Requisite Power and Authority
	  	11
	 	  	 5.3
	  	 Investment Representations
	  	12
	 	  	 5.4
	  	 Purchaser Bears Economic Risk
	  	12
	 	  	 5.5
	  	 Acquisition for Own Account
	  	12
	 	  	 5.6
	  	 Purchaser Can Protect Its Interest
	  	12
	 	  	 5.7
	  	 Accredited Investor
	  	13
	 	  	 5.8
	  	 Legends
	  	13
			
	 6.
	  	 Covenants of the Company
	  	14
	 	  	 6.1
	  	 Stop-Orders
	  	14

  

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	 	  	6.2	  	 Listing
	  	14
	 	  	6.3	  	 Market Regulations
	  	14
	 	  	6.4	  	 Reporting Requirements
	  	14
	 	  	6.5	  	 Use of Funds
	  	14
	 	  	6.6	  	 Access to Facilities
	  	14
	 	  	6.7	  	 Taxes
	  	15
	 	  	6.8	  	 Insurance
	  	15
	 	  	6.9	  	 Intellectual Property
	  	16
	 	  	6.10	  	 Properties
	  	16
	 	  	6.11	  	 Confidentiality
	  	16
	 	  	6.12	  	 Required Approvals
	  	16
	 	  	6.13	  	 Reissuance of Securities
	  	17
	 	  	6.14	  	 Opinion
	  	17
			
	 7.
	  	Covenants of the Purchaser	  	17
	 	  	7.1	  	 Confidentiality
	  	17
	 	  	7.2	  	 Non-Public Information
	  	18
			
	 8.
	  	Covenants of the Company and Purchaser Regarding Indemnification	  	18
	 	  	8.1	  	 Company Indemnification
	  	18
	 	  	8.2	  	 Purchaser’s Indemnification
	  	18
	 	  	8.3	  	 Procedures
	  	18
			
	 9.
	  	Registration Rights, Indemnification.	  	18
	 	  	9.1	  	 Registration Rights Granted.
	  	18
	 	  	9.2	  	 Indemnification.
	  	18
	 	  	9.3	  	 Offering Restrictions
	  	20
			
	 10.
	  	Miscellaneous	  	21
	 	  	10.1	  	 Governing Law
	  	21
	 	  	10.2	  	 Survival
	  	21
	 	  	10.3	  	 Successors
	  	22
	 	  	10.4	  	 Entire Agreement
	  	22
	 	  	10.5	  	 Severability
	  	22
	 	  	10.6	  	 Amendment and Waiver
	  	22
	 	  	10.7	  	 Delays or Omissions
	  	22
	 	  	10.8	  	 Notices
	  	22
	 	  	10.9	  	 Attorneys’ Fees
	  	23
	 	  	10.10	  	 Titles and Subtitles
	  	23
	 	  	10.11	  	 Facsimile Signatures; Counterparts
	  	24
	 	  	10.12	  	 Broker’s Fees
	  	24
	 	  	10.13	  	 Construction
	  	24

  

			
	 LIST OF EXHIBITS

	 Form of Convertible Term Note
	  	Exhibit A
	 Form of Warrant
	  	Exhibit B
	 Form of Opinion
	  	Exhibit C
	 Form of Escrow Agreement
	  	Exhibit D

  

 ii 

 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of February 10, 2004, by and
among Innovative Companies, Inc., a Florida corporation (the “Company”), Innovative Companies, Inc. Subsidiary (the Company’s wholly owned subsidiary)(“Subsidiary”) and Laurus Master Fund, Ltd., a Cayman Islands company (the
“Purchaser”). 
  
 RECITALS 
  
 WHEREAS, the Company and the Subsidiary have authorized the sale to the
Purchaser of the Subsidiary’s Series A Preferred Stock of in the stated amount of Five Million Dollars ($5,000,000) (the “Series A Preferred”), which Series A Preferred is convertible into shares of the Company’s common stock,
$0.01 par value per share (the “Common Stock”) at a conversion price of $6.94 per share of Common Stock (“Conversion Price”); 
  
 WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase up to 150,000 shares of the Company’s Common Stock in connection with
Purchaser’s purchase of the Series A Preferred; 
  
 WHEREAS,
Purchaser desires to purchase the Series A Preferred and Warrant on the terms and conditions set forth herein; and 
  
 WHEREAS, each of Subsidiary and the Company desires to issue and sell the Series A Preferred and Warrant, respectively, to Purchaser on the terms and
conditions set forth herein. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 1. Agreement to Sell and Purchase. Pursuant to the terms and
conditions set forth in this Agreement, on the Closing Date (as defined in Section 3), the Company agrees to cause the Subsidiary to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Subsidiary its Series A Preferred with a
stated value of $5,000,000 convertible into shares of the Company’s Common Stock in accordance with the terms of the Series A Preferred and this Agreement. The Series A Preferred purchased on the Closing Date shall be known as the
“Offering.” The certificate of designations of the Series A Preferred is annexed hereto as Exhibit A. Collectively, the Series A Preferred and Warrant (as defined in Section 2) and Common Stock issuable as dividends on the Series A
Preferred, upon conversion of the Series A Preferred and upon exercise of the Warrant are referred to as the “Securities.” 
  
 2. Fees and Warrant. On the Closing Date: 
  
 (a) The Company will issue and deliver to the Purchaser a Warrant to purchase up to 150,000 shares of Common Stock in connection with the
Offering (the 

 “Warrant”) pursuant to Section 1 hereof. The Warrant must be delivered on the Closing Date. A
form of Warrant is annexed hereto as Exhibit B. All the representations, covenants, warranties, undertakings, and indemnification, and other rights made or granted to or for the benefit of the Purchaser by the Company are hereby also made and
granted in respect of the Warrant and shares of the Company’s Common Stock issuable upon exercise of the Warrant (the “Warrant Shares”). 
  
 (b) Subject to the terms of Section 2(d) below, the Company shall pay to Laurus Capital Management, LLC, manager of Purchaser a closing
payment in an amount equal to three and six tenths percent (3.60%) of the stated value of the Series A Preferred issued to Purchaser on the date hereof. The foregoing fee is referred to herein as the “Closing Payment.” 
  
 (c) The Company shall reimburse the Purchaser for its
reasonable disbursements in preparation of this Agreement and the Related Agreements (as hereinafter defined) and relevant and matters. The Company shall not be required to pay legal expenses and for performing due diligence inquiries in respect of
the transaction contemplated hereby. 
  
 (d) The
Closing Payment, legal fees and due diligence fees (net of deposits previously paid by the Company shall be paid at closing out of funds held pursuant to a Funds Escrow Agreement of even date herewith among the Company, Purchaser, and an Escrow
Agent (the “Funds Escrow Agreement”) and a disbursement letter (the “Disbursement Letter”). 
  
 3. Closing, Delivery and Payment. 
  
 3.1 Closing. Subject to the terms and conditions herein, the closing of the transactions contemplated hereby (the “Closing”), shall take
place on the date hereof, at such time or place as the Company and Purchaser may mutually agree (such date is hereinafter referred to as the “Closing Date”). 
  
 3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form attached hereto as Exhibit C, at the Closing on the
Closing Date, the Company will deliver to the Purchaser, among other things, a Series A Preferred in the form attached as Exhibit A with a stated value of $5,000,000 and a Warrant in the form attached as Exhibit B in the Purchaser’s name
representing 150,000 Warrant Shares and the Purchaser will deliver to the Company, among other things, the amounts set forth in the Disbursement Letter by certified funds or wire transfer. 
  
 4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as of the date of this Agreement as set forth below which disclosures are supplemented by, and subject to the Company’s filings under the Securities Exchange Act of 1934 (collectively, the “Exchange
Act Filings”), copies of which have been provided to the Purchaser. 
  

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 4.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida. The Company has the corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, and the Series A Preferred and the
Warrant to be issued in connection with this Agreement, the Security Agreement dated as of February 10, 2004 between the Company and the Purchaser, the Registration Rights Agreement relating to the Securities dated as of February 10, 2004 between
the Company and the Purchaser and all other agreements referred to herein (collectively, the “Related Agreements”), to issue and sell the Series A Preferred and the shares of Common Stock issuable as dividends and upon conversion of the
Series A Preferred (the “Series A Preferred Shares”), to issue and sell the Warrant and the Warrant Shares, and to carry out the provisions of this Agreement and the Related Agreements and to carry on its business as presently conducted.
The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 
  
 4.2 Subsidiaries. The Company owns all of the issued and outstanding capital stock of [enter subsidiary names]. The Company does not own or control
any equity security or other interest of any other corporation, limited partnership or other business entity. 
  
 4.3 Capitalization; Voting Rights. 
  
 (a) The authorized capital stock of the Company, as of the date hereof consists of
            shares, of which             are shares of Common Stock, par value $0.01 per share,
            shares of which are issued and outstanding, and             are shares of preferred stock, par value
$0.01 per share of which             shares of              Preferred Stock with a stated value of
$            per share and an initial conversion ration of              shares of common stock per preferred share
are issued and outstanding. 
  
 (b) Except as
disclosed on Schedule 4.3, other than: (i) the shares reserved for issuance under the Company’s stock option plans; and (ii) shares which may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Company of any of its securities. Except as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the Series A Preferred or Warrant, or the issuance of any of the Series A Preferred Shares or Warrant Shares, nor the consummation of any transaction contemplated hereby will
result in a change in the price or number of any securities of the Company outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities. 
  
 (c) All issued and outstanding shares of the Company’s Common Stock: (i) have been duly authorized and
validly issued and are fully paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. 
  

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 (d) The rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company’s Certificate of Incorporation (the “Charter”). The Series A Preferred Shares and Warrant Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of
this Agreement and the Company’s Charter, the Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Securities may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. 
  
 4.4 Authorization; Binding Obligations. All corporate action on the part of the Company, its officers and directors necessary for the authorization
of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder at the Closing and, the authorization, sale, issuance and delivery of the Series A Preferred and Warrant has been taken or will be taken prior
to the Closing. The Agreement and the Related Agreements, when executed and delivered and to the extent it is a party thereto, will be valid and binding obligations of the Company enforceable in accordance with their terms, except: 
  
 (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and 
  
 (b) general principles of equity that restrict the availability of equitable or legal remedies. 
  
 The sale of the Series A Preferred and the subsequent conversion of the Series A Preferred
into Series A Preferred Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. The issuance of the Warrant and the subsequent exercise of the Warrant for
Warrant Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. 
  
 4.5 Liabilities. The Company, to the best of its knowledge, has no material contingent liabilities, except current liabilities incurred in the
ordinary course of business and liabilities disclosed in any Exchange Act Filings. 
  
 4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed in any Exchange Act Filings: 
  
 (a) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may involve: (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $50,000 (other than obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business); or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company (other than licenses arising from the purchase of
“off the shelf” or other standard products); or (iii) provisions 
  

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 restricting the development, manufacture or distribution of the Company’s products or services; or
(iv) indemnification by the Company with respect to infringements of proprietary rights. 
  
 (b) Since September 30, 2003, the Company has not: (i) declared or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans or advances to any person not in excess, individually or in the aggregate, of $100,000, other than ordinary advances for travel expenses; or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. 
  
 (c) For the purposes of subsections (a) and (b) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such
subsections. 
  
 4.7 Obligations to Related Parties. Except
as set forth on Schedule 4.7, there are no obligations of the Company to officers, directors, stockholders or employees of the Company other than: 
  
 (a) for payment of salary for services rendered and for bonus payments; 
  
 (b) reimbursement for reasonable expenses incurred on behalf of the Company; 
  
 (c) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company); and 
  

(d) obligations listed in the Company’s financial statements or disclosed in any of its Exchange Act Filings. 
  
 Except as described above or set forth on Schedule 4.7, none of the officers, directors or,
to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company, individually or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may compete with the Company. Except as described above, no officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company and no agreements, understandings or proposed transactions are contemplated between the Company and any such person. Except as set forth on Schedule 4.7, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. 
  

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 4.8 Changes. Since September 30, 2003, except as disclosed in any Exchange Act Filing or in any
Schedule to this Agreement or to any of the Related Agreements, there has not been: 
  
 (a) Any change in the assets, liabilities, financial condition, prospects or operations of the Company, other than changes in the ordinary
course of business, none of which individually or in the aggregate has had or is reasonably expected to have a material adverse effect on such assets, liabilities, financial condition, prospects or operations of the Company; 
  
 (b) Any resignation or termination of any officer, key
employee or group of employees of the Company; 
  
 (c) Any material change, except in the ordinary course of business, in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise; 
  
 (d) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company; 
  
 (e) Any waiver by the Company of a valuable right or of a material debt owed to it; 
  
 (f) Any direct or indirect material loans made by the
Company to any stockholder, employee, officer or director of the Company, other than advances made in the ordinary course of business; 
  
 (g) Any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder; 
  
 (h) Any declaration or payment of any dividend or other
distribution of the assets of the Company; 
  
 (i) Any labor organization activity related to the Company; 
  
 (j) Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business; 
  
 (k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets; 
  

 6 

 (l) Any change in any material agreement to which the Company is a party or by which it
is bound which may materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company; 
  
 (m) Any other event or condition of any character that, either individually or cumulatively, has or may materially and adversely affect
the business, assets, liabilities, financial condition, prospects or operations of the Company; or 
  
 (n) Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (m) above. 
  
 4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9, the Company has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: 
  
 (a) those resulting from taxes which have not yet become
delinquent; 
  
 (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; and 
  
 (c) those that have otherwise arisen in the ordinary course of business. 
  
 All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating
condition and repair and are reasonably fit and usable for the purposes for which they are being used. Except as set forth on Schedule 4.9, the Company is in compliance with all material terms of each lease to which it is a party or is otherwise
bound. 
  
 4.10 Intellectual Property. 
  
 (a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and to the Company’s knowledge as presently proposed to
be conducted (the “Intellectual Property”), without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company bound
by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products. 
  
 (b) The Company has not received any communications alleging that the Company has violated any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company aware of any basis therefor. 
  

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 (c) The Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been rightfully assigned to the Company. 
  
 4.11 Compliance with Other Instruments. Except as set forth on
Schedule 4.11, the Company is not in violation or default of any term of its Charter or Bylaws, or of any material provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of
any judgment, decree, order or writ. The execution, delivery and performance of and compliance with this Agreement and the Related Agreements to which it is a party, and the issuance and sale of the Series A Preferred by the Company and the other
Securities by the Company each pursuant hereto, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term or provision, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to
the Company, its business or operations or any of its assets or properties. 
  
 4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company that
prevents the Company to enter into this Agreement or the Related Agreements, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for any of the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to
initiate. 
  
 4.13 Tax Returns and Payments. The Company
has timely filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to the Company’s knowledge all other taxes due and payable by the
Company on or before the Closing, have been paid or will be paid prior to the time they become delinquent. Except as set forth on Schedule 4.13, the Company has not been advised: 
  
 (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof;
or 
  
 (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. 
  
 The Company has no
knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 
  

 8 

 4.14 Employees. Except as set forth on Schedule 4.14, the Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company. Except as disclosed in the Exchange Act Filings or on Schedule 4.14, the Company
is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the
Company’s knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of
any such individual to be employed by, or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company’s knowledge the continued employment by the Company of its present employees, and
the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company. The Company has not received any notice alleging that any such violation has
occurred. Except for employees who have a current effective employment agreement with the Company, no employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of
employment with the Company. Except as set forth on Schedule 4.14, the Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company, nor does the Company have a present
intention to terminate the employment of any officer, key employee or group of employees. 
  
 4.15 Registration Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, the Company is presently not under any obligation, and has not granted any
rights, to register any of the Company’s presently outstanding securities or any of its securities that may hereafter be issued. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to the Company’s
knowledge, no stockholder of the Company has entered into any agreement with respect to the voting of equity securities of the Company. 
  
 4.16 Compliance with Laws; Permits. Except as set forth on Schedule 4.16, to its knowledge, the Company is not in violation in any material respect
of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement and the issuance of any of the Securities, except such as has been duly and validly obtained or filed, or with respect to any
filings that must be made after the Closing, as will be filed in a timely manner. The Company has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack
of which would materially and adversely affect the business, properties, prospects or financial condition of the Company. 
  

 9 

 4.17 Environmental and Safety Laws. The Company is not in violation of any applicable statute, law
or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. Except as set forth on Schedule
4.17, no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or, to the Company’s knowledge, by any other person or entity on any property owned, leased or used by the Company. For the
purposes of the preceding sentence, “Hazardous Materials” shall mean: 
  
 (a) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous
substances, including building materials; or 
  
 (b) any petroleum products or nuclear materials. 
  
 4.18
Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities
laws. 
  
 4.19 Full Disclosure. The Company has provided
the Purchaser with all information requested by the Purchaser in connection with its decision to purchase the Series A Preferred and Warrant, including all information the Company believes is reasonably necessary to make such investment decision.
Neither this Agreement, the exhibits and schedules hereto, the Related Agreements nor any other document delivered by the Company to Purchaser or its attorneys or agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. Any
financial projections and other estimates provided to the Purchaser by the Company were based on the Company’s experience in the industry and on assumptions of fact and opinion as to future events which the Company, at the date of the issuance
of such projections or estimates, believed to be reasonable. 
  
 4.20 Insurance. The Company has general commercial, product liability, fire and casualty insurance policies with coverages which the Company believes are customary for companies similarly situated to the Company in the same or
similar business. 
  
 4.21 SEC Reports. Except as set forth
on Schedule 4.21, the Company has filed all proxy statements, reports and other documents required to be filed by it under the Exchange Act. The Company has furnished the Purchaser with copies of: (i) its Annual Report on Form 10-KSB for the fiscal
year ended March 31, 2003; and (ii) its Quarterly Reports on Form 10-QSB for the fiscal quarters ended June 30, 2003 and September 30, 2003, and the Form 8-K filings which it has made during 2003 to date (collectively, the “SEC Reports”).
Except as 
  

 10 

 set forth on Schedule 4.21, each SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
  
 4.22 Listing. The Company’s Common Stock is listed for trading on the NASDAQ SmallCap Market (“NASDAQ
SC”) and satisfies all requirements for the continuation of such listing. The Company has not received any notice that its Common Stock will be delisted from NASDAQ SC or that its Common Stock does not meet all requirements for listing.

  
 4.23 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 offering of the Securities
pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings. 
  
 4.24 Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or other order impeding the sale and delivery of any of the Securities at such time as the Securities are registered for public sale or an exemption from registration is
available, except as required by state and federal securities laws. 
  
 4.25 Dilution. The Company specifically acknowledges that its obligation to issue the shares of Common Stock upon conversion of the Series A Preferred and exercise of the Warrant 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. 
  
 5. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement) 
  
 5.1 No Shorting. The Purchaser or any of its affiliates and investment partners has not, will not and will not cause any person or entity, directly
or indirectly, to engage in “short sales” of the Company’s Common Stock or any other hedging strategies as long as the Series A Preferred shall be outstanding. 
  
 5.2 Requisite Power and Authority. Purchaser has all necessary power and authority under all applicable provisions of
law to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All corporate action on Purchaser’s part required for the lawful execution and delivery of this Agreement and the Related Agreements have
been or will be effectively taken prior to the Closing. Upon their execution and delivery, 
  

 11 

 this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance
with their terms, except: 
  
 (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and 
  
 (b) as limited by general principles of equity that restrict the availability of equitable and legal remedies. 
  
 5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in the Agreement, including, without limitation, that the Purchaser is an
“accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to the Series A Preferred and the Warrant to be purchased by it under this Agreement and the Series A Preferred Shares and the Warrant Shares acquired by it upon the
conversion of the Series A Preferred and the exercise of the Warrant, respectively. The Purchaser further confirms that it has had an opportunity to ask questions and receive answers from the Company regarding the Company’s business, management
and financial affairs and the terms and conditions of the Offering, the Series A Preferred, the Warrant and the Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to the Purchaser or to which the Purchaser had access. 
  
 5.4 Purchaser Bears Economic Risk. Purchaser has substantial experience in evaluating and investing in private placement transactions of securities
in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Purchaser must bear the economic risk of this investment until the
Securities are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration is available with respect to such sale. 
  
 5.5 Acquisition for Own Account. Purchaser is acquiring the Series A Preferred and Warrant and the Series A Preferred
Shares and the Warrant Shares for Purchaser’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution. 
  
 5.6 Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management’s, business and financial experience, Purchaser has the capacity to evaluate the merits and risks of its investment in the Series A Preferred, the Warrant and the Securities and to protect its own interests
in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement or the Related
Agreements. 
  

 12 

 5.7 Accredited Investor. Purchaser represents that it is an accredited investor within the meaning
of Regulation D under the Securities Act. 
  
 5.8 Legends.

  
 (a) The Series A Preferred shall bear
substantially the following legend: 
  
 “THIS SERIES A
PREFERRED AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SERIES A PREFERRED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS SERIES A PREFERRED AND THE COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS SERIES A PREFERRED MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS SERIES A PREFERRED OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO INNOVATIVE COMPANIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 (b) The Series A Preferred Shares and the Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall bear a legend which
shall be in substantially the following form until such shares are covered by an effective registration statement filed with the SEC: 
  
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
INNOVATIVE COMPANIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 (c) The Warrant shall bear substantially the following 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, OR
ANY APPLICABLE STATE SECURITIES LAWS. 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 OR
THE 
  

 13 

 UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO INNOVATIVE COMPANIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 6. Covenants of the Company. The Company covenants and agrees with the Purchaser as follows: 
  
 6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission (the “SEC”), 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. 
  
 6.2 Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon conversion of the Series A Preferred and upon the exercise of the Warrant on the NASDAQ SmallCap Market (the “Principal Market”) upon which shares of Common Stock are listed (subject to official notice
of issuance) and shall maintain such listing so long as any other shares of Common Stock shall be so listed. The Company will maintain the listing of its Common Stock on the Principal Market, and will comply in all material respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers (“NASD”) and such exchanges, as applicable. 
  
 6.3 Market Regulations. The Company shall notify the SEC, NASD 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 Purchaser and promptly provide copies thereof to Purchaser. 
  
 6.4 Reporting Requirements. The Company will timely file with the SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange
Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. 
  
 6.5 Use of Funds. The Company agrees that it will use the proceeds of the sale of the Series A Preferred and Warrant for general corporate purposes
only. 
  
 6.6 Access to Facilities. The Company will permit
any representatives designated by the Purchaser (or any successor of the Purchaser), upon reasonable notice and during normal business hours, at such person’s expense and accompanied by a representative of the Company, to: 
  
 (a) visit and inspect any of the properties of the Company;

  

 14 

 (b) examine the corporate and financial records of the Company (unless such examination
is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and 
  
 (c) discuss the affairs, finances and accounts of the Company with the directors, officers and independent accountants of the Company.

  
 Notwithstanding the foregoing, the Company will not provide any material,
non-public information to the Purchaser unless the Purchaser signs a confidentiality agreement and otherwise complies with Regulation FD, under the federal securities laws. 
  
 6.7 Taxes. 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 therefor. 
  
 6.8 Insurance. 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 similar business similarly situated as the Company; 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 which the Company reasonably believes is customary for companies in similar business similarly situated as the Company and to the extent available on
commercially reasonable terms. The Company and each of its subsidiaries set forth in Section 4.2 hereof (the “Subsidiaries”) will jointly and severally bear the full risk of loss from any loss of any nature whatsoever with respect to the
assets pledged to the Purchaser as security for its obligations hereunder and under the Related Agreements. At the Company’s own cost and expense in amounts and with carriers reasonably acceptable to Purchaser, the Company and each of the
Subsidiaries shall (i) keep all its insurable properties and properties in which it has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s including business interruption insurance; (ii) maintain a bond in such amounts as is customary in the
case of companies engaged in businesses similar to the Company’s or the Subsidiary’s insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with
others at any time have access to the assets or funds of the Company either directly or through governmental authority to draw upon such funds or to direct generally the disposition of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or property damage suffered by others; (iv) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which the Company or
the Subsidiary is engaged in business; and (v) furnish Purchaser with (x) copies of all policies and evidence of the 
  

 15 

 maintenance of such policies at least thirty (30) days before any expiration date, (y) excepting the Company’s
workers’ compensation policy, endorsements to such policies naming Purchaser as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance satisfactory to Purchaser, naming Purchaser
as loss payee, and (z) evidence that as to Purchaser the insurance coverage shall not be impaired or invalidated by any act or neglect of the Company or any Subsidiary and the insurer will provide Purchaser with at least thirty (30) days notice
prior to cancellation. The Company and each Subsidiary shall instruct the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to the Company and/or the Subsidiary and Purchaser jointly. In the
event that as of the date of receipt of each loss recovery upon any such insurance, the Purchaser has not declared an event of default with respect to this Agreement or any of the Related Agreements, then the Company shall be permitted to direct the
application of such loss recovery proceeds toward investment in property, plant and equipment that would comprise “Collateral” secured by Purchaser’s security interest pursuant to its security agreement, with any surplus funds to be
applied toward payment of the obligations of the Company to Purchaser. In the event that Purchaser has properly declared an event of default with respect to this Agreement or any of the Related Agreements, then all loss recoveries received by
Purchaser upon any such insurance thereafter may be applied to the obligations of the Company hereunder and under the Related Agreements, in such order as the Purchaser may determine. Any surplus (following satisfaction of all Company obligations to
Purchaser) shall be paid by Purchaser to the Company or applied as may be otherwise required by law. Any deficiency thereon shall be paid by the Company or the Subsidiary, as applicable, to Purchaser, on demand. 
  
 6.9 Intellectual Property. 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. 
  
 6.10 Properties. 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 needful 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. 
  
 6.11 Confidentiality. The Company agrees that it will not disclose, and will not include in any public announcement,
the name of the Purchaser, unless expressly agreed to by the Purchaser or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. The Company may disclose Purchaser’s
identity and the terms of this Agreement to its current and prospective debt and equity financing sources. 
  
 6.12 Required Approvals. For so long as fifty percent (50%) of the principal amount of the Series A Preferred is outstanding, the Company, without
the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, shall not: 
  
 (a) directly or indirectly declare or pay any dividends, other than dividends with respect to its preferred stock; 
  

 16 

 (b) liquidate, dissolve or effect a material reorganization; 
  
 (c) become subject to (including, without limitation, by way
of amendment to or modification of) any agreement or instrument which by its terms would (under any circumstances) restrict the Company’s right to perform the provisions of this Agreement or any of the agreements contemplated thereby;

  
 (d) materially alter or change the scope of
the business of the Company; 
  
 (e) create,
incur, assume or suffer to exist any indebtedness (exclusive of trade debt and debt incurred to finance the purchase of equipment (not in excess of ten percent (10%) per annum of the Company’s assets) whether secured or unsecured [other than
the Company’s indebtedness to Laurus and as set forth on Exhibit 6.12(e) attached hereto and made a part hereof or any refinancings or replacements thereof or any debt incurred in connection with the purchase of assets or in connection
with operating lines of credit as necessary to operate such assets, or any refinancings or replacements thereof]; (ii) cancel any debt owing to it in excess of $100,000 in the aggregate during any 12 month period; (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any obligations of any other Person, except the endorsement of negotiable instruments by a Company for deposit or collection or similar transactions in the ordinary course of
business or guarantees provided to any of the lenders set forth in subparagraph (i) immediately above. 
  
 6.13 Reissuance of Securities. The Company agrees to reissue certificates representing the Securities without the legends set forth in Section 5.7
above at such time as: 
  
 (a) the holder thereof
is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or 
  
 (b) upon resale subject to an effective registration statement after such Securities are registered under the Securities Act. 

 
 The Company agrees to cooperate with the Purchaser in connection with all resales pursuant
to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive reasonably requested representations from the selling Purchaser and broker, if any. 
  
 6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company’s legal counsel. The Company will provide, at the Company’s expense, such other legal opinions in the future as are reasonably necessary for the conversion of the Series A
Preferred and exercise of the Warrant. 
  
 7. Covenants of the
Purchaser. The Purchaser covenants and agrees with the Company as follows: 
  
 7.1 Confidentiality. The Purchaser agrees that it will not disclose, and will not include in any public announcement, the name of the Company, unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only to the extent of such requirement. 
  

 17 

 7.2 Non-Public Information. The Purchaser agrees not to effect any sales in the shares of the
Company’s Common Stock while in possession of material, non-public information regarding the Company if such sales would violate applicable securities law. 
  

8. Covenants of the Company and Purchaser Regarding Indemnification. 
  
 8.1 Company Indemnification. The Company agrees to indemnify, hold harmless, reimburse and defend Purchaser, each of
Purchaser’s officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Purchaser which results, arises out of or is based upon: (i) any misrepresentation by Company or breach of any warranty by Company in this Agreement or in any exhibits or schedules attached hereto or any Related Agreement; or (ii) any
breach or default in performance by Company of any covenant or undertaking to be performed by Company hereunder, or any other agreement entered into by the Company and Purchaser relating hereto. 
  
 8.2 Purchaser’s Indemnification. Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, affiliates, control persons and principal shareholders, at all times against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon: (i) any misrepresentation by Purchaser or breach of any warranty by Purchaser in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or (ii) any breach or default in performance by Purchaser of any covenant or undertaking to be performed by Purchaser hereunder, or any other agreement entered into by the Company and
Purchaser relating hereto. 
  
 8.3 Procedures. The
procedures and limitations set forth in Section 10.2(c) and (d) shall apply to the indemnifications set forth in Sections 8.1 and 8.2 above. 
  
 9. Registration Rights, Indemnification. 
  
 9.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser in respect of the Securities pursuant to a
Registration Rights Agreement dated as of even date herewith between the Company and the Purchaser. 
  
 9.2 Indemnification. (a) In the event of a registration of any Securities under the Securities Act pursuant to the Registration Rights Agreement,
the Company will indemnify and hold harmless the Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Purchaser, or such persons may become subject under the Securities 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 were registered under the Securities Act pursuant to the Registration Rights Agreement, any preliminary prospectus or final
prospectus contained therein, or any 
  

 18 

 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 Purchaser, and each such person for any reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and 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 or on behalf of the Purchaser or any such person in writing specifically for use in any such document. 
  
 (b) In the event of a registration of the Securities under the Securities Act
pursuant to the Registration Rights Agreement, the Purchaser will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company or such persons may become subject under the Securities 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 Securities were registered under the Securities Act pursuant to the Registration Rights Agreement,
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 person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Purchaser will be liable 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 so made in conformity with information furnished in writing to the Company by or on behalf of the Purchaser specifically for use in any such document. 
  

 19 

 (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 10.2(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 10.2(c) 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 10.2(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof; if the indemnified party retains
its own counsel, then the indemnified party shall pay all fees, costs and expenses of such counsel, 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 party 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 Securities Act in any case in which either: (i) the
Purchaser, or any controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 10.2 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 10.2 provides for indemnification in such case; or (ii) contribution under
the Securities Act may be required on the part of the Purchaser or controlling person of the Purchaser in circumstances for which indemnification is provided under this Section 10.2; then, and in each such case, the Company and the Purchaser 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 Purchaser 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, (A) the Purchaser will not be
required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section
10 of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 
  
 9.3 Offering Restrictions. Except as previously disclosed in the SEC Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the 
  

 20 

 Company; or shares of preferred stock issued to pay dividends in respect of the Company’s preferred stock; or equity
or debt issued in connection with an acquisition of a business or assets by the Company; or the issuance by the Company of stock in connection with the establishment of a joint venture partnership or licensing arrangement (these exceptions
hereinafter referred to as the “Excepted Issuances”), the Company will not issue any securities with a continuously variable/floating conversion feature which are or could be (by conversion or registration) free-trading securities (i.e.
common stock subject to a registration statement) prior to the full repayment or conversion of the Series A Preferred (the “Exclusion Period”). 
  
 9.4 Restricted Cash Account. Within one (1) business of Closing, the Company shall place Four Million Seven Hundred Ninety Nine Thousand Seven
Hundred Fifty Dollars ($4,799,750) in a restricted account at Wachovia Bank Account Number 2000016904583 and shall maintain such amounts in the restricted account in such amounts to act as a 100% as reserves against any unredeemed shares of Series A
Preferred Stock of the Subsidiary. The restricted account shall be pledged to Purchaser as security for the performance of the any and all obligations of the Company and/or Subsidiary as more fully described in that certain Pledge and Security
Agreement dated as of the date hereof between the Company and the Purchaser. 
  
 10. Miscellaneous. 
  
 10.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER
AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. 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. 
  
 10.2 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby to the extent provided therein. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 
  

 21 

 10.3 Successors. Except as otherwise expressly provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Securities from time to time, other
than the holders of Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an effective registration statement. Purchaser may not assign its rights hereunder to a competitor of the Company. 
  
 10.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in
any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 
  
 10.5 Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby. 
  
 10.6 Amendment and Waiver. 
  
 (a) This Agreement may be amended or modified only upon the written consent of the Company and the Purchaser. 
  
 (b) The obligations of the Company and the rights of the Purchaser under this Agreement may be waived only with the written consent of the
Purchaser. 
  
 (c) The obligations of the
Purchaser and the rights of the Company under this Agreement may be waived only with the written consent of the Company. 
  
 10.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related Agreements, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement, the Series A Preferred or the Related Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative. 
  
 10.8 Notices. All notices required or
permitted hereunder shall be in writing and shall be deemed effectively given: 
  
 (a) upon personal delivery to the party to be notified; 
  
 (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; 
  
 (c) three (3) business
days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or 
  

 22 

 (d) one (1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. 
  
 All communications
shall be sent as follows: 
  

					
	                 If to the Purchaser, to:
	 	 Innovative Companies, Inc.
 6950 Bryon Dairy Road
 Largo, Fl 33777

			
	 	 	 Attention:
 Facsimile:
	 	 Mr. Jay Taneja, President
 727-544-4386

		
	 	 	 with a copy to:

		
	 	 	 Attention: Thomas Rose, Esq.
 Facsimile: (212) 930-9700

		
	                 If to the Company, to:
	 	 Laurus Master Fund, Ltd.
 c/o Ironshore Corporate Services ltd.
 P.O. Box 1234 G.T.
 Queensgate House, South Church Street
 Grand Cayman, Cayman
Islands

	 	 	 Facsimile:
	 	 345-949-9877

		
	 	 	 with a copy to:

		
	 	 	 John E. Tucker, Esq.
 825 Third Avenue 14th Floor
 New York, NY 10022
 Facsimile: 212-541-4434

  
 or at such other address as the
Company or the Purchaser may designate by written notice to the other parties hereto given in accordance herewith. 
  
 10.9 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 
  
 10.10 Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. 
  

 23 

 10.11 Facsimile Signatures; Counterparts. This Agreement may be executed by facsimile signatures
and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 
  
 10.12 Broker’s Fees. Except as set forth on Schedule 11.12 hereof, Each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated
herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 11.12 being untrue. 
  
 10.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other. 
  
 [THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 
  

 24 

 IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE AGREEMENT as of the date set
forth in the first paragraph hereof. 
  

							
	 COMPANY:
	 	 PURCHASER:

		
	 INNOVATIVE COMPANIES, INC.
	 	 LAURUS MASTER FUND, LTD.

				
	 By:
	 	  

	 	 By:
	 	  

	 Name:
	 	  

	 	 Name:
	 	  

	 Title:
	 	  

	 	 Title:
	 	  

  

			
	 SUBSIDIARY:

	
	 BELCHER CAPITAL CORPORATION

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

  
  

 25 

 EXHIBIT A 
  

FORM OF CONVERTIBLE SERIES A PREFERRED 
  

 A-1 

 EXHIBIT B 
  

FORM OF WARRANT 
  

 B-1 

 EXHIBIT C 
  

FORM OF OPINION 
  
 1. The Company is a corporation validly existing and in good standing under the laws of the State of Minnesota and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business as it is now being conducted. 
  
 2. The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Agreement and Related Agreements.
All corporate action on the part of the Company and its officers, directors and stockholders necessary has been taken for: (i) the authorization of the Agreement and Related Agreements and the performance of all obligations of the Company thereunder
at the Closing; and (ii) the authorization, sale, issuance and delivery of the Securities pursuant to the Agreement and the Related Agreements. The Series A Preferred Shares and the Warrant Shares, when issued pursuant to and in accordance with the
terms of the Agreement and the Related Documents and upon delivery shall be validly issued and outstanding, fully paid and non assessable. 
  
 3. The execution, delivery and performance of the Agreement, the Series A Preferred or the Related Agreements by the Company and the consummation of the
transactions on its part contemplated by any thereof, will not, with or without the giving of notice or the passage of time or both: 
  
 (a) Violate the provisions of the Charter or bylaws of the Company; or 
  
 (b) To the best of such counsel’s knowledge, violate any judgment, decree, order or award of any court
binding upon the Company. 
  
 4. The Agreement and Related
Agreements will constitute, valid and legally binding obligations of the Company, and are enforceable against the Company in accordance with their respective terms, except: 
  
 (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights; and 
  
 (b) general principles of equity that restrict the availability of equitable or legal remedies. 
  
 5. To such counsel’s knowledge, the sale of the Series A Preferred and the subsequent conversion of the Series A Preferred into Series A Preferred
Shares are not subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. To such counsel’s knowledge, the sale of the Warrant and the subsequent exercise of the Warrant for Warrant Shares
are not subject to any preemptive rights or, to such counsel’s knowledge, rights of first refusal that have not been properly waived or complied with. 
  
 6. Assuming the accuracy of the representations and warranties of the Purchaser contained in the Agreement, the offer, sale and issuance of the Securities
on the Closing Date will be exempt from the registration requirements of the Securities Act. To such counsel’s 
  

 C-1 

 knowledge, 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 and security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions. 
  
 7. There is no action, suit, proceeding or investigation pending or, to such
counsel’s knowledge, currently threatened against the Company that prevents the right of the Company to enter into this Agreement or any of the Related Agreements, or to consummate the transactions contemplated thereby. To such counsel’s
knowledge, the Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality; nor is there any action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate. 
  
 8.
The UCC-1 Financing Statement naming the Company as debtor and Laurus as secured party is in proper form for filing and assuming that such UCC-1 Financing Statement has been filed with the Secretary of State of Delaware, the security interest
created under the Security Agreement will constitute a perfected security interest under the Uniform Commercial Code in favor of Laurus. 
  

 C-2 

 EXHIBIT D 
  

FORM OF ESCROW AGREEMENT 
  

 D-3REGISTRATION RIGHTS AGREEMENT

 Exhibit 4.7 
  
 REGISTRATION RIGHTS AGREEMENT 
  

This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 10, 2004, by and between Innovative Companies,
Inc., a [Delaware] corporation (the “Company”), and Laurus Master Fund, Ltd. (the “Purchaser”). 
  
 This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, by and between the Purchaser and the Company (the
“Securities Purchase Agreement”), and pursuant to the Note and the Warrants referred to therein. 
  
 The Company and the Purchaser hereby agree as follows: 
  
 1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the
meanings given such terms in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: 
  
 “Commission” means the Securities and Exchange Commission. 
  
 “Common Stock” means shares of the Company’s common stock, par value $0.01 per share. 
  
 “Effectiveness Date” means the 90th day following the date
hereof. 
  
 “Effectiveness Period” shall have the
meaning set forth in Section 2(a). 
  
 “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and any successor statute. 
  
 “Filing Date” means, with respect to the Registration Statement required to be filed hereunder, a date no later than thirty (30) days
following the date upon which the principal amount of the Term Loan to the Company in original principal amount of $5,000,000 has been funded to the Company. 
  
 “Holder” or “Holders” means the Purchaser or any of its affiliates or transferees to the extent any of them hold
Registrable Securities. 
  
 “Indemnified Party”
shall have the meaning set forth in Section 5(c). 
  
 “Indemnifying Party” shall have the meaning set forth in Section 5(c). 

 “Note” has the meaning set forth in the Securities Purchase Agreement. 
  
 “Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 
  
 “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus. 
  
 “Registrable Securities” means the shares of Common Stock issued upon the conversion of the Note and issuable upon exercise of the Warrants. 
  
 “Registration Statement” means each registration statement required to be filed hereunder, including the
Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such
registration statement. 
  
 “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
  
 “Rule 415” means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
  
 “Rule 424” means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 

 “Securities Act” means the Securities Act of 1933, as amended, and any successor
statute. 
  
 “Securities Purchase Agreement”
means the agreement between the parties hereto calling for the issuance by the Company of a $5,000,000 convertible Note plus Warrants. 
  
 “Trading Market” means any of the NASD OTC Bulletin Board, NASDAQ SmallCap Market, the Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange. 
  
 “Warrants” means the Common Stock purchase warrants issued pursuant to the Securities Purchase Agreement. 
  
 2. Registration. 
  
 (a) On or prior to the Filing Date the Company shall prepare and file with the Commission a Registration Statement covering the
Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities or Form S-3,
in which case such registration shall be on another appropriate form in accordance herewith). The Company shall cause the Registration Statement to become effective and remain effective as provided herein. The Company shall use its reasonable
commercial efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date. The Company shall use its reasonable
commercial efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities have been sold or (ii) all Registrable Securities may be sold
immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Holders (the “Effectiveness Period”). 
  
 (b) If: (i) the Registration Statement is not filed on or prior to the Filing Date; (ii) the Registration Statement is not declared
effective by the Commission by the Effectiveness Date; (iii) after the Registration Statement is filed with and declared effective by the Commission, the Registration 

 Statement ceases to be effective (by suspension or otherwise) as to all Registrable Securities to which
it is required to relate at any time prior to the expiration of the Effectiveness Period (without being succeeded immediately by an additional registration statement filed and declared effective) for a period of time which shall exceed 30 days in
the aggregate per year or more than 20 consecutive calendar days (defined as a period of 365 days commencing on the date the Registration Statement is declared effective); or (iv) the Common Stock is not listed or quoted, or is suspended from
trading on any Trading Market for a period of three (3) consecutive Trading Days (provided the Company shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Trading Market);
(any such failure or breach being referred to as an “Event,” and for purposes of clause (i) or (ii) the date on which such Event occurs, or for purposes of clause (iii) the date which such 30 day or 20 consecutive day period (as the case
may be) is exceeded, or for purposes of clause (iv) the date on which such three (3) Trading Day period is exceeded, being referred to as “Event Date”), then until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% for each thirty (30) day period (prorated for partial periods) on a daily basis of the original principal amount of the Note. While such Event continues, such liquidated
damages shall be paid not less often than each thirty (30) days. Any unpaid liquidated damages as of the date when an Event has been cured by the Company shall be paid within three (3) days following the date on which such Event has been cured by
the Company. 
  
 (c) Within three business days
of the Effectiveness Date, the Company shall cause its counsel to issue a blanket opinion in the form attached hereto as Exhibit A, to the transfer agent stating that the shares are subject to an effective registration statement and can be reissued
free of restrictive legend upon notice of a sale by Laurus and confirmation by Laurus that it has complied with the prospectus delivery requirements, provided that the Company has not advised the transfer agent orally or in writing that the opinion
has been withdrawn. Copies of the blanket opinion required by this Section 2(c) shall be delivered to Laurus within the time frame set forth above. 
  
 3. Registration Procedures. If and whenever the Company is required by the provisions hereof to effect the registration of any Registrable
Securities under the Securities Act, the Company will, as expeditiously as possible: 

 (a) prepare and file with the Commission the Registration Statement with respect to such
Registrable Securities, respond as promptly as possible to any comments received from the Commission, and use its best efforts to cause the Registration Statement to become and remain effective for the Effectiveness Period with respect thereto, and
promptly provide to the Purchaser copies of all filings and Commission letters of comment relating thereto; 
  
 (b) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in
connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement and to keep such Registration Statement effective until
the expiration of the Effectiveness Period; 
  
 (c) furnish to the Purchaser such number of copies of the Registration Statement and the Prospectus included therein (including each preliminary Prospectus) as the Purchaser reasonably may request to facilitate the public sale or
disposition of the Registrable Securities covered by the Registration Statement; 
  
 (d) use its commercially reasonable efforts to register or qualify the Purchaser’s Registrable Securities covered by the Registration
Statement under the securities or “blue sky” laws of such jurisdictions within the United States as the Purchaser may reasonably request, 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) list the Registrable Securities covered by the Registration Statement with any securities exchange on
which the Common Stock of the Company is then listed; 
  
 (f) immediately notify the Purchaser at any time when a Prospectus relating thereto is required to be delivered under the Securities 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; and 

 (g) make available for inspection by the Purchaser and any attorney, accountant or other
agent retained by the Purchaser, 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 attorney, accountant or agent of the Purchaser. 
  
 4. Registration Expenses. All expenses relating to the Company’s compliance with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, 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, fees of transfer agents and registrars, fees of, and disbursements incurred by, one counsel for the Holders (to the extent such counsel is required due to Company’s failure to meet
any of its obligations hereunder), are called “Registration Expenses”. All selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of any special counsel to the Holders beyond those
included in Registration Expenses, are called “Selling Expenses.” The Company shall only be responsible for all Registration Expenses. 
  
 5. Indemnification. 
  
 (a) In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which
the Purchaser, or such persons may become subject under the Securities 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 were registered under the Securities Act pursuant to this Agreement, 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
Purchaser, and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; 

 provided, however, that the Company will not be liable in any such case if and 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 or on behalf of the Purchaser or any such person
in writing specifically for use in any such document. 
  
 (b) In the event of a registration of the Registrable Securities under the Securities Act pursuant to this Agreement, the Purchaser will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who
controls the Company within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such persons may become subject under the Securities 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 which was furnished in writing by the Purchaser to the Company expressly for
use in (and such information is contained in) the Registration Statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, 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 person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Purchaser will be liable 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 so made in conformity with information furnished in
writing to the Company by or on behalf of the Purchaser specifically for use in any such document. Notwithstanding the provisions of this paragraph, the Purchaser shall not be required to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by the Purchaser in respect of Registrable Securities in connection with any such registration under the Securities Act. 
  
 (c) Promptly after receipt by a party entitled to claim indemnification hereunder (an “Indemnified Party”) of notice of the
commencement of any action, such Indemnified Party shall, if a claim for 

 indemnification in respect thereof is to be made against a party hereto obligated to indemnify such
Indemnified Party (an “Indemnifying Party”), 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 5(c) and shall only relieve it from any liability which it may have to such Indemnified Party under this Section 5(c) 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 5(c) for any legal expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; if the Indemnified Party retains its own counsel, then the Indemnified Party shall pay all fees,
costs and expenses of such counsel, 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 Party 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 Securities Act in any case in which
either (i) the Purchaser, or any officer, director or controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 5 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 5 provides for indemnification in such case,
or (ii) contribution under the Securities Act may be required on the part of the Purchaser or such officer, director or controlling person of the Purchaser in 

 circumstances for which indemnification is provided under this Section 5; then, and in each such case,
the Company and the Purchaser 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 Purchaser 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, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such Registration Statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 
  
 6. Representations and Warranties. 
  
 (a) The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act
and, except with respect to certain matters which the Company has disclosed to the Purchaser on Schedule 4.21 to the Securities Purchase Agreement, the Company has timely filed all proxy statements, reports, schedules, forms, statements and other
documents required to be filed by it under the Exchange Act. The Company has filed (i) its Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2004
and June 30, 2004 (collectively, the “SEC Reports”). Each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the
notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim 

 statements, to the extent they may not include footnotes or may be condensed) and fairly present in all
material respects the financial condition, the results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report. 
  
 (b) The Common Stock is listed for trading on the Nasdaq
SmallCap Market and satisfies all requirements for the continuation of such listing. The Company has not received any notice that its Common Stock will be delisted from the Nasdaq SmallCap Market (except for prior notices which have been fully
remedied) or that the Common Stock does not meet all requirements for the continuation of such listing. 
  
 (c) 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 offering of the Securities pursuant to the Securities Purchase Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act which would prevent the Company from selling the Common Stock pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its
affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings. 
  
 (d) The Warrants, the Note and the shares of Common Stock which the Purchaser may acquire pursuant to the Warrants and the Note are all
restricted securities under the Securities Act as of the date of this Agreement. The Company will not issue any stop transfer order or other order impeding the sale and delivery of any of the Registrable Securities at such time as such Registrable
Securities are registered for public sale or an exemption from registration is available, except as required by federal or state securities laws. 
  
 (e) The Company understands the nature of the Registrable Securities issuable upon the conversion of the Note and the exercise of the
Warrant and recognizes that the issuance of such Registrable Securities may have a potential dilutive effect. The Company specifically acknowledges that its obligation to issue the Registrable Securities 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. 

 (f) Except for agreements made in the ordinary course of business, there is no agreement
that has not been filed with the Commission as an exhibit to a registration statement or to a form required to be filed by the Company under the Exchange Act, the breach of which could reasonably be expected to have a material and adverse effect on
the Company and its subsidiaries, or would prohibit or otherwise interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement in any material respect. 
  
 (g) The Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock for the full conversion of the Note and exercise of the Warrants. 
  
 7. Miscellaneous. 
  
 (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement,
each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.

  
 (b) No Piggyback on Registrations.
Except as and to the extent specified in Schedule 7(b) hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statement other
than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right for inclusion of shares in the Registration Statement to any of its security holders. Except as and to the extent
specified in Schedule 7(b) hereto, the Company has not previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been fully satisfied. 
  
 (c) Compliance. Each Holder covenants and agrees that
it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. 
  
 (d) Discontinued Disposition. Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of a notice from the Company 

 of the occurrence of a Discontinuation Event (as defined below), such Holder will forthwith discontinue
disposition of such Registrable Securities under the applicable Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. For purposes of this Section 7(d), a “Discontinuation Event” shall mean (i) when the Commission notifies the
Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); (ii) any request by the Commission or any other Federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information; (iii) the issuance by
the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and/or (v) the occurrence of
any event or passage of time that makes the financial statements included in such Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

  
 (e) Piggy-Back Registrations. If at
any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act of any of its 

 equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within fifteen days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered to the extent the Company may do so without violating registration rights of others which exist as of the date of this Agreement, subject to customary underwriter cutbacks applicable to
all holders of registration rights and subject to obtaining any required the consent of any selling stockholder(s) to such inclusion under such registration statement. 
  
 (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence. 
  
 (g) Notices. Any notice or request hereunder may be given to the Company or the Purchaser at the respective addresses set forth
below or as may hereafter be specified in a notice designated as a change of address under this Section 7(g). Any notice or request hereunder shall be given by registered or certified mail, return receipt requested, hand delivery, overnight mail,
Federal Express or other national overnight next day carrier (collectively, “Courier”) or telecopy (confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed to have been given when delivered to any
party to whom it is addressed, in the case of those by mail or overnight mail, deemed to have been given three (3) business days after the date when deposited in the mail or with the overnight mail carrier, in the case of a Courier, the next

 business day following timely delivery of the package with the Courier, and, in the case of a telecopy,
when confirmed. The address for such notices and communications shall be as follows: 
  

			
	If to the Company:	  	 Innovative Companies, Inc.
 Attention: Chief Financial
Officer
 Facsimile:

		
	 	  	with a copy to:
		
	 	  	 Attention:
 Facsimile:

		
	If to a Purchaser:	  	To the address set forth under such Purchaser name on the signature pages hereto.
		
	If to any other Person who is then the registered Holder:	  	  
 To the address of such Holder as it appears in the stock transfer
books of the Company

  
 or such other address
as may be designated in writing hereafter in accordance with this Section 7(g) by such Person. 
  
 (h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns
of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Notes and the Security Agreement with the prior written consent of the Company, which consent shall not be unreasonably withheld. 
  
 (i) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid
binding obligation of 

 the party executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof. 
  
 (j) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement shall be commenced
exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right
to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing party
in such Proceeding shall be reimbursed by the other party for its reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding. 
  
 (k) Cumulative Remedies. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law. 
  
 (l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, 

 illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 
  
 (m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. 
  
 [BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

 SIGNATURE PAGE FOLLOWS] 

 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first
written above. 
  

							
	 INNOVATIVE COMPANIES, INC.
	  	 LAURUS MASTER FUND, LTD.

				
	 By:
	 	  

	  	 By:
	  	  

	 Name:
	 	  

	  	 Name:
	  	  

	 Title:
	 	  

	  	 Title:
	  	  

			
	 	 	 	  	 Address for Notices:

			
	 	 	 	  	 825 Third Avenue – 14th Floor

	 	 	 	  	 New York, NY 10022

	 	 	 	  	 Attention:    David Grin

	 	 	 	  	 Facsimile:     212-541-4434

 EXHIBIT A 
  

[Month         , 2004] 
  
  
 [Continental Stock Transfer

     & Trust Company 
 Two Broadway 
 New York, NY 10004 
 Attn: William Seegraber] 
  

	 	Re:	[Company Name]. Registration Statement on Form [S-3] 

  
 Ladies and Gentlemen: 
  
 As counsel to [company name], a Delaware corporation (the “Company”), we have been requested to render our opinion to you in connection with the
resale by the individuals or entitles listed on Schedule A attached hereto (the “Selling Stockholders”), of an aggregate of [amount] shares (the “Shares”) of the Company’s Common Stock. 
  
 A Registration Statement on Form [S-3] under the Securities Act of 1933, as
amended (the “Act”), with respect to the resale of the Shares was declared effective by the Securities and Exchange Commission on [date]. Enclosed is the Prospectus dated [date]. We understand that the Shares are to be offered and sold in
the manner described in the Prospectus. 
  
 Based upon the
foregoing, upon request by the Selling Stockholders at any time while the registration statement remains effective, it is our opinion that the Shares have been registered for resale under the Act and new certificates evidencing the Shares upon their
transfer or re-registration by the Selling Stockholders may be issued without restrictive legend. We will advise you if the registration statement is not available or effective at any point in the future. 
  
 Very truly yours, 
  
 [Company counsel] 
  
  

 Schedule A 
  

					
	 Selling Stockholder

	 	 R/N/O

	 	 Shares
 Being Offered

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