Document:

f8k113009ex4i_masshys.htm

    Exhibit
4.1

     

    
      

       

      SUBSCRIPTION
AGREEMENT

       

       

      THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of November ___, 2009, by and between Mass Hysteria Entertainment
Company, Inc., a Nevada corporation (the “Company”), and Steven Wexler
(the “Subscriber”).

      

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

       

      WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscriber, as provided herein, and such Subscriber
shall purchase (i) for up to $200,000 (the “Purchase Price”) of shares of
the Company’s Common Stock, $0.001 par value (the “Common Stock”) at a per share
purchase price of $0.20 per share (the “Offering”).  The
shares of Common Stock issuable upon this Offering (the “Shares” or the “Securities.”).

       

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

       

      1.           Closing
Date.   The “Closing Date” shall be the
date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Anslow &
Jaclin, LLP, 195 Route 9 South, Suite 204, Manalapan, New Jersey 07726, upon the
satisfaction or waiver of all conditions to closing set forth in this
Agreement.   Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, Subscriber shall purchase
and the Company shall sell to Subscriber shares of Common Stock in the aggregate
Purchase Price of up to $200,000 as described in Section 2 of this
Agreement.

      

      2.           Purchase of Common
Stock.

      

      Subject
to the satisfaction or waiver of the terms and conditions of this Agreement, on
the Closing Date, the Subscriber shall purchase and the Company shall sell to
the Subscriber shares of Common Stock in the Principal Amount designated on the
signature page hereto for such Subscriber’s Purchase Price indicated
thereon.

      

                            3.           Allocation of Purchase
Price.   The Purchase Price and number of Shares issued to
the subscriber will be allocated among the Subscriber pursuant and in the
amounts designated on the signature page hereto for such Subscriber’s Purchase
Price indicated thereon.

      

                            4.           Subscriber Representations
and Warranties.  The Subscriber hereby represents and warrants
to and agrees with the Company that:

      

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

     

    
      
         

      

      
        
        

        
          

        

      

      
         

    

    

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

    

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

     

              (d)           Information
on Company.    Such Subscriber has been furnished with or
has had access to the EDGAR Website of the Commission to the Company's Form 10-Q
filed on May 20, 2009 for the quarter ended March 31, 2009, together with all
other filings made with the Commission available at the EDGAR website until five
days before the Closing Date (hereinafter referred to collectively as the
"Reports").   In addition, such Subscriber may have received in
writing from the Company such other information concerning its operations,
financial condition and other matters as such
Subscriber has requested in writing, identified thereon as Other Written
Information (such other information is collectively, the "Other Written
Information"), and considered all factors such
Subscriber deems material in deciding on the advisability of investing in the
Securities.  Such Subscriber has relied on the Reports and Other
Written Information in making its investment decision.

    

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

    

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

     

     

    
      
         

      

      
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(g)           Compliance with
Securities Act.   Such Subscriber understands and agrees
that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of the
Subscriber contained herein), and that such
Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration.  In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into lawful
hedging transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties who in turn may
dispose of these Securities.

    

    (h)           Shares of Common Stock
Legend.  The Shares of Common Stock shall bear the following or
similar legend:

    

    "THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."

    

     

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

    

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

     

    
      
         

      

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

    

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

    

    (m)           Acknowledgement of Going
Concern.  Such Subscriber recognizes and acknowledges that the
Company is a “going concern” as disclosed in its Reports and Other Written
Information and as reported by its auditor and may be unable to meet its
financial obligations over the next twelve months.

    

    (n)           Survival.  The
foregoing representations and warranties shall survive the Closing
Date.

     

    5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with the subscriber that:

     

    (a)           Due
Incorporation.  The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its business as
presently conducted.  The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect.  For purposes of
this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, prospects, properties or business of the
Company and its Subsidiaries taken as a whole.  For purposes of this
Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity.  As of the Closing Date, all of the
Company’s Subsidiaries and the Company’s ownership interest therein is set forth
on Schedule
5(a).

     

    (b)           Outstanding
Stock.  All issued and outstanding shares of capital stock and
equity interests in the Company have been duly authorized and validly issued and
are fully paid and non-assessable.

     

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

     

    
      
         

      

      
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    (d)           Capitalization and
Additional Issuances.   The authorized and outstanding
capital stock of the Company and Subsidiaries on a fully diluted basis as of the
date of this Agreement and the Closing Date (not including the Securities) are
set forth on Schedule
5(d).  Except as set forth on Schedule 5(d), there are no
options, warrants, or rights to subscribe to, securities, rights, understandings
or obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock or other equity interest of the
Company or any of the Subsidiaries.  The only officer, director,
employee and consultant stock option or stock incentive plan or similar plan
currently in effect or contemplated by the Company is described on Schedule
5(d).  There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.

     

    (e)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.  The Transaction Documents and
the Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors.  No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority in the world, including
without limitation, the United States, or elsewhere is required by the Company
or any Affiliate of the Company in connection with the consummation of the
transactions contemplated by this Agreement, except as would not otherwise have
a Material Adverse Effect or the consummation of any of the other agreements,
covenants or commitments of the Company or any Subsidiary contemplated by the
other Transaction Documents. Any such qualifications and filings will, in the
case of qualifications, be effective on the Closing and will, in the case of
filings, be made within the time prescribed by law.

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

    (g)           The
Shares.  The Shares upon issuance:

     

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

    

    (ii)           have
been, or will be, duly and validly authorized and on the dates of issuance of
the Shares, such Shares will be duly and validly issued, fully paid and
non-assessable, and if registered pursuant to the 1933 Act and resold pursuant
to an effective registration statement or exempt from registration will be free
trading, unrestricted and unlegended;

     

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

     

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

     

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

     

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

     

    (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   Since December 31, 2008 and except as
modified in the Reports and Other Written Information or in the Schedules
hereto, there has been no Material Adverse Effect relating to the Company's
business, financial condition or affairs. The Reports and Other Written
Information including the financial statements included therein do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances and when
made.

     

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

     

    
      
         

      

      
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      have a
Material Adverse Effect, (ii) not in default with respect to any order of any
court, arbitrator or governmental body or subject to or party to any order of
any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.

    

     

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

     

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

     

    (n)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, other than those incurred
in the ordinary course of the Company businesses since December 31, 2008 and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule 5(n).

     

    (o)           No Undisclosed Events or
Circumstances.  Since December 31, 2008, except as disclosed in
the Reports, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

     

    (p)           Banking.   Schedule 5(p) contains a list
of all financial institutions at which the Company and Subsidiaries maintains
deposit, checking and other accounts.  The list includes the accurate
addresses of such financial institution and account numbers of such
accounts.

     

    (q)           Dilution.   The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company.  The
board of directors of the Company has concluded, in its good faith business
judgment that the issuance of the Shares is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to
issue the Shares is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company or parties entitled to receive equity of the
Company.

     

    
      
         

      

      
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    (r)           No Disagreements with
Accountants and Lawyers.  Other than the opinion regarding the
Company’s ability to continue as a “going concern,” as disclosed in the
Company’s Reports, there are no material disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise between the Company
and the accountants and lawyers previously and presently employed by the
Company, including but not limited to disputes or conflicts over payment owed to
such accountants and lawyers, nor have there been any such disagreements during
the two years prior to the Closing Date.

    

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

    

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

    

    (u)           Reporting Company/Shell
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock registered pursuant to Section
12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act,
the Company has timely filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve
months.  As of the Closing Date, the Company is a “start-up” company
as referred to in Footnote 172 to Rule 144 and, therefore, not considered a
“shell company” as those terms are employed in Rule 144(i) under the 1933
Act.

    

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

    

    (w)           Transfer
Agent.   The Company’s transfer agent is a participant in
the Depository Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent is set forth on Schedule 5(w)
hereto.

    

    (x)           Company Predecessor and
Subsidiaries.  The Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (k), (n), (o),
(p), (r), (s) and (t) of this Agreement, as same relate or could be applicable
to each Subsidiary.  All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors and successors.  The Company represents that it owns all
of the equity of the Subsidiaries and rights to receive equity of the
Subsidiaries identified on Schedule 5(a), free and clear
of all liens, encumbrances and claims, except as set forth on Schedule 5(a).  No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries.  The Company further represents that the
Subsidiaries have not been known by any other name for the prior five
years.

    

    (y)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscriber
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date, in which case such representation or warranty shall be
true as of such date.

     

    
      
         

      

      
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    (z)           Survival.  The
foregoing representations and warranties shall survive the Closing
Date.

     

    6.           Regulation D Offering/Legal
Opinion.  The offer and issuance of the Shares to the
Subscriber is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.  On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by Subscriber.
The Company will provide, at the Company's expense, such other legal opinions,
if any, as are reasonably necessary in the subscriber’s opinion for the issuance
and resale of the Common Stock pursuant to an effective registration statement,
Rule 144 under the 1933 Act or an exemption from registration.

     

    7.           Covenants of the
Company.  The Company covenants and agrees with the Subscriber
as follows:

     

    (a)           Stop
Orders.  Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscriber, within twenty-four hours
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the
Subscriber.

     

    (b)           Listing/Quotation.  The
Company shall promptly secure the quotation or listing of the Shares upon each
national securities exchange, or automated quotation system upon the Company’s
Common Stock is quoted or listed and upon which such Shares are or become
eligible for quotation or listing (subject to official notice of issuance) and
shall maintain same so long as any Subscriber still owns Shares.  The
Company will maintain the quotation or listing of its Common Stock on the
American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
Global Select Market, Bulletin Board, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or market for the
Common Stock (the “Principal
Market”), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable. The Company will provide Subscriber with copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market.  As of the date of this
Agreement and the Closing Date, the Bulletin Board is and will be the Principal
Market.

     

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

     

    (d)           Filing
Requirements.  From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, (ii) until all the
Shares have been resold or transferred by the Subscriber pursuant to a
registration statement or pursuant to Rule 144(b)(1)(i), or (iii) the Subscriber
no longer owns the Shares (the date of such latest occurrence being the “End Date”), the Company will
(A) cause its Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are 

     

    
      
         

      

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

    

     

    (e)           Use of
Proceeds.   The proceeds of the Offering will be employed
by the Company for expenses of the Offering, and general working
capital.  Except as described on Schedule 9(e), the Purchase
Price may not and will not be used for accrued and unpaid officer and director
salaries, payment of financing related debt, redemption of outstanding notes or
equity instruments of the Company nor non-trade obligations outstanding on a
Closing Date.  For so long as any Note is outstanding, the Company
will not prepay any financing related debt obligations, except equipment
payments or in the event such payments are made in the ordinary course of
business, nor redeem any equity instruments of the Company without the prior
consent of the Subscriber.

     

    (f)           DTC
Program.  At all times that the Common Stock is outstanding,
the Company will employ as the transfer agent for the Common Stock, a
participant in the Depository Trust Company Automated Securities Transfer
Program.

     

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

     

    (h)           Insurance.  As
reasonably necessary as determined by the Company, from the date of this
Agreement and until the End Date, the Company will keep its assets which are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company’s line of business and location, in amounts
and to the extent and in the manner customary for companies in similar
businesses similarly situated and located and to the extent available on
commercially reasonable terms.

     

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

     

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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (k)           Intellectual
Property.  From the date of this Agreement and until the End
Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for
value.  Schedule
9(l) hereto identifies all of the intellectual property owned by the
Company and Subsidiaries.

     

    (l)           Properties.  From
the date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases and claims to which it is a party
or under which it occupies or has rights to property if the breach of such
provision could reasonably be expected to have a Material Adverse
Effect.  The Company will not abandon any of its assets except for
those assets which have negligible or marginal value or for which it is prudent
to do so under the circumstances.

     

    (m)           Confidentiality/Public
Announcement.   From the date of this Agreement and until
the End Date, the Company agrees that except in connection with a Form 8-K and
the registration statement or statements regarding the Subscriber’s Securities
or in correspondence with the SEC regarding same, it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by a Subscriber or only to the extent required by law and then only upon
not less than three days prior notice to Subscriber.  In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K describing
the Offering not later than the fourth (4th)
business day after the Closing Date.  Prior to the Closing Date, such
Form 8-K will be provided to Subscriber for their review and
approval.  In the Form 8-K, the Company will specifically disclose the
nature of the Offering and amount of Common Stock outstanding immediately after
the Closing.  Upon  delivery by the Company to the
Subscriber after the Closing Date of any notice or information, in writing,
electronically or otherwise, and while Shares are held by Subscriber, unless
the  Company has in good faith determined that the matters relating to
such notice do not constitute material, nonpublic information relating
to the Company or Subsidiaries, the Company  shall within
one business day after any such delivery publicly disclose such 
material,  nonpublic  information on a
Report on Form 8-K.  In the event that
the Company believes that a notice or communication to
Subscriber contains material, nonpublic information relating to the Company or
Subsidiaries, the Company shall so indicate to Subscriber prior to delivery of
such notice or information.  Subscriber will be granted sufficient
time to notify the Company that such Subscriber elects not to receive such
information.   In such case, the Company will not deliver such
information to Subscriber.  In the absence of any such
indication, Subscriber shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.

     

               (n)           Non-Public
Information.  The Company covenants
and agrees that except for the Reports, Other Written Information and schedules
and exhibits to this Agreement and the Transaction Documents, which information
the Company undertakes to publicly disclose on the Form 8-K described in Section
9(n) above, neither it nor any other person acting on its behalf will at any
time provide any Subscriber or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Subscriber shall have agreed in writing to accept such
information.  The Company understands and confirms that the subscriber
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

    

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

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (i)           create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; and (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted Lien”).

    

                                                (ii)           amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscriber (an increase in the
amount of authorized shares and an increase in the number of directors will not
be deemed adverse to the rights of the Subscriber);

    

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

    

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

    

    (v)           prepay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, any such obligations which in management’s good faith,
reasonable judgment must be repaid to avoid disruption of the Company’s
businesses.

     

    The
Company agrees to provide Subscriber not less than ten (10) days notice prior to
becoming obligated to or effectuating a Permitted Lien or Excepted
Issuance.

     

    (p)           Notices.   For
so long as the Subscriber hold any Securities, the Company will maintain a
United States address and United States fax number for notice purposes under the
Transaction Documents.

     

    
      
         

      

      
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    (q)       Transactions With
Insiders.  So long as the Note is outstanding, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual.  Affiliate for purposes of this
Section 9(u) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity.  “Control” or
“Controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.  For purposes hereof, “Insiders” shall mean any officer,
director or manager of the Company, including but not limited to the Company’s
president, chief executive officer, chief financial officer and chief operations
officer, and any of their affiliates or family members.

     

    (r)           Blackout.    The
Company undertakes and covenants that without the consent of the Subscriber,
until the end of the Exclusion Period, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction or fail to take any
action that could have the effect of delaying the effectiveness of any pending
registration statement beyond the effective date, or causing an already
effective registration statement to no longer be effective or current for a
period of forty-five or more days in the aggregate during any three hundred and
sixty-five day period.

     

    8.           Covenants of the Company
Regarding Indemnification.

     

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

     

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

    

    9.           Additional Post-Closing
Obligations.

     

    9.1.           Piggy-Back
Registrations.   If at any time until two years after the
Closing Date there is not an effective registration statement covering all of
the Shares or the Shares are not saleable under Rule 144,  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 1933 Act of any of its equity securities, but excluding Forms S-4 or
S-8 and similar forms which do not permit such registration, then the Company
shall send to each holder of any of the Securities written notice of such
determination and, if within fifteen calendar 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 the Shares such holder requests to be
registered, subject to customary 

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

       

      underwriter
cutbacks applicable to all holders of registration rights and any cutbacks
in  accordance with guidance provided by the Securities and Exchange
Commission (including, but not limited to, Rule 415).  The obligations
of the Company under this Section may be waived by any holder of any of the
Securities entitled to registration rights under this Section 10.1. The holders
whose Shares are included or required to be included in such registration
statement are granted the same rights, benefits, liquidated or other damages and
indemnification granted to other holders of securities included in such
registration statement.  Notwithstanding anything to the contrary
herein, the registration rights granted hereunder to the holders of Securities
shall not be applicable for such times as such Shares may be sold by the holder
thereof without restriction pursuant to Section 144(b)(1) of the 1933
Act.  In no event shall the liability of any holder of Securities or
permitted successor in connection with any Shares included in any such
registration statement be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of the Shares sold
pursuant to such registration or such lesser amount applicable to other holders
of Securities included in such registration statement. All expenses incurred by
the Company in complying with Section 11, including, without limitation, all
registration and filing fees, printing expenses (if required), fees and
disbursements of counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection
with complying with state securities or “blue sky” laws, fees of the NASD,
transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
registrable securities are called "Selling
Expenses."  The Company will pay all Registration Expenses in
connection with the registration statement under Section 11.  Selling
Expenses in connection with each registration statement under Section 11 shall
be borne by the holder and will be apportioned among such holders in proportion
to the number of Shares included therein for a holder relative to all the
Securities included therein for all selling holders, or as all holders may
agree.

    

     

    9.2.           Delivery of Unlegended
Shares.

     

    (a)           Within
three (3) business days (such third business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable and if required, have been satisfied, (iii) the original
share certificates representing the shares of Common Stock that have been sold,
and (iv) in the case of sales under Rule 144, customary representation letters
of the Subscriber and, if required, Subscriber’s broker regarding compliance
with the requirements of Rule 144, the Company at its expense, (y) shall
deliver, and shall cause legal counsel selected by the Company to deliver to its
transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legend set forth in Section 4(h) above (the
“Unlegended Shares”);
and (z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted Common Stock certificate, if any, to the Subscriber at the address
specified in the notice of sale, via express courier, by electronic transfer or
otherwise on or before the Unlegended Shares Delivery Date.

     

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

    

    (c)           The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber.  As compensation to a
Subscriber for such loss, the Company agrees to pay late payment fees (as

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

       

      liquidated
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business day after the Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default.  If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.2 for an aggregate of thirty
days, then the subscriber or assignee holding Securities subject to such default
may, at its option, require the Company to redeem all or any portion of the
Shares subject to such default at a price per share equal to the greater of (i)
120%, or (ii) a fraction in which the numerator is the highest closing price of
the Common Stock during the aforedescribed thirty day period and the denominator
of which is the lowest conversion price during such thirty day period,
multiplied by the price paid by Subscriber for such Common Stock (“Unlegended Redemption
Amount”).  The Company shall pay any payments incurred under
this Section in immediately available funds upon demand.

    

    

    (d)           In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 9.2 and the Company is required to deliver such Unlegended Shares
pursuant to Section 9.2, the Company may not refuse to deliver Unlegended Shares
based on any claim that such Subscriber or any one associated or affiliated with
such Subscriber has been engaged in any violation of law, or for any other
reason, unless, an injunction or temporary restraining order from a court, on
notice, restraining and or enjoining delivery of such Unlegended Shares shall
have been sought and obtained by the Company and the Company has posted a surety
bond for the benefit of such Subscriber in the amount of 120% of the amount of
the aggregate purchase price of the Common Stock which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber’s favor.

    

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

    

                              9.3.           In
the event commencing six months after the Closing Date and ending twenty-four
months thereafter, the Subscriber is not permitted to resell any of the Shares
without any restrictive legend or if such sales are permitted but subject to
volume limitations or further restrictions on resale as a result of the
unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or any
successor rule (a “144
Default”), for any reason except for Subscriber’s status as an Affiliate
or “control person” of the Company, or as a result of a change in current
applicable securities laws, then the Company shall pay such Subscriber as
liquidated damages and not as a penalty an amount equal to two percent (2%) for
each thirty days (or such lesser pro-rata amount for any period less than thirty
days) thereafter of the purchase price of the Shares subject to such 144 Default
during the pendency of the 144 Default.  Liquidated Damages shall not
be payable pursuant to this Section 9.3 in connection with Shares for such times
as such Shares may be sold by the holder thereof without restriction pursuant to
Section 144(b)(1) of the 1933 Act or pursuant to an effective registration
statement.

    

    
      
         

      

      
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    9.4           Adjustment for Trading
Price.  If, on the date that is six-months following the
Closing Date (the “Six
Month Anniversary”), the Company’s closing bid price for the immediately
preceding Trading Day (the “Adjustment Date”) is
less than the Per Share Purchase Price, then the Company shall issue additional
shares of its common stock to the Subscriber respecting those Shares that are
then still owned by the Subscriber so that the Per Share Purchase Price of the
Shares purchased and owned by the Subscriber on the Six Month Anniversary is
equal to the closing bid price for the Adjustment Date.  The delivery
to the Subscriber of the additional shares of common stock shall be not later
than five Trading Days following the Adjustment Date.

     

    10.           Miscellaneous.

     

    (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

    

    If to the
Company, to:

    Mass
Hysteria Entertainment Company, Inc.

    5555
Melrose Avenue

    Swanson
Building, Suite 400

    Hollywood,
California 90038

    Telephone:
(323) 956-8388

    

    With a
copy by fax only to (which copy shall not constitute notice):

    Anslow
& Jaclin LLP

    Attn:
Eric Stein, Esq.

    195 Route
9 South, Suite 204

    Manalapan,
NJ 07726

    Facsimile:
(732) 577-1188

    

    If to the
Subscriber:

    [insert]

    

     

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

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

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

     

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

     

    (e)           Specific Enforcement,
Consent to Jurisdiction.  The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or
equity.  Subject to Section 13(d) hereof, the Company hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.

     

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

     

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

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (h)           Calendar
Days.   All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms
“business days” and “trading days” shall mean days that the New York Stock
Exchange is open for trading for three or more hours.  Time periods
shall be determined as if the relevant action, calculation or time period were
occurring in New York City.  Any deadline that falls on a non-business
day in any of the Transaction Documents shall be automatically extended to the
next business day and interest, if any, shall be calculated and payable through
such extended period.

     

    (i)           Captions: Certain
Definitions.  The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.  As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

     

    (j)           Severability.  In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

     

    (k)           Successor
Laws.  References in the Transaction Documents to laws, rules,
regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms.  A
successor rule to Rule 144(b)(1)(i) shall include any rule that would be
available to a non-Affiliate of the Company for the sale of Common Stock not
subject to volume restrictions and after a six month holding
period.

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    

     

    [SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT]

     

    

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

    

    MASS
HYSTERIA ENTERTAINMENT COMPANY, INC.,

    a Nevada
corporation

    

    

    By:_________________________________

    Name:

    Title:

    

    Dated:
November ___, 2009

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE

            	
              NUMBER
      OF SHARES

            
	
               

               

               

               

               

               

              ___________________________________________

              By:
      Steven Wexler

               

               

            	
               

               

              $200,000

            	
               

               

              1,000,000
      shares

            

    

    

     

     
 

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

     

    LIST OF EXHIBITS AND
SCHEDULES

     

    

     

    
      
        	
                Schedule
      5(a)

                 

              	
                Subsidiaries

              
	
                Schedule
      5(d)

                 

              	
                Additional
      Issuances / Capitalization

              
	
                Schedule
      5(n)

                 

              	
                Undisclosed
      Liabilities

              
	
                Schedule
      5(p)

                 

              	
                Financial
      Institutions

              
	
                Schedule
      5(w)

                 

              	
                Transfer
      Agent

              
	
                Schedule
      9(e)

                 

              	
                Use
      of Proceeds

              
	
                Schedule
      9(l)

              	
                Intellectual
      Propertyf8k121609ex10xiii_swissinso.htm

     

    Exhibit 10.13

    
      

       

      SUBSCRIPTION
AGREEMENT

       

      

      THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of _____ ________________, 2009, by and between SwissINSO Holding Inc.,
a Delaware corporation (the “Company”), and each of those
persons and entities, severally and not jointly, whose names are set forth on
the signature page hereto (which persons and entities are hereinafter
collectively referred to as “Subscribers” and each
individually as a “Subscriber”).

       

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

       

      WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscriber, as provided herein, and the Subscriber
shall purchase (i) for the principal amount of the 9% Secured Convertible Note
(the “Note”), in the
form attached hereto as Exhibit A, in the
amount as set forth on the signature page hereof (the “Subscription Price”) (which
aggregate amount for all Subscribers shall be the maximum of $15,000,000),
convertible into shares of the Company’s Common Stock (the “Common Stock”) at a conversion
price of $0.50 per share (“Conversion Shares”) and (ii)
warrants, in the form attached hereto as Exhibit B (the “Warrants”), each of which
entitles the Subscriber to purchase one share of Common Stock (the “Warrant Shares”) at an
exercise price of $1.00 per share, expiring five (5) years after the Closing
Date (as defined below).  The Note, Conversion Shares, the Warrants
and the Warrant Shares are collectively referred to herein as the “Securities”;

       

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

       

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

       

      1.            
Closing
Date.

       

      (a)     
 The “Initial Closing
Date” shall be the date that an aggregate of $1,000,000 is transmitted by
wire transfer or otherwise credited to or for the benefit of the Company
pursuant to the terms of the Escrow Agreement.  The consummation of
the transactions contemplated herein shall take place at the offices of Katten
Muchin Rosenman LLP, 575 Madison Avenue, New York, New York 10022 upon the
satisfaction or waiver of all conditions to closing set forth in this
Agreement.  Each of the Initial Closing Date and Subsequent Closing
Dates (as defined in Section 1(c) below) is referred to herein as a “Closing Date.”

       

       

      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

       

      
 

      (b)           Initial
Closing.  Subject to the satisfaction or waiver of the terms
and conditions of this Agreement and the Escrow Agreement, on the Initial
Closing Date, each Subscriber shall purchase and the Company shall sell to each
Subscriber a Note in the principal amount set forth on the signature page hereto
(“Initial Closing
Notes”), and Warrants as described in Section 2 of this
Agreement.  The principal amount of the Notes to be purchased by the
Subscribers on the Initial Closing Date shall no less than One Million Dollars
($1,000,000) (the “Initial
Closing Principal Amount”).

       

      (c)           Subsequent
Closings.  The “Subsequent Closing Dates”
shall be on or within five business days after the receipt by the Escrow Agent
of an executed Agreement and the applicable Subscription
Price.  Subject to the satisfaction or waiver of  the
conditions to Closing, on each Subsequent Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the Principal
Amount set forth on the signature page hereto (“Subsequent Closing Notes”) and
Warrants as described in Section 2 of this Agreement .  The Subsequent
Closing Notes and said Warrants shall be of the same tenor as the Notes and
Warrants issuable on the Initial Closing Date.  The principal amount
of the Notes to be purchased by the Subscribers on the Subsequent Closing Date
shall be not greater than Fourteen Million Dollars ($14,000,000).

      

      2.         
  Warrants.

      

      (a)           Warrants.  On
the Closing Date, the Company will issue and deliver Warrants to the
Subscriber.  One (1) Warrant will be issued for each Conversion Share
which would be issued on the Closing Date assuming the conversion of the Note on
the Closing Date.  The exercise price to acquire a Warrant Share upon
exercise of a Warrant shall be $1.00, subject to reduction as described in the
Warrant.  The Warrants shall be exercisable until five (5) years after
the issue date of the Warrants.

       

      (b)           Allocation of Subscription
Price.   The Subscription Price will be allocated among
the components of the Securities so that each component of the Securities will
be fully paid and non-assessable.

      

      3.           Legends.

      

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

      

      “THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”

       

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

      
 

      (b)           Note and Warrants
Legend.  The Note and Warrants shall bear the following
legend:

      

      “NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE –OR-EXERCISABLE] HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.”

      

      4.           Subscriber Representations
and Warranties.  Subscriber hereby represents and warrants to
and agrees with the Company that:

      

      (a)           Organization and Standing of
the Subscriber.  Subscriber is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.

      

      (b)          Authorization and
Power.  Subscriber has the requisite
power and authority to enter into and perform this
Agreement, the Escrow Agreement, and any other agreements delivered
together with this Agreement or in connection herewith (collectively, “Transaction Documents”) and to purchase the Note being sold to it
hereunder.  The execution, delivery and performance of this Agreement
and the other Transaction Documents by Subscriber and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action, and no further consent or authorization of
Subscriber, its Board of Directors, stockholders or any other third person is
required.  This Agreement and the other Transaction Documents have
been duly authorized, executed and when delivered by Subscriber and constitute,
or shall constitute when executed and delivered, a valid and binding obligation
of Subscriber enforceable against Subscriber in accordance with the terms
thereof.

       

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

      
 

      (c)           No Conflicts.   violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (i) the articles or certificate of
incorporation, charter or bylaws or other organizational documents of the
Subscriber, (ii) any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Subscriber of any court, governmental agency or
body, or arbitrator having jurisdiction over the Subscriber or over the
properties or assets of the Subscriber, or (iii) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Subscriber is a party, by which the Subscriber is bound,
or to which any of the properties of the Subscriber is subject.  Subscriber is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents  nor to purchase the Securities in accordance
with the terms hereof.

      

      (d)           Information on
Company.   Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's Form 10-K filed
on July 22, 2009 for the fiscal year ended May 31, 2009, the Current Reports on
Form 8-K filed thereafter, and the financial statements included in those
filings, together with all subsequent filings made with the Commission available
at the EDGAR website (hereinafter referred to collectively as the “Reports”).  In
addition, Subscriber may have received in writing from the Company such other
information concerning its operations, financial condition and other matters as
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the “Other Written Information”),
and considered all factors Subscriber deems material in deciding on the
advisability of investing in the Securities.

      

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

       

       

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

      
 

      (f)           Purchase of Note and
Warrants.  Subscriber is purchasing the Note and Warrants as
principal for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution
thereof.  No other person has a direct or indirect beneficial interest
in such Securities or any portion thereof.  Further, the Subscriber
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to the Securities for which the undersigned is subscribing
or any part of the Securities.

      

      (g)           Compliance with Securities
Act.   Subscriber understands and agrees that the
Securities have not been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of the Subscriber contained
herein), and that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration. The Subscriber has the financial
ability to bear the economic risk of his investment, has adequate means for
providing for his current needs and personal contingencies and has no need for
liquidity with respect to his investment in the Company.

       

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

      

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

       

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

      
 

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

      

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

      

      (l)           Survival.  The
foregoing representations and warranties shall survive the Closing
Date.

       

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

       

      (a)           Due
Incorporation.  The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own its properties and to carry on its
business as presently conducted.

       

      (b)           Subsidiaries.  The
Company does not own, directly or indirectly, nor has it entered into any
agreement or understanding to purchase or sell, any capital stock or other
equity interests in any person and does not have any subsidiaries, other than
SwissINSO SA, a Swiss company.

       

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

       

      (d)           Capitalization and
Additional Issuances.   The authorized and outstanding
capital stock of the Company is as described in the Reports.  Other
than as set forth in the Reports, there are no options, warrants, or rights to
subscribe to, securities, rights, understandings or obligations convertible into
or exchangeable for or giving any right to subscribe for any shares of capital
stock or other equity interest of the Company.  There are no
outstanding agreements or preemptive or similar rights affecting the Company's
Common Stock.

       

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

       

      (e)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin Board”) or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.  The Transaction Documents and
the Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors.

       

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

       

      (i)           violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company, or (C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which the
Company is a party, by which the Company is bound, or to which any of the
properties of the Company is subject; or

       

      (ii)           result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company except pursuant to applicable
securities laws and regulations; or

       

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

       

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

       

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

       

      (g)           The
Securities.  The Securities upon issuance:

       

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

      

      (ii)           have
been, or will be, duly and validly authorized and on the dates of issuance of
the Conversion Shares upon conversion of the Note, and the Warrant Shares upon
exercise of the Warrants, such Shares and Warrant Shares will be duly and
validly issued, fully paid and non-assessable;

       

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

       

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

       

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

       

      (h)           Litigation.  There
is no pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the complete and timely performance
by the Company of its obligations under the Transaction
Documents.  There is no pending or, to the best knowledge of the
Company, basis for or threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its Affiliates which litigation if adversely
determined would have a material adverse effect on the Company or its proposed
operations.

       

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

       

      (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   The Reports and Other Written Information
including the financial statements included therein do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, taken as a whole,
not misleading in light of the circumstances when made.

       

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

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

       

      (l)           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 of the Company nor solicited
any offers to buy any security of the Company under circumstances that would
cause the offer of the Securities pursuant to this Agreement to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Bulletin Board.  No prior offering
will impair the exemptions relied upon in this offering or the Company’s ability
to timely comply with its obligations hereunder.  Neither the Company
nor any of its Affiliates will take any action or steps that would cause the
offer or issuance of the Securities to be integrated with other offerings which
would impair the exemptions relied upon in this offering or the Company’s
ability to timely comply with its obligations hereunder.  The Company
will not conduct any offering other than the transactions contemplated hereby
that may be integrated with the offer or issuance of the Securities that would
impair the exemptions relied upon in this offering or the Company’s ability to
timely comply with its obligations hereunder.

       

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

       

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

       

      (o)           Dilution.   The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company’s equity or rights to receive equity of the Company.  The
board of directors of the Company has concluded, in its good faith business
judgment that the issuance of the Securities is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Note and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive equity of the
Company.

       

       

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

       

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

      

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

      

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

      

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

      

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

      

      (u)           Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing Date, shall be true and correct in all material respects as
of the Closing Date; provided, that, if such representation or warranty is made
as of a different date in which case such representation or warranty shall be
true as of such date.

       

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

       

      6.           Exempt  Offering.  The
offer and issuance of the Securities to the Subscribers is being made pursuant
to the exemption from the registration provisions of the 1933 Act afforded by
Section 4(2) or Section 4(6) of the 1933 Act, Rule 506 of Regulation D and/or
Regulation S promulgated thereunder.

      

      7.           Broker.   The
Company and Subscriber agree to indemnify the other against and hold the other
harmless from any and all liabilities to any persons claiming brokerage
commissions, finder’s fees, credit enhancement fees or due diligence fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement and the
offering.

       

      8.           Use of
Proceeds.   The proceeds of this Offering will be employed
by the Company (i) to repay a bridge loan in the amount of $750,000, (ii) as
additional loans and/or capital contributions to SwissINSO SA, (iii) for public
company expenses (in an amount of no less than $350,000), (iv) for expenses
related to this Offering and (v) general working capital.

       

      9.           Reservation.   The
Company undertakes to reserve on behalf of Subscriber from its authorized but
unissued Common Stock, a number of shares of Common Stock equal to the amount of
Common Stock necessary to allow Subscriber to be able to convert the Note and
the amount of Warrant Shares issuable upon exercise of the
Warrants.

       

      10.           Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on a Current Report on Form 8-K, neither it nor
any other person acting on its behalf will at any time provide Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto Subscriber shall have
agreed in writing to accept such information.  The Company understands
and confirms that Subscriber shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

       

      11.           Indemnification.  The
Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company,
the Company’s officers, directors, agents, Affiliates, members, managers,
control persons, representatives, principal shareholders and their respective
successors and assigns, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon any such person which results, arises out of or is based upon any
misrepresentation by Subscriber or breach of any representation or warranty by
Subscriber in this Agreement or in any Exhibits or Schedules attached hereto in
any Transaction Document, or other agreement delivered pursuant hereto or in
connection herewith, now or after the date hereof.

       

       

      
        
           

        

        
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      12.           Registration.

       

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

       

      (i)           On
one occasion, but only subsequent to the 9th
month after the Initial Closing Date, upon a written request therefor from any
record holder or holders of more than 51% of the Conversion Shares issued and
issuable upon conversion of the outstanding Notes, the Company shall prepare and
file with the Commission a registration statement under the 1933 Act registering
the Registrable Securities, as defined in Section 12.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder
thereof.  For purposes of Sections 12.1(i) and 12.1(ii), Registrable
Securities shall not include Securities which are (A) registered for resale in
an effective registration statement, (B) included for registration in a pending
registration statement, (C) which have been issued without further transfer
restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act or
(D) which may be resold under Rule 144 without volume
limitations.  Upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received
written requests within ten days after the Company gives such written
notice.  Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section
12.1(i).

       

      (ii)           If
the Company at any time proposes to register any of its securities under the
1933 Act for sale to the public, whether for its own account or for the account
of other security holders or both, except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Subscribers pursuant
to an effective registration statement, each such time it will give at least ten
days' prior written notice to the record holder of the Registrable Securities of
its intention so to do. Upon the written request of the holder, received by the
Company within ten days after the giving of any such notice by the Company, to
register any of the Registrable Securities not previously registered, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the “Seller” or “Sellers”). In the event that
any registration pursuant to this Section 12.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein. Notwithstanding the foregoing provisions, the Company may withdraw or
delay or suffer a delay of any registration statement referred to in this
Section 12.1(ii) without thereby incurring any liability to the
Seller.

       

       

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

       

       

      (iii)           If,
at the time any written request for registration is received by the Company
pursuant to Section 12.1(i), the Company has determined to proceed with the
actual preparation and filing of a registration statement under the 1933 Act in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 12.1(ii) rather than Section 12.1(i), and the rights of the
holders of Registrable Securities covered by such written request shall be
governed by Section 12.1(ii).

       

      (iv)           As
provided for in Section 12.1(i) or (ii), the Company shall file with the
Commission a Form S-1 registration statement (the “Registration Statement”) (or
such other form that it is eligible to use) in order to register the Registrable
Securities for resale and distribution under the 1933 Act.  The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to 100% of the Shares issued
and issuable upon conversion of all of the Notes and 100% of the Warrant Shares
issuable upon exercise of the Warrants (collectively the “Registrable Securities”). The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber, pro rata, and not issued,
employed or reserved for anyone other than each Subscriber.

       

      12.2.           Registration
Procedures.  If and whenever the Company is required by the
provisions of Sections 12.1(i) or 12.1(ii) to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously as
possible:

       

      (a)           subject
to the timelines provided in this Agreement, prepare and file with the
Commission a registration statement required by Section 12, with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly notify the Sellers (by
telecopier and by e-mail addresses provided by the Subscribers) on or before the
second  business day thereafter that the Company receives notice that
(i) the Commission has no comments or no further comments on the registration
statement, and (ii) the registration statement has been declared
effective;

       

      (b)           prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of one (1) year, and comply with the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the Sellers’ intended method of disposition set forth in such registration
statement for such period;

       

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

       

       

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

       

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

       

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

       

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

       

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

       

      (h)           provide
to the Sellers copies of the Registration Statement and amendments thereto five
business days prior to the filing thereof with the Commission.  Any
Seller’s failure to comment on any registration statement or other document
provided to a Subscriber or its counsel shall not be construed to constitute
approval thereof nor the accuracy thereof.

       

      12.3.           Provision of
Documents.  In connection with each registration described in
this Section 12, each Seller will furnish to the Company in writing such
information and representation letters with respect to itself and the proposed
distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.

       

       

      
        
           

        

        
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      12.4.           Expenses.  All
expenses incurred by the Company in complying with Section 12, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the NASD, transfer taxes, and fees of transfer agents and registrars, are called
“Registration Expenses”.
All underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called “Selling
Expenses”.  The Company will pay all Registration Expenses in
connection with any registration statement described in Section
12.  Selling Expenses in connection with each such registration
statement shall be borne by the Seller and may be apportioned among the Sellers
in proportion to the number of shares included on behalf of the Seller relative
to the aggregate number of shares included under such registration statement for
all Sellers, or as all Sellers thereunder may agree.

       

      12.5.           Indemnification and
Contribution.

       

      (a)           In
the event of a registration of any Registrable Securities under the 1933 Act
pursuant to Section 12, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each of the officers, directors, agents,
Affiliates, members, managers, control persons, and principal shareholders of
the Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the 1933 Act pursuant to Section 12, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances when made,
and will subject to the provisions of Section 12.5(c) reimburse the Seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to the Seller to the extent that any such
damages arise out of or are based upon an untrue statement or omission made in
any preliminary prospectus if (i) the Seller failed to send or deliver a copy of
the final prospectus delivered by the Company to the Seller with or prior to the
delivery of written confirmation of the sale by the Seller to the person
asserting the claim from which such damages arise, (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (iii) to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Seller for use in such registration
statement or prospectus.

       

       

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

       

      (b)           In
the event of a registration of any of the Registrable Securities under the 1933
Act pursuant to Section 12, each Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 12, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished to the
Company by such Seller for use in such registration statement or
prospectus.

       

      (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 12.5(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 12.5(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 12.5(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnifying party shall
have reasonably concluded that there may be reasonable defenses available to
indemnified party which are different from or additional to those available to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel, reasonably satisfactory to the indemnified and indemnifying party, 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.

       

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

       

      (d)           In
order to provide for just and equitable contribution in the event of joint
liability under the 1933 Act in any case in which either (i) a Seller, or any
controlling person of a Seller, makes a claim for indemnification pursuant to
this Section 12.5 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 12.5 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 12.5; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.

       

      13.           Miscellaneous.

       

      (a)           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: SwissINSO Holding Inc.,
Biopole, Route de la Corniche, 1066 Epalinges, Switzerland, with a copy by fax
only to:  Katten Muchin Rosenman LLP, 575 Madison Avenue, New York,
New York 10022, Attn: Michael Hirschberg, Esq., facsimile:
(212)  894-5646, and (ii) if to the Subscriber, to: the address and
fax number indicated on the signature page hereto.

       

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

       

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

       

       

       

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

       

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

       

      (e)           Specific Enforcement,
Consent to Jurisdiction.  The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or
equity.  Subject to Section 13(d) hereof, the Subscriber hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.

       

      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      

       

       

      (f)           Captions: Certain
Definitions.  The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.  As used in this Agreement the term
“person” shall
mean and include an individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.

       

      (g)           Severability.  In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.

       

       

      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      

       

       

      SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT

       

      

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

      

      SWISSINSO
HOLDING INC.

      

      By:___________________________

      Name:
Yves Ducommun

      Title: Chief Executive
Officer

      

      Dated:
___________________, 2009

      

      

      

      
        	
                SUBSCRIBER

                ADDRESS

              	
                PURCHASE
      PRICE AND NOTE PRINCIPAL

              	
                WARRANTS

              
	
                 

                 

                 

                 

                ____________________________________________

                By:

                Title:

              	
                $

              	 
      
	
                 

                 

                ____________________________________________

                By:

                Title:

              	 
      	 
      
	
                 

                 

                ____________________________________________

                By:

                Title:

                 

              	 
      	 
      

      

       

       

      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

       

      
 

      INVESTOR
QUESTIONNAIRE

      

      
        	
                A.

              	
                General
      Information

              	 
      
	 
      	 
      	 
      
	
                1.

              	
                Print
      Full Name of Investor:

              	
                Individual:

              
	 
      	 
      	
                ____________________________________

              
	 
      	 
      	
                First,
      Middle, Last

              
	 
      	 
      	 
      
	 
      	 
      	
                Partnership,
      Corporation, Trust, Custodial Account, Other:

              
	 
      	 
      	 
      
	 
      	 
      	
                ____________________________________

              
	 
      	 
      	
                Name
      of Entity

              
	 
      	 
      	 
      
	
                2.

              	
                Address
      for Notices:

              	
                ____________________________________

              
	 
      	 
      	
                ____________________________________

              
	 
      	 
      	
                ____________________________________

              
	 
      	 
      	 
      
	
                3.

              	
                Name
      of Primary Contact Person:

                Title:

              	
                ____________________________________

              
	 
      	 
      	 
      
	
                4.

              	
                Telephone
      Number:

              	
                ____________________________________

              
	 
      	 
      	 
      
	
                5.

              	
                E-Mail
      Address:

              	
                ____________________________________

              
	 
      	 
      	 
      
	
                6.

              	
                Facsimile
      Number:

              	
                ____________________________________

              
	 
      	 
      	 
      

      

       

       

      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      

       

      
 

      
        	
                7.

                 

                 

              	
                U.S. Investors
      Only:

                 

                U.S.
      Taxpayer Identification or Social

                Security
      Number:

                 

              	
                 

                 

                 

                ____________________________________

              

      

      

      B.           Accredited Investor
Status

      

      The
Subscriber represents and warrants that the Subscriber is an “accredited
investor” within the meaning of Rule 501 of Regulation D under the Securities
Act of 1933, as amended (the “Securities Act”), and has checked the box or boxes
below which are next to the categories under which the Investor qualifies as an
accredited investor:

      

      
        	
                FOR
      INDIVIDUALS:

                 

              
	
                o

              	
                A
      natural person with individual net worth (or joint net worth with spouse)
      in excess of $1 million. For purposes of this item, “net worth” means the
      excess of total assets at fair market value, including home, home
      furnishings and automobiles (and including property owned by a spouse),
      over total liabilities.

              
	 
      	 
      	 
      
	
                o

              	
                A
      natural person with individual income (without including any income of the
      Investor’s spouse) in excess of $200,000, or joint income with spouse of
      $300,000, in each of the two most recent years and who reasonably expects
      to reach the same income level in the current year.

              
	 
      	 
      	 
      
	
                FOR
      ENTITIES:

              
	 
      	 
      	 
      
	
                o

              	
                A
      bank as defined in Section 3(a)(2) of the Securities Act or any savings
      and loan association or other institution as defined in Section 3(a)(5)(A)
      of the Securities Act, whether acting in its individual or fiduciary
      capacity.

              
	 
      	 
      	 
      
	
                o

              	
                An
      insurance company as defined in Section 2(13) of the Securities
      Act.

              	 
      
	 
      	 
      	 
      
	
                o

              	
                A
      broker-dealer registered pursuant to Section 15 of the Securities Exchange
      Act of 1934.

              	 
      
	 
      	 
      	 
      
	
                o

              	
                An
      investment company registered under the Investment Company Act of 1940, as
      amended (the “Investment Company Act”). If an Investor has checked this
      box, please contact Michael Hirschberg, Esq. at 212-940-8511 for
      additional information that will be required.

              
	 
      	 
      	 
      
	
                o

              	
                A
      business development company as defined in Section 2(a)(48) of the
      Investment Company Act.

              	 
      
	 
      	 
      	 
      
	
                o

              	
                A
      small business investment company licensed by the Small Business
      Administration under Section 301(c) or (d) of the Small Business
      Investment Act of 1958.

              
	 
      	 
      	 
      

         

         

        
          
             

          

          
            -22-

            
              

            

          

          
             

          

        

         

         

        	
                o

              	
                A
      private business development company as defined in Section 202(a)(22) of
      the Investment Advisers Act of 1940. If an Investor has checked this box,
      please contact Michael Hirschberg, Esq. for additional information that
      will be required.

              
	 
      	 
      	 
      
	
                o

              	
                An
      organization described in Section 501(c)(3) of the Internal Revenue Code,
      a corporation, Massachusetts or similar business trust, or partnership,
      not formed for the specific purpose of acquiring the Securities, with
      total assets in excess of $5 million.

              
	 
      	 
      	 
      
	
                o

              	
                A
      trust with total assets in excess of $5 million not formed for the
      specific purpose of acquiring the Securities, whose purchase is directed
      by a person with such knowledge and experience in financial and business
      matters as to be capable of evaluating the merits and risks of an
      investment in the Company and the purchase of the
    Securities.

              
	 
      	 
      	 
      
	
                o

              	
                An
      employee benefit plan within the meaning of ERISA if the decision to
      invest in the Securities is made by a plan fiduciary, as defined in
      Section 3(21) of ERISA, which is either a bank, savings and loan
      association, insurance company, or registered investment adviser, or if
      the employee benefit plan has total assets in excess of $5 million or, if
      a self-directed plan, with investment decisions made solely by persons
      that are accredited investors.

              
	 
      	 
      	 
      
	
                o

              	
                A
      plan established and maintained by a state, its political subdivisions, or
      any agency or instrumentality of a state or its political subdivisions,
      for the benefit of its employees, if the plan has total assets in excess
      of $5 million.

              
	 
      	 
      	 
      
	
                o

              	
                An
      entity, including a grantor trust, in which all of the equity owners are
      accredited investors as determined under any of the foregoing paragraphs
      (for this purpose, a beneficiary of a trust is not an equity owner, but
      the grantor of a grantor trust is an equity
  owner).

              

      

       

       

      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      

       

      
 

      IF
THE FOLLOWING SECTION IS APPLICABLE, CHECK HERE ___ INDICATING THAT THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THE FOLLOWING SECTION ARE EXPRESSLY
MADE BY THE SUBSCRIBER

      

      C.       Regulation
S

      

      The Subscriber understands that the
Securities are being offered and sold in reliance on an exemption from the
registration requirements of United States federal and state securities laws
under Regulation S promulgated under the Securities Act and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the applicability of such exemptions and the suitability
of the Investor to acquire the Securities.  In this regard, the
Subscriber represents, warrants and agrees that:

      

      
        	
                1.  

              	
                The
      Subscriber is not a U.S. Person (as defined below) and is an affiliate (as
      defined in Rule 501(b) under the Securities Act) of the Company and is not
      acquiring the Securities for the account or benefit of a U.S.
      Person.

              

      

      

       A U.S. Person means any one of
the following:

       

      
        	
                ·  

              	
                any
      natural person resident in the United States of
  America;

              

      

       

      
        	
                ·  

              	
                any
      partnership or corporation organized or incorporated under the laws of the
      United States of America;

              

      

       

      
        	
                ·  

              	
                any
      estate of which any executor or administrator is a U.S.
      person;

              

      

       

      
        	
                ·  

              	
                any
      trust of which any trustee is a U.S.
person;

              

      

       

      
        	
                ·  

              	
                any
      agency or branch of a foreign entity located in the United States of
      America;

              

      

       

      
        	
                ·  

              	
                any
      non-discretionary account or similar account (other than an estate or
      trust) held by a dealer or other fiduciary for the benefit or account of a
      U.S. person;

              

      

       

      
        	
                ·  

              	
                any
      discretionary account or similar account (other than an estate or trust)
      held by a dealer or other fiduciary organized, incorporated or (if an
      individual) resident in the United States of America;
  and

              

      

       

      
        	
                ·  

              	
                any
      partnership or corporation if:

              

      

       

       

      
        
           

        

        
          -24-

          
            

          

        

        
           

        

      

       

      
 

      
        (A)
organized or incorporated under the laws of any foreign jurisdiction;
and

         

        (B)
formed by a U.S. person principally for the purpose of investing in securities
not registered under the Securities Act, unless it is organized or incorporated,
and owned, by accredited investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons, estates or
trusts.

      

      

      
        	
                2.  

              	
                At
      the time of the origination of contact concerning this Agreement and the
      date of the execution and delivery of this Agreement, the Subscriber was
      outside of the United States.

              

      

      

      
        	
                3.  

              	
                The
      Subscriber will not, during the period commencing on the date of issuance
      of the Note or Warrants and ending on the six month anniversary of such
      date, (the “Restricted Period”), offer, sell, pledge or otherwise transfer
      the Note or the Warrants in the United States, or to a U.S. Person for the
      account or for the benefit of a U.S. Person, or otherwise in a manner that
      is not in compliance with Regulation
S.

              

      

      

      
        	
                4.  

              	
                The
      Subscriber will, after expiration of the Restricted Period, offer, sell,
      pledge or otherwise transfer the Note or Warrants only pursuant to
      registration under the Securities Act or an available exemption therefrom
      and, in accordance with all applicable state and foreign securities
      laws.

              

      

      

      
        	
                5.  

              	
                The
      Subscriber was not in the United States, engaged in, and prior to the
      expiration of the Restricted Period will not engage in, any short selling
      of or any hedging transaction with respect to the Securities, including
      without limitation, any put, call or other option transaction, option
      writing or equity swap.

              

      

      

      
        	
                6.  

              	
                Neither
      the Subscriber nor or any person acting on his behalf has engaged, nor
      will engage, in any directed selling efforts to a U.S. Person with respect
      to the Securities and the Investor and any person acting on his behalf
      have complied and will comply with the “offering restrictions”
      requirements of Regulation S under the Securities
  Act.

              

      

      

      
        	
                7.  

              	
                The
      transactions contemplated by this Agreement have not been pre-arranged
      with a buyer located in the United States or with a U.S. Person, and are
      not part of a plan or scheme to evade the registration requirements of the
      Securities Act.

              

      

      

      
        	
                8.  

              	
                Neither
      the Subscriber nor any person acting on his behalf has undertaken or
      carried out any activity for the purpose of, or that could reasonably be
      expected to have the effect of, conditioning the market in the United
      States, its territories or possessions, for any of the
      Securities.  The Subscriber agrees not to cause any
      advertisement of the Securities to be published in any newspaper or
      periodical or posted in any public place and not to issue any circular
      relating to the Securities, except such advertisements that include the
      statements required by Regulation S under the Securities Act, and only
      offshore and not in the U.S. or its territories, and only in compliance
      with any local applicable securities
laws.

              

      

       

      
        
           

        

        
          -25-

          
            

          

        

        
           

        

      

       

      
 

      
        	
                9.  

              	
                In
      addition to the legends described in Section 3 of the Agreement, each
      certificate representing the Securities shall be endorsed with the
      following legends, in addition to any other legend required to be placed
      thereon by applicable federal or state securities
  laws:

              

      

      

      “THE
SECURITIESARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES
ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED
UNDER THE SECURITIES ACT.”

       

      D.          Supplemental
Data for Entities

      

      1.           If
the Subscriber is not a natural person, furnish the following supplemental data
(natural persons may skip this Section D of the Investor
Questionnaire):

      

      Legal
form of entity (trust, corporation, partnership, etc.):
_________________________

      

      Jurisdiction
of organization: ________________________________________________

      

      2.           Was
the Subscriber organized for the specific purpose of acquiring the
Securities?

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      If the
answer to the above question is “Yes,” please contact Michael Hirschberg, Esq.
at 212-940-8511 for additional information that will be required.

      

      3.           Are
shareholders, partners or other holders of equity or beneficial interest in the
Investor able to decide individually whether to participate, or the extent of
their participation, in the Investor’s investment in the Company (i.e., can
shareholders, partners or other holders of equity or beneficial interest in the
Investor determine whether their capital will form part of the capital invested
by the Investor in the Company)?

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      

      If the
answer to the above question is “Yes,” please contact Michael Hirschberg for
additional information that will be required.

       

      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

       

      
 

      4(a).       Please
indicate whether or not the Subscriber is, or is acting on behalf of, (i) an
employee benefit plan within the meaning of Section 3(3) of ERISA, whether or not such plan is
subject to ERISA, or (ii) an entity which is deemed to hold the assets of
any such employee benefit plan pursuant to 29 C.F.R. § 2510.3-101. For example,
a plan which is maintained by a foreign corporation, governmental entity or
church, a Keogh plan covering no common-law employees and an individual
retirement account are employee benefit plans within the meaning of Section 3(3)
of ERISA but generally are not subject to ERISA (collectively, “Non-ERISA Plans”). In
general, a foreign or US entity which is not an operating company and which is
not publicly traded or registered as an investment company under the Investment
Company Act of 1940, as amended, and in which 25% or more of the value of any
class of equity interest is held by employee pension or welfare plans (including
an entity which is deemed to hold the assets of any such plan), would be deemed
to hold the assets of one or more employee benefit plans pursuant to 29 C.F.R. §
2510.3-101. However, if only Non-ERISA Plans were invested in such an entity,
the entity generally would not be subject to ERISA. For purposes of determining
whether this 25% threshold has been met or exceeded, the value of any equity
interest held by a person (other than such a plan or entity) who has
discretionary authority or control with respect to the assets of the entity, or
any person who provides investment advice for a fee (direct or indirect) with
respect to such assets, or any affiliate of such a person, is
disregarded.

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      

      4(b).           If
the Subscriber is, or is acting on behalf of, such an employee benefit plan, or
is an entity deemed to hold the assets of any such plan or plans, please
indicate whether or not the Investor is subject to ERISA.

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      4(c.)           If
the Subscriber answered “Yes” to question 4.(b) and the Subscriber is investing
the assets of an insurance company general account, please indicate what
percentage of the Investor’s assets the purchase of the Securities is subject to
ERISA. ___________%.

      

      5.             
Does the amount of the Subscriber’s subscription for the Securities in the
Company exceed 40% of the total assets (on a consolidated basis with its
subsidiaries) of the Subscriber?

      

      
        	
                o   Yes

              	
                o   No

              

      

      

        If
the question above was answered “Yes,” please contact Michael Hirschberg for
additional information that will be required.

      

      6(a).           Is
the Subscriber a private investment company which is not registered under the
Investment Company Act, in reliance on Section 3(c)(1) or Section 3(c)(7)
thereof?

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      6(b).           If
the question above was answered “Yes,” was the Subscriber formed prior to April
30, 1996?

      

      
        	
                o  Yes

              	
                o  No

              

      

      

        If
the questions set forth in (a) and (b) above were both answered “Yes,” please
contact Michael Hirschberg for additional information that will be
required.

      

      7(a).           Is
the Subscriber a grantor trust, a partnership or an S-Corporation for US federal
income tax purposes?

      

      
        	
                o  Yes

              	
                o  No

              

      

       

       

      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

      
 

      7(b).           If
the question above was answered “Yes,” please indicate whether or
not:

      

      (i) more
than 50 percent of the value of the ownership interest of any beneficial owner
in the Subscriber is (or may at any time during the term of the Company be)
attributable to the Subscriber’s (direct or indirect) interest in the Company;
or

      

      
        	
                o  Yes

              	
                o  No

              

      

      

      (ii) it
is a principal purpose of the Subscriber’s participation in the Company to
permit the Partnership to satisfy the 100 partner limitation contained in US
Treasury Regulation Section 1.7704-1(h)(3).

      

      
        	
                o  Yes

              	
                o  No

              

      

      

        If
either question above was answered “Yes,” please contact Michael Hirschberg for
additional information that will be required.

      

      8.             
If the Subscriber’s tax year ends on a date other than December 31, please
indicate such date below:

       

      
        	 
      	 
      
	 
      	
                (Date)

              

      

       

      E.           
Related
Parties

      

      1. To the
best of the Subscriber’s knowledge, does the Subscriber control, or is the
Subscriber controlled by or under common control with, any other investor in the
Company?

      

      
        	
                o  Yes

              	
                o  No

              

      

       

      If the
answer above was answered “Yes”, please identify such related investor(s)
below.

       

      Name(s)
of related investor(s): _______________________________

      

      2.                                                      
Will any other person or persons have a beneficial interest in the Securities to
be acquired hereunder (other than as a shareholder, partner, or other beneficial
owner of equity interest in the Subscriber)?

      

      
        	
                o  Yes

              	
                o  No

              

      

       

      If either
question above was answered “Yes”, please contact Michael Hirschberg for
additional information that will be required.

       

       

       

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

      
 

      The
Subscriber understands that the foregoing information will be relied upon by the
Company for the purpose of determining the eligibility of the Subscriber to
purchase the Securities. The Subscriber agrees to notify the Company immediately
if any representation or warranty contained in this Agreement, including this
Investor Questionnaire, becomes untrue at any time. The Subscriber agrees to
provide, if requested, any additional information that may reasonably be
required to substantiate the Subscriber’s status as an accredited investor or to
otherwise determine the eligibility of the Subscriber to purchase the
Securities. The Subscriber agrees to indemnify and hold harmless the Company and
each officer, director, shareholder, agent and representative of the Company and
their respective affiliates and successors and assigns from and against any
loss, damage or liability due to or arising out of a breach of any
representation, warranty or agreement of the Subscriber contained
herein.

      

      

      
        	 
      	
                INDIVIDUAL:

              
	 
      	 
      
	 
      	
                ____________________________________

              
	 
      	
                (Signature)

              
	 
      	 
      
	 
      	
                ____________________________________

              
	 
      	
                (Print
      Name)

              
	 
      	 
      
	 
      	
                PARTNERSHIP,
      CORPORATION, TRUST, CUSTODIAL ACCOUNT, OTHER:

              
	 
      	 
      
	 
      	
                ___________________________________

              
	 
      	
                (Name
      of Entity)

              
	 
      	 
      
	 
      	
                By:  ________________________________

              
	 
      	
                (Signature)

              
	 
      	 
      
	 
      	
                       ________________________________

              
	 
      	
                (Print
      Name and Title)

              

      

       

      
 

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

      

      Annex
1

      

      DEFINITION
OF “INVESTMENTS”

      

      

      The term
“investments” means:

      

      
        	
                1)  

              	
                Securities,
      other than securities of an issuer that controls, is controlled by, or is
      under common control with, the Subscriber that owns such securities,
      unless the issuer of such securities
is:

              

      

      

      
        	
                (i)  

              	
                An
      investment company or a company that would be an investment company but
      for the exclusions or exemptions provided by the Investment Company Act,
      or a commodity pool; or

              

      

      

      
        	
                (ii)  

              	
                a
      Public Company (as defined below);

              

      

      

      
        	
                (iii)  

              	
                A
      company with shareholders’ equity of not less than $50 million (determined
      in accordance with generally accepted accounting principles) as reflected
      on the company’s most recent financial statements, provided that such
      financial statements present the information as of a date within 16 months
      preceding the date on which the Subscriber acquires
      Securities;

              

      

      

      
        	
                2)  

              	
                Real
      estate held for investment
purposes;

              

      

      

      
        	
                3)  

              	
                Commodity
      Shares (as defined below) held for investment
  purposes;

              

      

      

      
        	
                4)  

              	
                Physical
      Commodities (as defined below) held for investment
    purposes;

              

      

      

      
        	
                5)  

              	
                To
      the extent not securities, Financial Contracts (as defined below) entered
      into for investment purposes;

              

      

      

      
        	
                6)  

              	
                In
      the case of a Subscriber that is a company that would be an investment
      company but for the exclusions provided by Section 3(c)(1) or 3(c)(7) of
      the Investment Company Act, or a commodity pool, any amounts payable to
      such Subscriber pursuant to a firm agreement or similar binding commitment
      pursuant to which a person has agreed to acquire an interest in, or make
      capital contributions to, the Subscriber upon the demand of the
      Subscriber; and

              

      

      

      
        	
                7)  

              	
                Cash
      and cash equivalents held for investment
  purposes.

              

      

      

      Real
Estate that is used by the owner or a Related Person (as defined below) of the
owner for personal purposes, or as a place of business, or in connection with
the conduct of the trade or business of such owner or a Related Person of the
owner, will NOT be considered Real Estate held for investment purposes, provided
that real estate owned by an Subscriber who is engaged primarily in the business
of investing, trading or developing real estate in connection with such business
may be deemed to be held for investment purposes. However, residential real
estate will not be deemed to be used for personal purposes if deductions with
respect to such real estate are not disallowed by section 280A of the Internal
Revenue Code of 1986, as amended.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
 

      A
Commodity Interest or Physical Commodity owned, or a Financial Contract entered
into, by the Subscriber who is engaged primarily in the business of investing,
reinvesting, or trading in Commodity Shares, Physical Commodities or Financial
Contracts in connection with such business may be deemed to be held for
investment purposes.

      

      “Commodity
Shares” means commodity futures contracts, options on commodity futures
contracts, and options on physical commodities traded on or subject to the rules
of:

      

      
        	
                (i)  

              	
                Any
      contract market designated for trading such transactions under the
      Commodity Exchange Act and the rules thereunder;
  or

              

      

      

      
        	
                (ii)  

              	
                Any
      board of trade or exchange outside the United States, as contemplated in
      Part 30 of the rules under the Commodity Exchange
  Act.

              

      

      

      “Public
Company” means a company that:

      

      
        	
                (i)  

              	
                files
      reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended; or

              

      

      

      
        	
                (ii)  

              	
                has
      a class of securities that are listed on a Designated Offshore Securities
      Market, as defined by Regulation S of the Securities
  Act.

              

      

      

      “Financial
Contract” means any arrangement that:

      

      
        	
                (i)  

              	
                takes
      the form of an individually negotiated contract, agreement, or option to
      buy, sell, lend, swap, or repurchase, or other similar individually
      negotiated transaction commonly entered into by participants in the
      financial markets;

              

      

      

      
        	
                (ii)  

              	
                is
      in respect of securities, commodities, currencies, interest or other
      rates, other measures of value, or any other financial or economic
      interest similar in purpose or function to any of the foregoing;
      and

              

      

      

      
        	
                (iii)  

              	
                is
      entered into in response to a request from a counter party for a
      quotation, or is otherwise entered into and structured to accommodate the
      objectives of the counterparty to such
  arrangement.

              

      

      

      “Physical
Commodities” means any physical commodity with respect to which a Commodity
Interest is traded on a market specified in the definition of Commodity Shares
above.

      

      “Related
Person” means a person who is related to the Subscriber as a sibling, spouse or
former spouse, or is a direct lineal descendant or ancestor by birth or adoption
of the Subscriber, or is a spouse of such descendant or ancestor, provided that,
in the case of a Family Company, a Related Person includes any owner of the
Family Company and any person who is a Related Person of such an owner. “Family
Company” means a company that is owned directly or indirectly by or for two or
more natural persons who are related as siblings or spouse (including former
spouses), or direct lineal descendants by birth or adoption, spouses of such
persons, the estates of such persons, or foundations, charitable organizations
or trusts established for the benefit of such persons.

      

      For
purposes of determining the amount of investments owned by a company, there may
be included investments owned by majority-owned subsidiaries of the company and
investments owned by a company (“Parent Company”) of which the company is a
majority-owned subsidiary, or by a majority-owned subsidiary of the company and
other majority-owned subsidiaries of the Parent Company.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
 

      In
determining whether a natural person is a qualified purchaser, there may be
included in the amount of such person’s investments any investment held jointly
with such person’s spouse, or investments in which such person shares with such
person’s spouse a community property or similar shared ownership interest. In
determining whether spouses who are making a joint investment in the Partnership
are qualified purchasers, there may be included in the amount of each spouse’s
investments any investments owned by the other spouse (whether or not such
investments are held jointly). There shall be deducted from the amount of any
such investments any amounts specified by paragraph 2(a) of Annex 2 incurred by
such spouse.

      

      In
determining whether a natural person is a qualified purchaser, there may be
included in the amount of such person’s investments any investments held in an
individual retirement account or similar account the investments of which are
directed by and held for the benefit of such person.

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Annex 2

      

       

      VALUATIONS
OF INVESTMENTS

       

      The
general rule for determining the value of investments in order to ascertain
whether a person is a qualified purchaser is that the value of the aggregate
amount of investments owned and invested on a discretionary basis by such person
shall be their fair market value on the most recent practicable date or their
cost. This general rule is subject to the following provisos:

      

      
        	
                1)  

              	
                In
      the case of Commodity Shares, the amount of investments shall be the value
      of the initial margin or option premium deposited in connection with such
      Commodity Shares; and

              

      

      

      
        	
                2)  

              	
                In
      each case, there shall be deducted from the amount of investments owned by
      such person the following amounts:

              

      

      

      
        	
                (i)  

              	
                The
      amount of any outstanding indebtedness incurred to acquire the investments
      owned by such person.

              

      

      

      
        	
                (ii)  

              	
                A
      Family Company, in addition to the amounts specified in paragraph (a)
      above, shall have deducted from the value of such Family Company’s
      investments any outstanding indebtedness incurred by an owner of the
      Family Company to acquire such
investments.

              

      

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      Exhibit
A

      

      NOTE

       

       

       

       

       

       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      Exhibit
B

      

      WARRANT

       

       

       

       

       

       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

         

         

      

      Exhibit
C

      

      ESCROW
AGREEMENT

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