Document:

ex10_1.htm

Exhibit 10.1 

 

	

The Securities To Which This Agreement Relates Have Not Been Registered Under The United States Securities Act Of 1933, As Amended (The “1933 Act”) And The Rules And Regulations Promulgated Thereunder And May Not Be Offered Or Sold Directly Or Indirectly (A) Within The United States Or To Or For The Account Or Benefit Of U.S. Persons
(As Defined In Regulation S) Except Pursuant To An Effective Registration Statement As To Such Securities Under, Or An Exemption From, The Prospectus And Registration Requirements Of The 1933 Act, Or (B) In the Republic of Hungary Or To Residents Of Republic of Hungary Except Pursuant To The Applicable Securities Laws And Regulations Or Pursuant To An Exemption Order Made By The Appropriate Governmental Securities Regulator(S). 

 

Subscription Agreement

 

Dated  October 24, 2008 For Reference

 

By and Between

 

A.           Power of the Dream Ventures, Inc., a Delaware corporation having its principal office at 1095 Budapest, Soroksari ut 94-96, Hungary (the “Company”);

And

B.           The undersigned subscriber [¢ a
natural person,  £ a trust, £ a corporation, £ a
partnership,  £ other (please specify) ______________________] having an office or residential address, as the case may be, set forth on the Signature Page hereto (the “Subscriber”).

 

Recitals

 

Whereas, the Company is offering on a no minimum basis (the “Offering”) up to an aggregate of 2,500,000 shares (the “Offered
Shares”) of its common stock (the “Common Stock”) in 10 units (the “Units”) of 250,000 Offered Shares each at a price of $100,000 per Unit ($0.40 per Offered Share), or $1,000,000 in
the aggregate.

 

Whereas, the Company will offer and sell Offered Shares only to investors (i) who are not “U.S. Persons” as defined in Regulation S as promulgated under the Securities Act of 1933, as amended (the “1933
Act”) and (ii) who otherwise satisfy any applicable criteria established by the laws of the jurisdiction in which they reside.

  

  

  

 

WHEREAS, the Subscriber desires to purchase from the Company and the Company desires to sell to the Subscriber the number of Units set forth on the Signature Page hereof (the “Subscribed for Units”), subject to the
terms and conditions set forth herein.

 

NOW THEREFORE, in consideration of the recitals and the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

AGREEMENTS

 

	
1.
	
Subscription and Purchase of Shares; Closing.

	 	
1.1
	
Definitions.

“1933 Act” shall have the meaning ascribed thereto in the recitals to this Agreement.

“1934 Act” shall mean the United States Securities Exchange Act of 1934, as amended.

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person.  For the purposes of this definition, "control," when used with respect to any Person, means the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing.

“Agreement” means this Subscription Agreement.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are closed.

“Closing Date” shall have the meaning ascribed thereto in Section 1.4 hereof.

“Commission” means the Securities and Exchange Commission.

“Common Sock” means shares of the Company's common stock, $0.001 par value, or such securities that such stock shall hereafter be reclassified into.

“Company,” shall have the meaning ascribed thereto in the preamble.

“Offered Shares” shall have the meaning ascribed thereto in the recitals to this Agreement.

“Offering” means the offering of Offered Shares.

  

  

  

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceed­ing, such as a deposition), whether commenced or threatened.

“Purchase Price” shall have the meaning ascribed thereto in Section 1.2 hereof.

“SEC Filings” shall have the meaning ascribed thereto in Section 4.5 hereof.

“Subscribed for Units” shall have the meaning ascribed thereto in recitals to this Agreement.

“US Person” shall have the meaning ascribed thereto in Section 1.5 hereto.

 

	 	
1.2
	
Subscription and Purchase of Shares.

 

Subject to the terms and conditions herein set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company the Subscribed for Units, at a price per Unit of $100,000, or $0.40 per Offered Share, (the “Purchase
Price”).

 

	 	
1.3
	
Payment of Purchase Price.

 

Simultaneously with the execution and delivery of this Agreement by the Subscriber, the Subscriber shall deliver the Purchase Price by check payable to the Company or by wire transfer of funds pursuant to wiring instructions provided by the Company and as set forth on Exhibit
1.3 hereto.

	 	
1.4
	
Closing.

 

The closing of the purchase and sale of the Subscribed for Units (the “Closing”) shall take place at the offices of the Company simultaneously with the execution and delivery of this Agreement by the Company, or at such other time and place or on such other business day
thereafter as the parties hereto may agree (the “Closing Date”). As soon as practicable following the Closing Date, the Company will deliver or cause to be delivered a certificate(s) representing the Offered Shares constituting the Subscribed for Units to the Subscriber against confirmation of collection of the Purchase Price.

 

	 	
1.5
	
Limitations of Offering.

The Subscriber acknowledges that the Company is offering and selling the Offered Shares only to investors (the “Qualified Subscribers”) who are (a) who are not “US Persons” as that term is defined in Rule
902(o) of the Regulations as promulgated under the 1933 Act and (b) who otherwise satisfy any applicable criteria established by the laws of the jurisdiction in which they reside.

  

  

  

 

	 	
1.6
	
No Minimum Number of Offered Shares Need be Sold.

The Subscriber acknowledges that the Company is offering and selling the Offered Shares on a no minimum basis, and further acknowledges and understands that since there is no minimum number of Units to be sold, no proceeds will be held in an escrow account and all funds will be immediately available to, and for use by, the Company. Subscriber
further acknowledges that he may be the only investor in the Offering.

	
2.
	
Subscriber’s Conditions of Closing.

 

The Subscriber’s obligation to purchase and pay for the Subscribed for Units is subject to the satisfaction or waiver of the condition that the representations, warranties and covenants of the Company set forth in Section 4 hereof shall be true in all material respects on and
as of the Closing Date, except to the extent of changes caused by the transactions herein contemplated; and, if the Closing Date is other than the date hereof, the Company shall deliver to Subscriber a certificate of a duly authorized officer of the Company, dated the Closing Date, to such effect.

	
3.
	
Company’s Conditions of Closing.

 

The Company’s obligation to sell the Subscribed for Units is subject to the satisfaction or waiver, on or before the Closing Date, of the conditions contained in this Section 3.

 

	 	
3.1
	
Representations, Warranties and Covenants.

 

The representations, warranties and covenants of the Subscriber set forth in Section 5 hereof shall be true in all material respects on and as of the Closing Date.

 

	 	
3.2
	
Payment of Purchase Price.

 

The Subscriber shall have purchased and paid for the Subscribed for Units by delivery of the Purchase Price.

 

	 	
3.3
	
No Adverse Action or Decision.

 

There shall be no action, suit, investigation or proceeding pending, or to the Company’s knowledge, threatened, against or affecting the Company or any of its properties or rights, or any of its affiliates, associates, officers or directors, before any court, arbitrator, or administrative or governmental body that (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise adversely affect the transactions contemplated by this Agreement, or (ii) questions the validity or legality of any such transaction or seeks to recover damages or to obtain other relief in connection with any such transaction.

  

  

  

 

	 	
3.4
	
Compliance with Securities Laws.

 

The offer and sale of the Subscribed for Units under this Agreement shall have complied with, and shall not be prohibited by, all applicable requirements of the 1933 Act or applicable Hungarian Securities Laws (as hereinafter defined).

 

	
4.
	
Representations and Warranties of the Company.

 

The Company represents, warrants and covenants to the Subscriber that:

 

	 	
4.1
	
Corporate Existence and Business.

 

The Company is a Company duly organized, legally existing, and in good standing under the laws of the State of Delaware with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is currently a development stage start-up technology company focused
on the acquisition and development of intellectual property and technologies in the Republic of Hungary for commercialization in international markets. The Company seeks to acquire rights to and interests in intellectual property and technologies through a variety of methods including, but not limited to, the direct investment in entities owning or developing the intellectual property, licensing of the intellectual property or technology,
or a joint venture arrangement to mutually develop and commercialize the intellectual property or technologies.

 

	 	
4.2
	
Authorization; Enforcement.

 

The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement, and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company. When executed and delivered in accordance with the terms hereof, this Agreement shall constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application. Anything herein to the contrary notwithstanding, this Agreement shall not become a binding obligation of the Company until it has been accepted by the Company as evidenced by its execution by a duly authorized officer.

 

	 	
4.3
	
Agreement Not in Conflict.

 

The execution and delivery of this Agreement by the Company and the completion of the transactions contemplated hereby do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under (whether after notice or lapse of time or both): (A) any statute, rule or regulation
applicable to the Company; (B) the charter documents, by-laws or resolutions of the Company which are in effect at the date hereof; (C) any mortgage, note, indenture, contract, agreement, instrument, lease or other document to which the Company is a party or by which it is bound; or (D) any judgment, decree or order binding the Company or, to the best of its knowledge, information and belief, the property or assets of the Company.

  

  

  

 

	 	
4.4 
	
Authorized and Outstanding Capital Stock.

The Company’s authorized capital stock consists of 250,000,000 shares of Common Stock, and 10,000,000 preferred shares, $0.001 par value. As of the Reference Date there were 45,115,181 shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding.  If all of the Offered Shares are
sold there will be an aggregate of 47,615,181 shares of Common Stock issued and outstanding.

	 	
4.5
	
Reporting Issuer Status.

The Company has a reporting obligation under Section 12(g) of the 1934 Act and is required to file current, quarterly and annual reports with the Commission on forms 8-K, 10-QSB and 10-KSB (collectively, the “SEC Filings”). The filed material may be inspected and copied at
the Public Reference Room maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information about operation of the Public Reference Room by calling the Commission at 1-800-U.S. The Commission also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the U.S.  Securities & Exchange Commission at http://www.sec.gov. Copies of such material can be obtained
from the public reference section of the U.S.  Securities & Exchange Commission at prescribed rates. The Company is current in its filings with the Commission.

	 	
4.6
	
Market for the Company’s Common Stock.

There currently is no trading market for the Company’s securities and no assurance can be given that a trading market for such securities will develop.

	
5.
	
Representations, Warranties and Acknowledgements of Subscriber.

 

The Subscriber represents, warrants and covenants to the Company that:

 

	 	
5.1
	
Organization; Authority.

 

The Subscriber has the requisite power and authority to enter into and to consummate the transactions contemplated hereby and to carry out its obligations hereunder.  The Subscriber:

 

(a)           if a company, trust, partnership, qualified plan or other entity, further warrants and represents that it is duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its organization and is authorized and qualified to become
a holder of the Subscribed for Units, the person signing this Agreement on behalf of such entity has been duly authorized to execute and deliver this agreement, and the acquisition of the Subscribed for Units by the Subscriber and the consummation by the Subscriber of the transactions contemplated hereby have been duly authorized by all necessary action to be taken on the part of the Subscriber;

  

  

  

 

(b)           if not an individual, further warrants and represents that it has the requisite power, authority and legal capacity to execute and deliver this Subscription Agreement, to perform all of its obligations hereunder and to undertake all actions required of the Subscriber
hereunder, and all necessary approvals of its directors, partners, shareholders, trustees or otherwise (as the case may be) with respect to such matters have been given or obtained; and

 

(c)           in any case, represents and warrants that this Agreement has been duly executed and delivered by the Subscriber and constitutes a valid and legally binding obligation of the Subscriber, enforceable against the Subscriber, in accordance with its terms, subject to applicable
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 entering into of this Agreement and the transactions contemplated hereby will not result in a violation of any of the terms or provisions of any law applicable to the Subscriber, or any of the Subscriber’s charter documents, or of any agreement to which the Subscriber is a party or by which it is
bound.

 

	 	
5.2
	
Acquisition of Offered Shares for Investment.

 

The Subscriber is acquiring the Subscribed for Units as principal for its own account for investment purposes only and not with a view to or for distributing or reselling the Subscribed for Units or any part thereof or interest therein. Except as otherwise disclosed in writing to the Company, the Subscriber is not acting jointly or in
concert with any other person or company for the purposes of acquiring any of the Offered Shares.

 

	 	
5.3
	
Experience of Subscriber.

 

The Subscriber either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating and assessing the merits and risks of the prospective investment in the Subscribed for Units, and has so evaluated the merits and risks of such investment
and has determined that the Subscribed for Units are suitable to investment for him.

 

	 	
5.4
	
Ability of Subscriber to Bear Risk of Investment.

 

The Subscriber acknowledges that the purchase of the Subscribed for Units is a highly speculative investment, involving a high degree of risk and the Subscriber is able to bear the economic risk of an investment in the Subscribed for Units; and, at the present time, is able to afford a complete loss of such investment.

 

	 	
5.5
	
No Conflict or Violation.

 

The execution, delivery, and performance of this Agreement by Subscriber and the consummation by Subscriber of the transactions contemplated hereby will not conflict with or result in a default under the terms of any material contract, agreement, obligation or commitment applicable to Subscriber. The execution, delivery and performance
by the Subscriber of this Subscription Agreement and the completion of the transaction contemplated hereby do not and will not result in a violation of any law, regulation, order or ruling applicable to the Subscriber, and do not and will not constitute a breach of or default under any of the Subscriber’s charter documents (if the Subscriber is not a natural person) or any agreement to which the Subscriber is a party or by which it is bound.

  

  

  

 

	 	
5.6
	
Regulation S Representations, Acknowledgements and Warranties.

 

The Subscriber represents, warrants, acknowledges, and covenants to the Company, that:

 

(a)           he is not a “US Person” as that term is defined in Rule 902 of Regulation S;

 

(b)           the Subscribed for Units are being offered and sold in reliance on the exemptions from the registration requirements of the 1933 Act provided by the provisions of Regulation S as promulgated under the 1933 Act, and that the Subscribed for Units may not be resold in the
United States or to a US Person as defined in Regulation S, except pursuant to an effective registration statement or an exemption from the registration provisions of the 1933 Act as evidenced by an opinion of counsel acceptable to the Company, and that in the absence of an effective registration statement covering the Subscribed for Units or an available exemption from registration under the 1933 Act, the Subscribed for Units must be held indefinitely. The Subscriber further acknowledges that this Agreement
is not intended as a plan or scheme to evade the registration requirements of the 1933 Act;

 

(c)           he is a resident of the country set forth on the signature page hereto;

 

(d)           he is not, and on the Closing Date will not be, an affiliate of the Company;

 

(e)           all offers and sales of the Subscribed for Units shall be made in compliance with all applicable laws of any applicable jurisdiction and, particularly, in accordance with Rules 903 and 904, as applicable, of Regulation S or pursuant to registration of the Subscribed for
Units under the 1933 Act or pursuant to an exemption from registration.  In any case, none of the Subscribed for Units have been and will be offered or sold by the Subscriber to, or for the account or benefit of a U.S. Person or within the United States until after the end of a six month period commencing on the date on which this Agreement is accepted by the Company (the “Distribution Compliance Period”), except pursuant to an effective
registration statement as to the Subscribed for Units or an applicable exemption from the registration requirements of the 1933 Act;

 

(f)           the Subscribed for Units have not been offered to the Subscriber in the United States and the individuals making the decision to purchase the Subscribed for Units and executing and delivering this Agreement on behalf of the Subscriber were not in the United States when
the decision was made and this Agreement was executed and delivered;

 

(g)           he will not engage in any activity for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares;

 

(h)           neither the Subscriber nor any of his affiliates will directly or indirectly maintain any short position, purchase or sell put or call options or otherwise engage in any hedging activities in any of the Subscribed for Units or any other securities of the Company until
after the end of the Distribution Compliance Period, and acknowledges that such activities are prohibited by Regulation S.

  

  

  

 

	 	
5.7
	
Transfer Restrictions.

 

(a)           The Subscriber acknowledges that the certificates representing the Offered Shares, shall bear a legend substantially as follows:

 

“THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY (A) WITHIN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER, IN COMPLIANCE WITH REGULATION S AND/OR OTHER APPLICABLE EXEMPTION FROM, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, OR (B) IN REPUBLIC OF HUNGARY OR TO RESIDENTS OF REPUBLIC OF HUNGARY EXCEPT PURSUANT TO APPLICABLE SECURITIES LAWS AND REGULATIONS IN EACH CASE AS EVIDENCED BY AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY.”

 

(b)           The Subscriber understands and acknowledges that the Company has the right not to record a purported transfer of the Subscribed for Units, without the Company being satisfied that such transfer is exempt from or not subject to (a) registration under the U.S. 1933 Act
and any applicable state securities laws, and (b) the registration and prospectus requirements under Hungarian Securities Laws.

(c)           In addition to resale restrictions imposed under U.S. federal securities law, there are additional restrictions on the Subscriber’s ability to resell the Subscribed for Units under applicable Hungarian Securities Law.

 

(d)           The Subscriber understands and acknowledges that the Company is not obligated to file and has no present intention of filing any registration statement or prospectus in respect of re-sales of the Subscribed for Units with the SEC in the United States or with any of the
provincial securities regulatory authorities in Republic of Hungary.

(e)           The Subscriber confirms that it has been advised to consult its own legal and financial advisors with respect to the suitability of the Subscribed for Units as an investment for the Subscriber and the resale restrictions (including “hold
periods”) to which the Subscribed for Units will be subject under applicable securities legislation and confirms that no representation has been made to the Subscriber by or on behalf of the Company with respect thereto.

(f)           The Subscriber will not resell any Subscribed for Units except in accordance with the provisions of applicable securities legislation and stock exchange rules.

  

  

  

 

	 	
5.8
	
No Offering Memorandum.

 

(a)           The Subscriber acknowledges that it has reviewed the description of the Company’s business.

 

(b)           The Subscriber acknowledges that the offering is being conducted without delivery of an offering memorandum and that it has not relied on any oral representation, warranty or information in connection with the offering of the Subscribed for Units by the Company, or any
officer, employee, agent, affiliate or subsidiary of the Company.

 

	 	
5.9
	
No Approval by Regulatory Authority.

 

The Subscriber understands that no securities commission, stock exchange, governmental agency, regulatory body or similar authority has made any finding or determination or expressed any opinion with respect to the merits of an investment in Offered Shares of which the Subscribed for Units are a part.

 

	 	
5.10
	
No Representation as to Value of Offered Shares.

 

The Subscriber confirms that neither the Company nor any of its directors, employees, officers, consultants, agents or affiliates, has made any representations (written or oral) to the Subscriber regarding the future value of the Offered Shares and acknowledges and confirms that no representation has been made to the Subscriber with respect
to the listing of the Offered Shares on any exchange or that application has been or will be made for such listing. In making its investment decision with respect to the Subscribed for Units, the Subscriber has relied solely upon publicly available information relating to the Company and the written representation made by or on behalf of the Company herein.

 

	 	
5.11
	
No Advertisement.

 

The Subscriber is not and has not become aware of any advertisement in printed public media or on radio, television or other form of communication (including electronic display such as the Internet) with respect to the Offering.

 

	 	
5.12
	
Conditional Sale.

 

The Subscriber understands that the sale and delivery of the Subscribed for Units is conditional upon such sale being exempt from the registration and prospectus requirements under applicable securities legislation or upon the issuance of such orders, consents or approvals as may be required to permit such sale and delivery without complying
with such requirements. If required under applicable securities legislation or regulatory policy, or by any securities commission, stock exchange or other regulatory authority, the Subscriber will execute, deliver, file and otherwise assist the Company in filing such reports, undertakings and other documents with respect to the issue of the Subscribed for Units.

  

  

  

 

	 	
5.13
	
No Joint Action.

 

Except as disclosed in writing to the Company, the Subscriber does not act jointly or in concert with any other person or company for the purposes of acquiring the Subscribed for Units.

 

	 	
5.14
	
Tax Consequences.

 

The Subscriber understands that the investment in the Subscribed for Units may have tax consequences under applicable taxation laws, that it is the sole responsibility of the Subscriber to determine and assess such tax consequences as may apply to its particular circumstances, and the Subscriber has not received and is not relying on the
Company for any tax advice whatsoever.

 

	 	
5.15
	
Legal Advice.

 

The Subscriber understands that he, she or it is responsible for obtaining such legal advice as he, she or it considers appropriate in connection with the execution and delivery of this Subscription Agreement and the purchase of the Subscribed for Units.

 

	 	
5.16
	
Risk Acknowledgement.

The Subscriber acknowledges that he, she or it has reviewed the Risk Factors and that the purchase of the Shares is a speculative investment involving substantial business and market risks.

 

	
6.
	
Reliance and Indemnification.

 

	 	
6.1
	
Reliance and Timeliness.

 

The Subscriber understands and acknowledges that (i) the Offered Shares are being offered and sold to the Subscriber without registration under the Securities Act or applicable Hungarian securities laws in a private placement that is exempt from the registration provisions of the Securities
Act and/or the requirements of applicable Hungarian securities laws and (ii) the availability of such exemption, depends in part on, and the Company will rely upon, the accuracy and truthfulness of, the foregoing representations and warranties and the Subscriber hereby consents to such reliance. The Subscriber agrees that the representations, warranties and covenants of the Subscriber contained herein (or in any Representation Letter executed and delivered by the Subscriber pursuant to the provisions hereof)
shall be true and correct both as of the execution of this Subscription Agreement and as of the Closing Date, and shall survive the completion of the distribution of the Offered Shares.  The Subscriber hereby agrees to notify the Company immediately of any change in any representation, warranty, covenant or other information relating to the Subscriber contained in this Agreement which takes place prior to Closing.

 

	 	
6.2
	
Indemnification.

 

The Subscriber agrees to indemnify the Company, and each of its officers, directors, employees, consultants and agents from and against all losses, claims, costs, expenses, damages or liabilities that any of them they may suffer or incur as a result of or in connection with their reliance on such representations, warranties and covenants.
The Subscriber acknowledges and agrees that the Company acts as trustee of the Subscriber’s covenants hereunder for each of its officers, directors, employees, consultants and agents entitled to indemnity hereunder and shall be entitled to enforce such covenants on behalf of such persons.

  

  

  

 

	
7.
	
Miscellaneous.

 

	
7.1
	
Amendment; Waivers.

 

No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Subscriber; or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

	 	
7.2
	
Survival of Representations and Warranties.

 

All representations, warranties and agreements contained herein or made in writing by or on behalf of any party to this Agreement in connection herewith shall survive the execution and delivery of this Agreement.

 

	 	
7.3
	
Successors and Assigns; No Third Party.

 

All covenants and agreements in this Agreement contained by or on behalf of the parties hereto shall be binding upon and inure to the benefit of the parties and their respective successors and assigns and, to the extent provided in this Agreement.

 

	 	
7.4
	
Notices.

 

Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior
to 4:30 p.m. (New York Time) on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in the this Agreement later than 4:30 p.m. (New York Time) on any date and earlier than 11:59 p.m. (New York Time) on such date, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as follows:

	
If to the Company:
	
Power of the Dream Ventures, Inc.

	  	  
	  	
1095 Budapest

	  	
Soroksari ut 94-96

	  	
Hungary

	  	Telephone: +36-1-456-6061
	  	Facsimile:+36-1-456-6062

  

  

  

 

If to the Subscriber: At the address set forth below the Subscriber’s name on the signature page hereto; or, such other address as may be designated in writing hereafter, in the same manner, by such party.

	 	
7.5
	
Headings.

 

The headings herein are inserted for convenience only and do not constitute a part of this Agreement.  Whenever the context requires, the gender of any word used in this Agreement includes the masculine, feminine or neuter, and the number of any word includes the singular or plural. Unless the context otherwise requires, all
references to articles and sections refer to articles and sections of this Agreement, and all references to schedules are to schedules attached hereto, each of which is made a part hereof for all purposes. The descriptive headings of the several articles and sections of this Agreement are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof.

	 	
7.6
	
Governing Law; Consent to Jurisdiction.

 

The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

	 	
7.7
	
Remedies.

 

In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Subscriber will be entitled to specific performance of the obligations of the Company hereunder. The Company and the Subscriber agree that monetary damages would not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

  

  

  

 

	 	
7.8
	
Entire Agreement.

 

This Agreement and the other writings referred to herein or delivered pursuant hereto contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto.

 

	 	
7.9
	
Severability.

 

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and the parties will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.  Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

	 	
7.10
	
Counterparts.

 

This Agreement may be executed in any number of counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties
need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

	 	
7.11
	
Fees and Expenses.

 

Except as otherwise provided herein, each of the parties hereto shall pay its own fees and expenses, including attorney fees, in connection with the transactions contemplated by this Agreement.

 

	 	
7.12
	
English Language.

 

The Subscriber acknowledges that it has consented to and requested that all documents evidencing or relating in any way to the sale of the Offered Shares, of which the Subscribed for Units are part, be drawn up in the English language only.

 

	 	
7.13
	
Knowledge. 

 

As used in this Agreement, the term “knowledge” of any person or entity shall mean and include (i) actual knowledge and (ii) that knowledge which a reasonably prudent business person could have obtained in the management of his or her business affairs after making due inquiry and exercising due diligence which a prudent business
person should have made or exercised, as applicable, with respect thereto.

  

  

  

 

	 	
7.14
	
Currency.

 

All dollar references herein are to U.S. dollars unless otherwise indicated.

 

The remainder of this page is left intentionally blank.

  

  

  

 

IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly executed as of the dates set forth below.

 

	  	  	 	

Date the Subscription:

	

, 2008

	  	

Sandor Feket

	 	  
	  	

(Name of Subscriber – please print)

	 	

Number Of Subscribed for Units: 10

	  	  	 	  
	  	  	 	

Price Per Unit: $100,000

	  	  	 	  
	  	  	 	

Aggregate Consideration: $1,000,000 ______

	

By:

	

/s/ Sandor Fekete

	 	  
	  	

Authorized Signature

	 	

Paid by  □ Check    TWire Transfer

	  	  	 	  
	  	  	 	  
	  	  	 	  
	  	  	 	  
	  	

(Official Capacity or Title – please print)

	 	  
	  	  	 	  
	  	  	 	

(Subscriber’s Address including Country of

	  	

(Please print name of individual whose signature

	 	

Residence)

	  	

appears above if different than the name of the

	 	  
	  	

subscriber printed above.)

	 	  
	  	  	 	

(Telephone Number)/(Facsimile Number)

	  	  	 	  
	  	

Tax Identification Number:

	 	

Email Address:

 

ACCEPTANCE

 

The Company hereby accepts the above subscription for the Subscribed for Units effective the 24 day of October 2008.

 

	

Power of the Dream Ventures, Inc.

	 	

Address:

	 	

Power of the Dream Ventures, Inc.

	  	  	 	  	 	

1095 Budapest

	  	  	 	  	 	

Soroksari ut 94-96

	

By:

	

/s/ Viktor Rozsnyay

	 	  	 	

Hungary

	

Name:

	

Viktor Rozsnyay

	 	  	 	

Telephone: +36-1-456-6061

	

Title:

	

President and CEO

	 	  	 	

Fax: +36-1-456-6062

  

  

  

 

Exhibit 1.3

 

WIRE TRANSFER INFORMATION

 

 

	
Remit U.S. Dollar Wire Payments to:
	  
	  	  
	  	  
	
Name of the acct:
	
Power of the Dream Ventures Inc.

	
Acct no:
	
1500876685

	
Name of the Bank:
	
Signature Bank

	  	
950 Third Avenue, 9th flr

	  	
New York NY 10022

	
Bank Swift no:
	
SIGNUS33.

	  	  
	
Or
	  
	  	  
	
Remit U.S. Dollar Wire Payments to:
	  
	  	  
	
Name of the acct:
	
Vidatech Kft.

	
Acct no:
	
HU15-10104167-57302700-01000993

	
Name of the Bank:
	
Budapest Bank

	  	
1138 Budapest

	  	
Vaci ut 188

	
Bank Swift no:
	
BUDAHUHB

	  	  
	
Or
	  
	  	  
	  	  
	
Remit (Hungarian forint) Wire Payments to:
	  
	  	  
	  	  
	
Name of the acct:
	
Vidatech Kft.

	
Acct no:
	
HU70-10104167-57302700-01000003

	
Name of the Bank:
	
Budapest Bank

	  	
1138 Budapest

	  	
Vaci ut 188

	
Bank Swift no:
	
BUDAHUHBUnassociated Document

     

    Exhibit
      10.1

    

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement dated as of November 17, 2008 (this “Agreement”)
      is
      made by and between CSMG Technologies, Inc., a Texas corporation, with principal
      executive offices located at 500 North Shoreline Drive, Suite 1005 North, Corpus
      Christi, Texas 78471 (the “Company”),
      and
      La Jolla Cove Investors, Inc. (“Holder”).
      

     

    WHEREAS,
      Holder desires to purchase from the Company, and the Company desires to issue
      and sell to Holder, upon the terms and subject to the conditions of this
      Agreement, a Convertible Debenture of the Company in the aggregate principal
      amount of $1,500,000 (the “Debenture”);
      and

     

    WHEREAS,
      upon the terms and subject to the conditions set forth in the Debenture the
      Debenture is convertible into shares of the Company’s Common Stock (the
“Common
      Stock”).

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants contained
      herein, the parties hereto, intending to be legally bound, hereby agree as
      follows:

     

    
      	
            	I.	
              PURCHASE
                AND SALE OF DEBENTURE

            

    

     

    A.  Transaction. 
      Holder hereby agrees to purchase from the Company, and the Company has offered
      and hereby agrees to issue and sell to Holder in a transaction exempt from
      the
      registration and prospectus delivery requirements of the Securities Act of
      1933,
      as amended (the “Securities
      Act”),
      the
      Debenture.

     

    B.  Purchase
      Price; Form of Payment. 
      The purchase price for the Debenture to be purchased by Holder hereunder shall
      be $1,500,000 (the “Purchase
      Price”).
      Simultaneously with the execution of this Agreement, Holder shall pay the
      Purchase Price by wire transfer of $125,000 in immediately available funds
      to
      the Company and delivery to the Company of a Secured Promissory Note in the
      principal amount of $1,375,000, in the form attached hereto as Exhibit
      A
      (the
“Promissory
      Note”).
      Simultaneously with the execution of this Agreement, the Company shall deliver
      the Debenture (which shall have been duly authorized, issued and executed I/N/O
      Holder or, if the Company otherwise has been notified, I/N/O Holder’s nominee)
      to the Holder.

     

    C.  Second
      Debenture. 
      Provided that no Event of Default (as defined in the Debenture) has occurred
      under the Debenture (provided that Holder may, in its sole and absolute
      discretion waive the occurrence of such Event of Default with respect to this
      Section), Holder shall, in Holder’s sole and absolute discretion, select a date
      during the Second Debenture Period (as defined below) (with such date as
      selected by Holder referred to herein as the “Second
      Debenture Date”)
      at
      which the Company shall sell and the Holder shall purchase a debenture in the
      principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
      (the “Second
      Debenture”),
      with
      such purchase price paid via a cash payment of $400,000 and the issuance of
      a
      promissory note in the principal amount of $1,100,000 (the “Second
      Promissory Note”),
      with
      the form of and terms of the Second Debenture and the Second Promissory Note
      and
      payment of the purchase price subject to the same terms and conditions of this
      Agreement, the Debenture and the Promissory Note, as applicable, entered into
      in
      connection with this Agreement and the Debenture, and when the Second Debenture
      is issued, the term “Debenture” as used in this Agreement shall be deemed to
      include the Second Debenture in all respects and when the Second Promissory
      Note
      is issued, the term “Promissory Note” as used in this Agreement shall be deemed
      to include the Second Promissory Note in all respects. The closing of the
      purchase and sale of the Second Debenture and the issuance of the Second
      Promissory Note shall occur within thirty days of the Second Debenture Date.
      For
      the purposes of this Agreement, the “Second Debenture Period” shall mean the
      period that commences on the date hereof and terminates upon the date that
      the
      remaining Principal Amount of the Debenture is equal to an amount not greater
      than $250,000.

    
      

        
          	
                  ____________

                	 	
                  ____________

                
	
                  Initials

                	 	
                  Initials

                

        

      

       

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    D.  Third
      Debenture. 
      Provided that no Event of Default (as defined in the Debenture) has occurred
      under the Debenture (provided that Holder may, in its sole and absolute
      discretion waive the occurrence of such Event of Default with respect to this
      Section), Holder shall, in Holder’s sole and absolute discretion, select a date
      during the Third Debenture Period (as defined below) (with such date as selected
      by Holder referred to herein as the “Third
      Debenture Date”)
      at
      which the Company shall sell and the Holder shall purchase a debenture in the
      principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
      (the “Third
      Debenture”),
      with
      such purchase price paid via a cash payment of $400,000 and the issuance of
      a
      promissory note in the principal amount of $1,100,000 (the “Third
      Promissory Note”),
      with
      the form of and terms of the Third Debenture and the Third Promissory Note
      and
      payment of the purchase price subject to the same terms and conditions of this
      Agreement, the Debenture and the Promissory Note, as applicable, entered into
      in
      connection with this Agreement and the Debenture, and when the Third Debenture
      is issued, the term “Debenture” as used in this Agreement shall be deemed to
      include the Third Debenture in all respects and when the Third Promissory Note
      is issued, the term “Promissory Note” as used in this Agreement shall be deemed
      to include the Third Promissory Note in all respects. The closing of the
      purchase and sale of the Third Debenture and the issuance of the Third
      Promissory Note shall occur within thirty days of the Third Debenture Date.
      For
      the purposes of this Agreement, the “Third Debenture Period” shall mean the
      period that commences on the date of the issuance of the Second Debenture to
      Holder and terminates upon the date that the remaining Principal Amount of
      the
      Second Debenture is equal to an amount not greater than $250,000.

     

    E.  Fourth
      Debenture. 
      Provided that no Event of Default (as defined in the Debenture) has occurred
      under the Debenture (provided that Holder may, in its sole and absolute
      discretion waive the occurrence of such Event of Default with respect to this
      Section), Holder shall, in Holder’s sole and absolute discretion, select a date
      during the Fourth Debenture Period (as defined below) (with such date as
      selected by Holder referred to herein as the “Fourth
      Debenture Date”)
      at
      which the Company shall sell and the Holder shall purchase a debenture in the
      principal amount of $1,500,000 in exchange for a purchase price of $1,500,000
      (the “Fourth
      Debenture”),
      with
      such purchase price paid via a cash payment of $400,000 and the issuance of
      a
      promissory note in the principal amount of $1,100,000 (the “Fourth
      Promissory Note”),
      with
      the form of and terms of the Fourth Debenture and the Fourth Promissory Note
      and
      payment of the purchase price subject to the same terms and conditions of this
      Agreement, the Debenture and the Promissory Note, as applicable, entered into
      in
      connection with this Agreement and the Debenture, and when the Fourth Debenture
      is issued, the term “Debenture” as used in this Agreement shall be deemed to
      include the Fourth Debenture in all respects and when the Fourth Promissory
      Note
      is issued, the term “Promissory Note” as used in this Agreement shall be deemed
      to include the Fourth Promissory Note in all respects. The closing of the
      purchase and sale of the Fourth Debenture and the issuance of the Fourth
      Promissory Note shall occur within thirty days of the Fourth Debenture Date.
      For
      the purposes of this Agreement, the “Fourth Debenture Period” shall mean the
      period that commences on the date of the issuance of the Second Debenture to
      Holder and terminates upon the date that the remaining Principal Amount of
      the
      Second Debenture is equal to an amount not greater than $250,000.

    
      

        
          	
                  ____________

                	 	
                  ____________

                
	
                  Initials

                	 	
                  Initials

                

        

      

       

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    F.  Non-Funding
      Penalty. 
      Notwithstanding the foregoing requirements of Holder to purchase each of the
      Second Debenture, Third Debenture and Fourth Debenture (each, an “Additional
      Debenture”
and
      collectively, the “Additional
      Debentures”),
      in
      the event that Holder does not purchase any or all of the Additional Debentures
      within 10 business days of the date that the delivery of funds associated with
      such purchase would otherwise be due, upon 20 days’ prior written notice from
      the Company of such failure to so purchase any or all of the Additional
      Debentures (during such time Holder shall have the option to cure such failure
      to so purchase any Additional Debenture with no penalty attached thereto),
      Holder shall pay an amount equal to $25,000 (the “Non-Funding
      Penalty”)
      to the
      Company, provided however that in the event that the Common Stock shall trade
      on
      the Trading Market (as defined in the Debenture) at a price per share that
      is
      $0.27 per share or lower at any time during the six month period commencing
      on
      the date hereof and ending on the six month anniversary of the date hereof
      (as
      adjusted for any stock splits, stock dividends, combinations, subdivisions,
      recapitalizations or the like),
      then
      the Non-Funding Penalty shall be reduced to equal $5,000. The amount payable
      by
      the Holder to the Company in connection with any damages, losses, claims or
      other amounts in connection with the failure of the Holder to purchase any
      or
      all of the Additional Debentures shall not exceed $25,000 (or $5,000, subject
      to
      the terms of this Section) in the aggregate. Upon the payment of the Non-Funding
      Penalty to the Company, the Holder shall have no further obligations or duties
      under this Agreement, the Debenture or any agreements or debentures entered
      into
      in connection with any of the Additional Debentures, if any, with respect to
      the
      purchase of any Additional Debenture or other duties to deliver any additional
      funds to the Company, provided however, that other than with respect to the
      removal of the requirement to purchase and enter into any Additional Debenture,
      the Company and the Holder shall remain obligated and bound by the remaining
      terms and conditions of this Agreement, the Debenture, the Promissory Note
      and
      any agreements or debentures previously entered into in connection with any
      Additional Debenture. The Company’s sole and exclusive remedy in the event that
      the Holder fails to purchase any or all of the Additional Debentures shall
      be
      the right of the Company to receive the Non-Funding Penalty from the Holder.
      

     

    G.  Non-Funding
      Election. 
      In the event that the Common Stock shall trade on the Trading Market (as defined
      in the Debenture) at a price per share that is $0.25 per share or lower at
      any
      time during the six month period commencing on the date hereof and ending on
      the
      six month anniversary of the date hereof (as
      adjusted for any stock splits, stock dividends, combinations, subdivisions,
      recapitalizations or the like),
      the
      Holder shall have the right, in the Holder’s sole and absolute discretion,
      during the time period commencing on the date hereof and ending on the six
      month
      anniversary of the date hereof, to terminate the right and obligation of the
      Holder to purchase any or all of the Additional Debentures through the delivery
      of written notice to the Company of such termination in the manner provided
      in
      Section XVII hereof. In the event that Holder so terminates Holder’s right and
      obligation to purchase any or all of the Additional Debentures under the terms
      of this Section I.G., the Holder shall have no obligation to pay any of the
      Non-Funding Penalty and shall have no further obligations or duties under this
      Agreement, the Debenture or any agreements or debentures entered into in
      connection with any of the Additional Debentures, if any, with respect to the
      purchase of any Additional Debenture or other duties to deliver any additional
      funds to the Company, provided however, that other than with respect to the
      removal of the requirement to purchase and enter into any Additional Debenture
      and pay any of the Non-Funding Penalty, the Company and the Holder shall remain
      obligated and bound by the remaining terms and conditions of this Agreement,
      the
      Debenture, the Promissory Note and any agreements or debentures previously
      entered into in connection with any Additional Debenture. 

    
      

        
          	
                  ____________

                	 	
                  ____________

                
	
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        3

        
          

        

      

      
        
        

      

    

     

    H.  Company
      Redemption of Debenture and Termination of Additional Debenture
      Purchases. 
      Provided that no Event of Default has occurred under the Debenture, the Company
      shall have the right, in the Company’s sole and absolute discretion, during the
      time period commencing on the date hereof and terminating on the 45th
      day
      following the date hereof, to (i) redeem the Debenture for a redemption price
      equal to 100% of the outstanding principal amount of the Debenture, plus any
      accrued and unpaid interest thereon (such aggregate amount referred to herein
      as
      the “Redemption
      Amount”),
      and
      (ii) terminate the right and obligation of the Holder to purchase all of the
      Additional Debentures through (x) the delivery of written notice to the Holder
      of such termination in the manner provided in Article XVII hereof and (y) the
      delivery to the Holder of a payment in cash equal to the Redemption Amount
      within 3 business days of the delivery of such notice. Notwithstanding the
      foregoing, the payment of the Redemption Amount shall first be satisfied by
      and
      offset against any amounts due to the Company under the Promissory Note and
      such
      amounts of the Promissory Note so applied against the Redemption Amount that
      the
      Company is required or permitted to redeem shall reduce the amount outstanding
      under the Promissory Note by a like amount. After the application of the amount
      owed under the Promissory Note, if any, to the Redemption Amount, the Company
      shall immediately pay in cash to the Holder any remaining amount owed by the
      Company to the Holder in connection with the payment of the Redemption Amount,
      return all copies of the Promissory Note marked “Cancelled” to the Holder, and
      file all appropriate documentation with the appropriate authorities to cancel,
      release and terminate any and all UCC Financing Statements, liens, restrictions,
      security interests or encumbrances on any of the Holder’s assets or properties
      that have been made in connection with the Promissory Note and promptly deliver
      copies of such filings to the Holder. The Company shall provide such other
      assistance related to the termination of such financing statements, liens,
      restrictions, security interests or encumbrances on any of the Holder’s assets
      or properties made in connection with the Promissory Note including, but not
      limited to, the filing of any UCC termination or financing statements, releases
      or reconveyances as reasonably requested by the Holder.

     

    
      	
            	II.	
              HOLDER’S
                REPRESENTATIONS AND
                WARRANTIES

            

    

     

    Holder
      represents and warrants to and covenants and agrees with the Company as
      follows:

     

    1.  Holder
      is
      purchasing the Debenture and the Common Stock issuable upon conversion or
      redemption of or payment of interest under the Debenture (the “Conversion
      Shares”
and,
      collectively with the Debenture, the “Securities”)
      for
      its own account, for investment purposes only and not with a view towards or
      in
      connection with the public sale or distribution thereof in violation of the
      Securities Act.

    
      

        
          	
                  ____________

                	 	
                  ____________

                
	
                  Initials

                	 	
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        4

        
          

        

      

      
        
        

      

    

     

    2.  Holder
      is
      (i) an “accredited investor” within the meaning of Rule 501 of Regulation D
      under the Securities Act, (ii) experienced in making investments of the kind
      contemplated by this Agreement, (iii) capable, by reason of its business and
      financial experience, of evaluating the relative merits and risks of an
      investment in the Securities, and (iv) able to afford the loss of its investment
      in the Securities.

     

    3.  Holder
      understands that the Securities are being offered and sold by the Company in
      reliance on an exemption from the registration requirements of the Securities
      Act and equivalent state securities and “blue sky” laws, and that the Company is
      relying upon the accuracy of, and Holder’s compliance with, Holder’s
      representations, warranties and covenants set forth in this Agreement to
      determine the availability of such exemption and the eligibility of Holder
      to
      purchase the Securities;

     

    4.  Holder
      understands that the Securities have not been approved or disapproved by the
      Securities and Exchange Commission (the “Commission”)
      or any
      state or provincial securities commission.

     

    5.  This
      Agreement has been duly and validly authorized, executed and delivered by Holder
      and is a valid and binding agreement of Holder enforceable against it in
      accordance with its terms, subject to applicable bankruptcy, insolvency,
      fraudulent conveyance, reorganization, moratorium and similar laws affecting
      creditors’ rights and remedies generally and except as rights to indemnity and
      contribution may be limited by federal or state securities laws or the public
      policy underlying such laws.

     

    
      	
            	III.	
              THE
                COMPANY’S REPRESENTATIONS

            

    

     

    The
      Company represents and warrants as of the date hereof to the Holder that, except
      as set forth on Schedule III attached hereto, the statements contained in this
      Section 3 are complete and accurate as of the date of this Agreement. As used
      in
      this Section 3, the term “Knowledge” shall mean the knowledge of the members of
      the board of directors of the Company and/or the officers or employees of the
      Company after reasonable investigation.

     

    A.  Capitalization.

     

    1.  The
      authorized capital stock of the Company consists of 80,000,000 shares of Common
      Stock and 10,000,000 shares of Preferred Stock of which 41,668,875 shares and
      no
      shares, respectively, are issued and outstanding as of the date hereof and
      are
      fully paid and nonassessable. The amount, exercise, conversion or subscription
      price and expiration date for each outstanding option and other security or
      agreement to purchase shares of Common Stock is accurately set forth on
Schedule
      III.A.1.

     

    2.  The
      Securities have been duly and validly authorized and reserved for issuance
      by
      the Company, and, when issued by the Company upon conversion of the Debenture,
      will be duly and validly issued, fully paid and nonassessable and will not
      subject the holder thereof to personal liability by reason of being such
      holder.

     

    3.  Except
      as
      disclosed on Schedule III.A.3.,
      there
      are no preemptive, subscription, “call,” right of first refusal or other similar
      rights to acquire any capital stock of the Company or other voting securities
      of
      the Company that have been issued or granted to any person and no other
      obligations of the Company to issue, grant, extend or enter into any security,
      option, warrant, “call,” right, commitment, agreement, arrangement or
      undertaking with respect to any of their respective capital stock. The issuance
      of the Securities will not obligate the Company to issue any other securities
      to
      any third party and will not result in a right of any holder of Company
      securities to adjust the exercise, conversion, exchange or reset price under
      such securities.

    
      

        
          	
                  ____________

                	 	
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        5

        
          

        

      

      
        
        

      

    

     

    B.  Organization;
      Reporting Company Status.

     

    1.  The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the state or jurisdiction in which it is incorporated and
      is
      duly qualified as a foreign corporation in all jurisdictions in which the
      failure so to qualify would reasonably be expected to have a material adverse
      effect on the business, properties, prospects, condition (financial or
      otherwise) or results of operations of the Company or on the consummation of
      any
      of the transactions contemplated by this Agreement (a “Material
      Adverse Effect”).

     

    2.  The
      Company is subject to the reporting requirements of the Securities Exchange
      Act
      of 1934, as amended (the “Exchange
      Act”).
      The
      Common Stock is traded on the OTC Bulletin Board (“OTCBB”)
      and
      the Company has not received any notice regarding, and to its Knowledge there
      is
      no threat of, the termination or discontinuance of the eligibility of the Common
      Stock for such trading.

     

    C.  Authorization. 
      The Company (i) has duly and validly authorized and reserved for issuance shares
      of Common Stock, which is a number sufficient for the conversion of the
      Debenture in full and issuable upon payment of interest under the Debenture
      and
      (ii) at all times from and after the date hereof shall have a sufficient number
      of shares of Common Stock duly and validly authorized and reserved for issuance
      to satisfy the conversion of the Debenture in full. The Company understands
      and
      acknowledges the potentially dilutive effect on the Common Stock of the issuance
      of the Conversion Shares. The Company further acknowledges that its obligation
      to issue Conversion Shares upon conversion of the Debenture in accordance with
      this Agreement is absolute and unconditional regardless of the dilutive effect
      that such issuance may have on the ownership interests of other stockholders
      of
      the Company and notwithstanding the commencement of any case under 11 U.S.C.
      § 101 et
      seq.
      (the
“Bankruptcy
      Code”).
      In
      the event the Company is a debtor under the Bankruptcy Code, the Company hereby
      waives to the fullest extent permitted any rights to relief it may have under
      11 U.S.C. § 362 in respect of the conversion of the Debenture. The
      Company agrees, without cost or expense to Holder, to take or consent to any
      and
      all action necessary to effectuate relief under 11 U.S.C.
§ 362.

     

    D.  Authority;
      Validity and Enforceability. 
      The Company has the requisite corporate power and authority to enter into the
      Documents (as such term is hereinafter defined) and to perform all of its
      obligations hereunder and thereunder (including the issuance, sale and delivery
      to Holder of the Securities). The execution, delivery and performance by the
      Company of the Documents and the consummation by the Company of the transactions
      contemplated hereby and thereby (including, without limitation, the issuance
      of
      the Debenture and the issuance and reservation for issuance of the Conversion
      Shares) have been duly and validly authorized by all necessary corporate action
      on the part of the Company and no further filing, consent, or authorization
      is
      required by the Company, its board of directors, or its stockholders. Each
      of
      the Documents has been duly and validly executed and delivered by the Company
      and each Document constitutes a valid and binding obligation of the Company
      enforceable against it in accordance with its terms, subject to applicable
      bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
      similar laws affecting creditors’ rights and remedies generally and except as
      rights to indemnity and contribution may be limited by federal or state
      securities laws or the public policy underlying such laws. The Securities have
      been duly and validly authorized for issuance by the Company and, when executed
      and delivered by the Company, will be valid and binding obligations of the
      Company enforceable against it in accordance with their respective terms,
      subject to applicable bankruptcy, insolvency, fraudulent conveyance,
      reorganization, moratorium and similar laws affecting creditors’ rights and
      remedies generally. For purposes of this Agreement, the term “Documents”
means
      (i) this Agreement; (ii) the Debenture; and (iii) the Promissory
      Note.

    
      

        
          	
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    E.  Validity
      of Issuance of the Securities. 
      The Debenture and the Conversion Shares upon their issuance in accordance with
      the Debenture, will be validly issued and outstanding, fully paid and
      nonassessable, and not subject to any preemptive rights, rights of first
      refusal, tag-along rights, drag-along rights or other similar
      rights.

     

    F.  Non-contravention. 
      The execution and delivery by the Company of the Documents, the issuance of
      the
      Securities, and the consummation by the Company of the transactions contemplated
      hereby and thereby do not, and compliance with the provisions of this Agreement
      and other Documents will not, conflict with, or result in any violation of,
      or
      default (with or without notice or lapse of time, or both) under, or give rise
      to a right of termination, cancellation or acceleration of any obligation or
      loss of a material benefit under, or result in the creation of any Lien (as
      such
      term is hereinafter defined) upon any of the properties or assets of the Company
      or any of its Subsidiaries under, or result in the termination of, or require
      that any consent be obtained or any notice be given with respect to (i) the
      Articles or Certificate of Incorporation or By-Laws of the Company or the
      comparable charter or organizational documents of any of its Subsidiaries,
      in
      each case as amended to the date of this Agreement, (ii) any loan or credit
      agreement, debenture, bond, mortgage, indenture, lease, contract or other
      agreement, instrument or permit applicable to the Company or any of its
      Subsidiaries or their respective properties or assets or (iii) any statute,
      law,
      rule or regulation applicable to, or any judgment, decree or order of any court
      or government body having jurisdiction over, the Company or any of its
      Subsidiaries or any of their respective properties or assets. A “Lien”
means
      any assignment, transfer, pledge, mortgage, security interest or other
      encumbrance of any nature, or an agreement to do so, or the ownership or
      acquisition or agreement to acquire any asset or property of any character
      subject to any of the foregoing encumbrances (including any conditional sale
      contract or other title retention agreement). 

     

    G.  Approvals. 
No
      authorization, approval or consent of any court or public or governmental
      authority is required to be obtained by the Company for the performance by
      the
      Company of its obligations hereunder and the other Documents, including the
      issuance and sale of the Securities to Holder as contemplated by this Agreement,
      except such authorizations, approvals and consents as have been obtained by
      the
      Company prior to the date hereof.

    
      

        
          	
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    H.  Commission
      Filings. 
      The Company is subject to the reporting requirements of Section 13 or 15(d)
      of
      the Exchange Act. The Company has properly and timely filed with the Commission
      all reports, proxy statements, forms and other documents required to be filed
      with the Commission under the Securities Act and the Exchange Act since becoming
      subject to such Acts (the “Commission
      Filings”),
      including without limitation the timely filing of all required reports under
      Section 13 or 15(d) of the Exchange Act during the 12 months prior to the date
      hereof (or for such shorter period that the Company was required to file such
      reports). As of their respective dates, (i) the Commission Filings complied
      in
      all material respects with the requirements of the Securities Act or the
      Exchange Act, as the case may be, and the rules and regulations of the
      Commission promulgated thereunder applicable to such Commission Filings and
      (ii)
      none of the Commission Filings contained at the time of its filing any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances under which they were made, not misleading. The financial
      statements of the Company included in the Commission Filings, as of the dates
      of
      such documents, were true and complete in all material respects and complied
      with applicable accounting requirements and the published rules and regulations
      of the Commission with respect thereto, were prepared in accordance with
      generally accepted accounting principles in the United States (“GAAP”)
      (except in the case of unaudited statements permitted by Form 10-QSB under
      the
      Exchange Act) applied on a consistent basis during the periods involved (except
      as may be indicated in the notes thereto) and fairly presented the consolidated
      financial position of the Company and its Subsidiaries as of the dates thereof
      and the consolidated results of their operations and cash flows for the periods
      then ended (subject, in the case of unaudited statements, to normal year-end
      audit adjustments that in the aggregate are not material and to any other
      adjustment described therein).

     

    I.  Full
      Disclosure. 
      There is no fact (other than general economic or industry conditions known
      to
      the public generally) that has not been fully disclosed in the Commission
      Filings that (i) reasonably could be expected to have a Material Adverse Effect
      or (ii) reasonably could be expected to materially and adversely affect the
      ability of the Company to perform its obligations pursuant to the
      Documents.

     

    J.  Absence
      of Events of Default. 
No
      “Event
      of Default”
(as
      defined in any agreement or instrument to which the Company is a party) and
      no
      event which, with notice, lapse of time or both, would constitute an Event
      of
      Default (as so defined), has occurred and is continuing.

     

    K.  Securities
      Law Matters. 
      Assuming the accuracy of the representations and warranties of Holder set forth
      in Article II, the offer and sale by the Company of the Securities is exempt
      from (i) the registration and prospectus delivery requirements of the Securities
      Act and the rules and regulations of the Commission thereunder and (ii) the
      registration and/or qualification provisions of all applicable state and
      provincial securities and “blue sky” laws. The Company shall not directly or
      indirectly take, and shall not permit any of its directors, officers or
      Affiliates directly or indirectly to take, any action (including, without
      limitation, any offering or sale to any person or entity of any security similar
      to the Debenture) which will make unavailable the exemption from Securities
      Act
      registration being relied upon by the Company for the offer and sale to Holder
      of the Debenture and the Conversion Shares, as contemplated by this Agreement.
      No form of general solicitation or advertising has been used or authorized
      by
      the Company or any of its officers, directors or Affiliates in connection with
      the offer or sale of the Debenture (and the Conversion Shares), as contemplated
      by this Agreement or any other agreement to which the Company is a party. As
      used in the Documents, “Affiliate”
      has the
      meaning ascribed to such term in Rule 12b-2 under the Exchange Act.

    
      

        
          	
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    L.  Registration
      Rights.
      Except
      as set forth on Schedule III.L.,
      no
      Person has, and as of the Closing (as such term is hereinafter defined), no
      Person shall have, any demand, “piggy-back” or other rights to cause the Company
      to file any registration statement under the Securities Act relating to any
      of
      its securities or to participate in any such registration
      statement.

     

    M.  Interest.
      The
      timely payment of interest on the Debenture is not prohibited by the Articles
      or
      Certificate of Incorporation or By-Laws of the Company, in each case as amended
      to the date of this Agreement, or any agreement, contract, document or other
      undertaking to which the Company is a party.

     

    N.  No
      Misrepresentation.
      No
      representation or warranty of the Company contained in this Agreement or any
      of
      the other Documents, any schedule, annex or exhibit hereto or thereto or any
      agreement, instrument or certificate furnished by the Company to Holder pursuant
      to this Agreement contains any 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.

     

    O.  Finder’s
      Fee.
      There is
      no finder’s fee, brokerage commission or like payment in connection with the
      transactions contemplated by this Agreement for which Holder is liable or
      responsible.

     

    P.  Subsidiaries.
      Other
      than the Subsidiaries (as hereinafter defined) listed on Schedule III.P., the
      Company does not presently own or control, directly or indirectly, any interest
      in any other corporation, association, or other business entity. The Company
      is
      not a participant in any joint venture, partnership, or similar arrangement.
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar rights to
      subscribe for or purchase securities.

     

    Q.  Litigation.
      Other
      than as disclosed in the Commission Filings, there is no action, suit,
      proceeding or investigation pending or, to the Company’s knowledge, currently
      threatened against the Company or its Subsidiaries that questions the validity
      of this Agreement, the Documents, or the right of the Company to enter into
      such
      agreements, or to consummate the transactions contemplated hereby or thereby,
      or
      that might result, either individually or in the aggregate, in any material
      adverse changes in the business, assets or condition of the Company and its
      Subsidiaries, taken as a whole, financially or otherwise, or any change in
      the
      current equity ownership of the Company or its Subsidiaries. Neither the Company
      nor its Subsidiaries are parties or subject to the provisions of any order,
      writ, injunction, judgment or decree of any court or government agency or
      instrumentality. There is no action, suit, proceeding or investigation by the
      Company or its Subsidiaries currently pending or that the Company or its
      Subsidiaries intends to initiate. 

    
      

        
          	
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    R.  Agreements. 
      Except for agreements explicitly contemplated hereby, or disclosed in the
      Commission Filings, there are no agreements, understandings or proposed
      transactions between the Company and any of its officers, directors, Affiliates,
      or any affiliate thereof.

     

    S.  Tax
      Returns. 
      The Company and each of its Subsidiaries has made and filed all federal and
      state income and all other tax returns, reports and declarations required by
      any
      jurisdiction to which it is subject and (unless and only to the extent that
      the
      Company and each of its Subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) has
      paid
      all taxes and other governmental assessments and charges that are material
      in
      amount, shown or determined to be due on such returns, reports and declarations,
      except those being contested in good faith and has set aside on its books
      provision reasonably adequate for the payment of all taxes for periods
      subsequent to the periods to which such returns, reports or declarations apply.
      There are no unpaid taxes in any material amount claimed to be due by the taxing
      authority of any jurisdiction, and the officers of the Company know of no basis
      for any such claim.

     

    T.  Acknowledgment
      Regarding Holder’s Purchase of Securities. 
      The Company acknowledges and agrees that the Holder is acting solely in the
      capacity of an arm's length purchaser with respect to this Agreement and the
      transactions contemplated hereby. The Company further acknowledges that Holder
      is not acting as a financial advisor or fiduciary of the Company (or in any
      similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any statement made by Holder or any of its
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Holder’s purchase of the Securities. The Company further represents to
      Holder that the Company's decision to enter into this Agreement has been based
      solely on the independent evaluation of the Company and its
      representatives.

     

    U.  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 in any
      security or solicited any offers to buy any security under circumstances that
      would require registration under the Securities Act of the issuance of the
      Securities to the Holder. The issuance of the Securities to the Holder will
      not
      be integrated with any other issuance of the Company's securities (past, current
      or future) for purposes of any shareholder approval provisions applicable to
      the
      Company or its securities. 

     

    V.  Solvency. 
      The Company (after giving effect to the transactions contemplated by this
      Agreement) is solvent (i.e., its assets have a fair market value in excess
      of
      the amount required to pay its probable liabilities on its existing debts as
      they become absolute and matured) and currently the Company has no information
      that would lead it to reasonably conclude that the Company would not, after
      giving effect to the transaction contemplated by this Agreement, have the
      ability to, nor does it intend to take any action that would impair its ability
      to, pay its debts from time to time incurred in connection therewith as such
      debts mature. The Company did not receive a qualified opinion from its auditors
      with respect to its most recent fiscal year end and, after giving effect to
      the
      transactions contemplated by this Agreement, does not anticipate or know of
      any
      basis upon which its auditors might issue a qualified opinion in respect of
      its
      current fiscal year.

    
      

        
          	
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    W.  No
      Shell Company. 
      The Company is not, nor at any time preceding the date hereof has the Company
      been a “shell company,” as such term is defined in paragraph (i)(1)(i) of Rule
      144 or Rule 12b-2 of the Exchange Act, the effect of which would prevent the
      Holder from selling the Conversion Shares without restriction pursuant to Rule
      144 (as hereinafter defined).

     

    X.  No
      Investment Company. 
      The Company is not, and upon the issuance and sale of the Securities as
      contemplated by this Agreement will not be an "investment company" required
      to
      be registered under the Investment Company Act of 1940 (an "Investment
      Company"). The Company is not controlled by an Investment Company.

     

    Y.  Material
      Changes. 
      Since the date of the Company’s latest audited financial statements, (i) there
      has been no event, occurrence or development that has had or that could
      reasonably be expected to result in a Material Adverse Effect, (ii) the Company
      has not incurred any liabilities (contingent or otherwise) other than (A) trade
      payables and accrued expenses incurred in the ordinary course of business
      consistent with past practice and (B) liabilities not required to be reflected
      in the Company's financial statements pursuant to GAAP or required to be
      disclosed in Commission filings, (iii) the Company has not altered its method
      of
      accounting, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its capital
      stock and (v) the Company has not issued any equity securities to any officer,
      director or Affiliate, except pursuant to existing Company stock option
      plans.

     

    Z.  Compliance. 
      Neither the Company nor any Subsidiary (i) is in default under or in violation
      of (and no event has occurred that has not been waived that, with notice or
      lapse of time or both, would result in a default by the Company or any
      Subsidiary under), nor has the Company or any Subsidiary received notice of
      a
      claim that it is in default under or that it is in violation of, any indenture,
      loan or credit agreement or any other agreement or instrument to which it is
      a
      party or by which it or any of its properties is bound (whether or not such
      default or violation has been waived), (ii) is in violation of any order of
      any
      court, arbitrator or governmental body, or (iii) is or has been in violation
      of
      any statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws applicable to its business
      except in each case as could not have a Material Adverse Effect.

     

    AA.  Regulatory
      Permits. 
      The Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses, except where
      the
      failure to possess such permits could not have or reasonably be expected to
      result in a Material Adverse Effect (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation or modification of any Material Permit.

     

    BB.  Title
      to Assets. 
      The Company and the Subsidiaries have good and marketable title in fee simple
      to
      all real property owned by them that is material to the business of the Company
      and the Subsidiaries and good and marketable title in all personal property
      owned by them that is material to the business of the Company and the
      Subsidiaries, in each case free and clear of all Liens, except for (i) Liens
      that do not materially affect the value of such property and do not materially
      interfere with the use made and proposed to be made of such property by the
      Company and the Subsidiaries, and (ii) Liens for the payment of federal, state
      or other taxes, the payment of which is neither delinquent nor subject to
      penalties. Any real property and facilities held under lease by the Company
      and
      the Subsidiaries are held by them under valid, subsisting and enforceable leases
      of which the Company and the Subsidiaries are in compliance.

    
      

        
          	
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    CC.  Patents
      and Trademarks.  The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights necessary or material for use
      in
      connection with their respective businesses and which the failure to so have
      could have a Material Adverse Effect (collectively, the “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any Subsidiary violates
      or
      infringes upon the rights of any person or entity. To the knowledge of the
      Company, all such Intellectual Property Rights are enforceable and there is
      no
      existing infringement by another person or entity of any of the Intellectual
      Property Rights of others.

     

    DD.  Sarbanes-Oxley;
      Internal Accounting Controls.  
      The Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act of 2002. The Company and the Subsidiaries maintain a system of internal
      accounting controls sufficient to provide reasonable assurance that (i)
      transactions are executed in accordance with management's general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with GAAP and to maintain
      asset accountability, (iii) access to assets is permitted only in accordance
      with management's general or specific authorization, and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any differences.
      The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
      disclosure controls and procedures to ensure that material information relating
      to the Company, including its Subsidiaries, is made known to the certifying
      officers by others within those entities, particularly during the period in
      which the Company's most recently filed periodic report under the Securities
      Exchange Act of 1934, as the case may be, is being prepared. The Company's
      certifying officers have evaluated the effectiveness of the Company's controls
      and procedures as of the date prior to the filing date of the most recently
      filed periodic report under the Exchange Act (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the Company's internal controls (as such term is defined in Item
      307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge,
      in other factors that could significantly affect the Company's internal
      controls. 

     

    EE.  Application
      of Takeover Protections. 
      The Company and its Board of Directors have taken all necessary action, if
      any,
      in order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company's Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to Holder as a result of Holder
      and the Company fulfilling their obligations or exercising their rights under
      the Documents, including without limitation as a result of the Company's
      issuance of the Securities and Holder’s ownership of the
      Securities.

    

      
        	
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    FF.  Disclosure. 
      The Company confirms that neither it nor any other Person acting on its behalf
      has provided any of Holder or their agents or counsel with any information
      that
      constitutes or might constitute material, nonpublic information. The Company
      understands and confirms that Holder will rely on the foregoing representations
      and covenants in effecting transactions in securities of the
      Company.

     

    GG.  Tax
      Status. 
      Except for matters that would not, individually or in the aggregate, have or
      reasonably be expected to result in a material adverse effect, the Company
      and
      each Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened against the Company or any Subsidiary.

     

    HH.  Seniority. 
As
      of the Closing Date, no indebtedness or other equity of the Company is senior
      to, or pari passu with, the Debenture in right of payment, whether with respect
      to interest or upon liquidation or dissolution, or otherwise.

     

    II.  No
      Disagreements with Accountants and Lawyers. 
      There are no disagreements of any kind presently existing, or reasonably
      anticipated by the Company to arise, between the accountants and lawyers
      formerly or presently employed by the Company and the Company is current with
      respect to any fees owed to its accountants and lawyers. By making this
      representation the Company does not, in any manner, waive the attorney/client
      privilege or the confidentiality of the communications between the Company
      and
      its lawyers.

     

    
      	
            	IV.	
              CERTAIN
                COVENANTS AND
                ACKNOWLEDGMENTS

            

    

     

    A.  Filings. 
      The Company shall take all actions and make all necessary Commission Filings
      and
“blue sky” filings required to be made by the Company in connection with the
      sale of the Securities to Holder as required by all applicable laws, including
      without limitation such action as the Company shall reasonably determine is
      necessary to qualify the Securities, or obtain an exemption for the Securities
      for sale to the Holder at the Closing pursuant to this Agreement under all
      applicable laws, and shall provide a copy thereof to Holder promptly after
      such
      filing.

     

    B.  Reporting
      Status. 
      With a view to making available to the Holder the benefits of Rule 144
      promulgated under the Securities Act or any similar rule or regulation of the
      Commission that may at any time permit Holder to sell securities of the Company
      to the public without registration (“Rule 144”), and as a material inducement to
      the Holder’s purchase of the Securities, the Company represents, warrants, and
      covenants to the following: 

     

    1.  The
      Company's Common Stock is and for the last 12 months prior to the date hereof
      has been registered under Section 12(g) of the Exchange Act;

     

    2.  The
      Company is not and for at least the last 12 months prior to the date hereof
      has
      not been a "shell company," as defined in paragraph (i)(1)(i) of Rule 144 or
      Rule 12b-2 of the Exchange Act;

     

    3.  The
      Company is and for the last 12 months prior to the date hereof has been subject
      to the reporting requirements of section 13 or 15(d) of the Exchange Act and
      has
      filed all required reports under section 13 or 15(d) of the Exchange Act during
      the 12 months prior to the date hereof, other than Form 8-K reports;

    
      

        
          	
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    4.  From
      the
      date hereof until all the Securities either have been sold by the Holder, or
      may
      permanently be sold by the Holder without any restrictions pursuant to Rule
      144,
      (the "Registration
      Period")
      (i)
      the Company shall file with the SEC in a timely manner all required reports
      under section 13 or 15(d) of the Exchange Act and such reports shall conform
      to
      the requirements of the Exchange Act and the SEC for filing thereunder, and
      (ii)
      the Company shall not terminate its status as an issuer required to file reports
      under the Exchange Act even if the Exchange Act or the rules and regulations
      thereunder would permit such termination;

     

    5.  During
      the Registration Period the Company shall not become a "shell company," as
      defined in paragraph (i)(1)(i) of Rule 144 or Rule 12b-2 of the Exchange Act;
      and

     

    6.  The
      Company shall furnish to the Holder so long as the Holder owns Securities,
      promptly upon request, (i) a written statement by the Company that it has
      complied with the reporting requirements of Rule 144, (ii) a copy of the most
      recent annual or quarterly report of the Company and such other reports and
      documents so filed by the Company, and (iii) such other information as may
      be
      reasonably requested to permit the Holders to sell such securities pursuant
      to
      Rule 144 without registration.

     

    C.  8-K
      Filing. 
On
      or before the fourth Business Day following the date hereof, the Company shall
      file a Current Report on Form 8-K describing the terms of the transactions
      contemplated by the Documents in the form required by the Exchange Act and
      attaching the material Documents (including, without limitation, this Agreement
      and the Debenture) as exhibits to such filing (the “8-K
      Filing”).
      In
      the event that the Company does not file the 8-K Filing within four Business
      Days following the date hereof, the Discount Multiplier (as defined in the
      Debenture) under the Debenture shall decrease by one percentage point (1%)
      for
      each period of five Business Days that the 8-K Filing is not filed by the
      Company following the date hereof for all conversions of the Debenture
      thereafter.

     

    D.  Listing.
       Except
      to the extent the Company lists its Common Stock on The New York Stock Exchange,
      The American Stock Exchange or The Nasdaq Stock Market, the Company shall have
      its Common Stock traded on OTCBB. If the Common Stock is delisted from OTCBB,
      the Company will arrange to have the Common Stock traded on the most liquid
      national securities exchange or quotation system that the Common Stock is
      qualified to be listed on, it being understood, however, that compliance with
      the foregoing shall not be deemed a waiver of any Event of Default under the
      Debenture.

     

    E.  Reserved
      Conversion Shares. 
      The Company at all times from and after the date hereof shall have such number
      of shares of Common Stock duly and validly authorized and reserved for issuance
      as shall be sufficient for issuance in full of the Conversion Shares. The
      Company shall take all action reasonably necessary to at all times have
      authorized, and reserved for the purpose of issuance, such number of shares
      of
      Common Stock as shall be necessary to effect the full conversion of the
      Debenture and the Additional Debentures outstanding, if any. If at any time
      the
      number of authorized shares of Common Stock of the Company is insufficient
      to
      effect the full conversion of the Debenture and the Additional Debentures
      outstanding, if any, the Company shall call and hold a special meeting of the
      shareholders of the Company within thirty (30) days of such occurrence, for
      the
      sole purpose of increasing the number of authorized shares of the Common Stock.
      The Company's management shall recommend to the shareholders to vote in favor
      of
      increasing the number of shares of authorized Common Stock. Management shall
      also vote all of its shares in favor of increasing the number of authorized
      shares of Common Stock.

    
      

        
          	
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    F.  Information. 
      Each of the parties hereto acknowledges and agrees that Holder shall not be
      provided with, nor be given access to, any material non-public information
      relating to the Company.

     

    G.  Accounting
      and Reserves. 
      The Company shall maintain a standard and uniform system of accounting and
      shall
      keep proper books and records and accounts in which full, true, and correct
      entries shall be made of its transactions, all in accordance with GAAP applied
      on consistent basis through all periods, and shall set aside on such books
      for
      each fiscal year all such reserves for depreciation, obsolescence, amortization,
      bad debts and other purposes in connection with its operations as are required
      by such principles so applied.

     

    H.  Transactions
      with Affiliates. 
So
      long as the Debenture is outstanding, neither the Company nor any of its
      Subsidiaries shall, directly or indirectly, enter into any material transaction
      or agreement with any stockholder, officer, director or Affiliate of the Company
      or family member of any officer, director or Affiliate of the Company, unless
      the transaction or agreement is (i) reviewed and approved by a majority of
      Disinterested Directors (as such term is hereinafter defined) and (ii) on
      terms no less favorable to the Company or the applicable Subsidiary than those
      obtainable from a nonaffiliated person. A “Subsidiary”
      means
      any entity of which securities or other ownership interests having ordinary
      voting power to elect a majority of the board of directors or other persons
      performing similar functions are owned directly or indirectly by the Company.
      A
“Disinterested
      Director”
shall
      mean a director of the Company who is not and has not been an officer or
      employee of the Company and who is not a member of the family of, controlled
      by
      or under common control with, any such officer or employee.

     

    I.  Certain
      Restrictions. 
So
      long as the Debenture is outstanding, no dividends shall be declared or paid
      or
      set apart for payment nor shall any other distribution be declared or made
      upon
      any capital stock of the Company, nor shall any capital stock of the Company
      be
      redeemed, purchased or otherwise acquired (other than a redemption, purchase
      or
      other acquisition of shares of Common Stock made for purposes of an employee
      incentive or benefit plan (including a stock option plan) of the Company or
      pursuant to any of the security agreements listed on Schedule
      IV.I)
      for any
      consideration by the Company, directly or indirectly, nor shall any moneys
      be
      paid to or made available for a sinking fund for the redemption of any Common
      Stock. So
      long
      as the Debenture remains outstanding, the Company shall not, without the prior
      written consent of the Holder, (i) issue or sell shares of Common Stock or
      Preferred Stock without consideration or for a consideration per share less
      than
      the bid price as determined on the Trading Market (the “Bid
      Price”)
      of the
      Common Stock determined immediately prior to its issuance, (ii) issue any
      preferred stock, warrant, option, right, contract, call, or other security
      or
      instrument granting the holder thereof the right to acquire Common Stock without
      consideration or for a consideration less than such Common Stock's Bid Price
      determined immediately prior to its issuance, or (iii) file any registration
      statements on Form S-8 covering securities valued at more than $500,000 in
      the
      aggregate as reflected on the table in the registration statement, provided,
      however, that nothing in this Section IV. shall prohibit the Company from
      selling convertible debt to raise capital where the conversion price is fixed
      at
      a value that is greater than the Bid Price immediately prior to the issuance
      of
      such debt (such financing an “Angel
      Financing”)
      or
      selling shares of common stock of Live Tissue Connect, Inc. (“LTC”),
      a
      subsidiary of the Company, in an initial public offering registered with the
      Commission (“IPO”)
      or
      shares of LTC preferred stock through an offering placed by Jesup & Lamont
      Securities Corporation, or selling shares of Common Stock in that
      IPO.

    
      

        
          	
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    J.  Short
      Selling. 
      So
      long
      as the Debenture is outstanding, Holder agrees and covenants on its behalf
      and
      on behalf of its affiliates that neither Holder nor its affiliates shall at
      any
      time engage in any short sales with respect to the Company’s Common Stock, or
      sell put options or similar instruments with respect to the Company’s Common
      Stock. The parties acknowledge that Holder shall be entitled to sell the Common
      Stock from each Debenture conversion immediately upon submission of the
      applicable Debenture Conversion Notice, and payment of the purchase price,
      to
      the Company for such Common Stock.

     

    K.  Shareholder
      Rights Plan. 
No
      claim will be made or enforced by the Company or, to the knowledge of the
      Company, any other person or entity that Holder is an “Acquiring Person” under
      any shareholder rights plan or similar plan or arrangement in effect or
      hereafter adopted by the Company, or that Holder could be deemed to trigger
      the
      provisions of any such plan or arrangement, by virtue of receiving Securities
      under the Transaction Documents or under any other agreement between the Company
      and Holder.

     

    L.  Use
      of Proceeds. 
      The Company shall use the net proceeds from the sale of the Securities hereunder
      for the payment of payroll and other working capital purposes and not for the
      repayment or redemption of any obligations or interests held by any officers,
      directors, or shareholders of the Company. 

     

    M.  Subsequent
      Equity Sales.  In
      addition to the limitations set forth herein and except as provided in Section
      IV.I., from the date hereof until such time as Holder does not hold any of
      the
      Securities, the Company shall be prohibited from effecting or entering into
      an
      agreement to effect any financing involving a “Variable Rate Transaction” or an
“MFN Transaction” (each as defined below). The term “Variable
      Rate Transaction”
shall
      mean a transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock.
      The
      term “MFN
      Transaction”
shall
      mean a transaction in which the Company issues or sells any securities in a
      capital raising transaction or series of related transactions which grants
      to an
      investor the right to receive additional shares based upon future transactions
      of the Company on terms more favorable than those granted to such investor
      in
      such offering. Holder shall be entitled to obtain injunctive relief against
      the
      Company to preclude any such issuance, which remedy shall be in addition to
      any
      right to collect damages

    
      

        
          	
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    N.  Most
      Favored Nation Provision. 
      Any time the Company effects a subsequent financing other than an Angel
      Financing, Holder may elect, in its sole discretion, to exchange all or some
      portion of the Debenture(s) then held by it for the securities issued in a
      subsequent financing based on the then outstanding principal amount of the
      Debenture(s) plus any other fees then owed by the Company to Holder, at the
      effective price at which such securities are sold in such subsequent
      financing.

     

    
      	
            	V.	
              ISSUANCE
                OF COMMON STOCK 

            

    

     

    A.  The
      Company undertakes and agrees that no instruction other than the instructions
      referred to in this Article V shall be given to its transfer agent for the
      Conversion Shares and that the Conversion Shares shall otherwise be freely
      transferable on the books and records of the Company as and to the extent
      provided in this Agreement and applicable law. Nothing contained in this Section
      V.A. shall affect in any way Holder’s obligations and agreement to comply with
      all applicable securities laws upon resale of such Common Stock. 

     

    B.  Holder
      shall have the right to convert the Debenture by telecopying an executed and
      completed Conversion Notice (as such term is defined in the Debenture) to the
      Company. Each date on which a Conversion Notice is telecopied to and received
      by
      the Company in accordance with the provisions hereof shall be deemed a
      Conversion Date (as such term is defined in the Debenture). The Company shall
      cause the transfer agent to transmit the certificates evidencing the Common
      Stock issuable upon conversion of the Debenture (together with a new debenture,
      if any, representing the principal amount of the Debenture not being so
      converted) to Holder via express courier, or if a Registration Statement
      covering the Common Stock has been declared effective by the SEC by electronic
      transfer, within two (2) business days after receipt by the Company of the
      Conversion Notice, as applicable (the “Delivery
      Date”).

     

    C.  Upon
      the
      conversion of the Debenture or respective part thereof, the Company shall,
      at
      its own cost and expense, take all necessary action (including the issuance
      of
      an opinion of counsel) to assure that the Company's transfer agent shall issue
      stock certificates in the name of Holder (or its nominee) or such other persons
      as designated by Holder and in such denominations to be specified at conversion
      or exercise representing the number of shares of common stock issuable upon
      such
      conversion or exercise. The Company covenants that the Conversion Shares will
      be
      unlegended, free-trading, and freely transferable, and will not contain a legend
      restricting the resale or transferability of the Company Common Stock provided
      the Conversion Shares, as applicable, are being sold pursuant to an effective
      registration statement covering the Common Stock to be sold or is otherwise
      exempt from registration when sold. 

     

    D.  The
      Company understands that a delay in the delivery of the Common Stock in the
      form
      required pursuant to this section, or the Mandatory Redemption Amount described
      in Section E hereof, beyond the Delivery Date or Mandatory Redemption Payment
      Date (as hereinafter defined) could result in economic loss to the Holder.
      As
      compensation to the Holder for such loss, the Company agrees to pay late
      payments to the Holder for late issuance of Common Stock in the form required
      pursuant to Section E hereof upon Conversion of the Debenture or late payment
      of
      the Mandatory Redemption Amount, in the amount of $100 per business day after
      the Delivery Date or Mandatory Redemption Payment Date, as the case may be,
      for
      each $10,000 of Debenture principal amount being converted or redeemed. The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand. Furthermore, in addition to any other remedies
      which may be available to the Holder, in the event that the Company fails for
      any reason to effect delivery of the Common Stock by the Delivery Date or make
      payment by the Mandatory Redemption Payment Date, the Holder will be entitled
      to
      revoke all or part of the relevant Notice of Conversion or rescind all or part
      of the notice of Mandatory Redemption by delivery of a notice to such effect
      to
      the Company whereupon the Company and the Holder shall each be restored to
      their
      respective positions immediately prior to the delivery of such notice, except
      that late payment charges described above shall be payable through the date
      notice of revocation or rescission is given to the Company. 

    

      
        	
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    E.  Mandatory
      Redemption.
      In the
      event the Company is prohibited from issuing Common Stock, or fails to timely
      deliver Common Stock on a Delivery Date, or upon the occurrence of an Event
      of
      Default (as defined in the Debenture) or for any reason other than pursuant
      to
      the limitations set forth herein, then at the Holder's election, the Company
      must pay to the Holder ten (10) business days after request by the Holder or
      on
      the Delivery Date (if requested by the Holder) a sum of money determined by
      multiplying up to the outstanding Principal Amount (as defined in the Debenture)
      of the Debenture designated by the Holder by 118%, together with accrued but
      unpaid interest thereon ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by the Holder on the same date
      as
      the Company Common Stock otherwise deliverable or within ten (10) business
      days
      after request, whichever is sooner ("Mandatory
      Redemption Payment Date").
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Debenture
      principal and interest will be deemed paid and no longer outstanding.

     

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

    
      

        
          	
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    G.  The
      Securities shall be delivered by the Company to the Holder pursuant to Section
      I.B. hereof on a “delivery-against-payment basis” at the Closing. 

     

    H.  Certificates
      evidencing the Conversion Shares shall not contain any legend: (i) while a
      registration statement covering the resale of such security is effective under
      the Securities Act, or (ii) following any sale of such Conversion Shares
      pursuant to Rule 144, or (iii) if such Conversion Shares are eligible for sale
      under Rule 144, or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the Commission). The Company shall cause
      its counsel to issue a legal opinion to the Company’s transfer agent promptly if
      required by the Company’s transfer agent to effect the removal of the legend
      hereunder. If all or any portion of a Debenture is converted or exercised (as
      applicable) at a time when there is an effective registration statement to
      cover
      the resale of the Conversion Shares, or if such Conversion Shares may be sold
      under Rule 144 or if such legend is not otherwise required under applicable
      requirements of the Securities Act (including judicial interpretations thereof)
      then such Conversion Shares shall be issued free of all legends. The Company
      agrees that at such time as such legend is no longer required under this
      Section, it will, no later than three Trading Days following the delivery by
      Holder to the Company or the Company's transfer agent of a certificate
      representing the Conversion Shares, as applicable, issued with a restrictive
      legend, deliver or cause to be delivered to Holder a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section.

     

    
      	
            	VI.	
              CLOSING
                DATE

            

    

     

    The
      “Closing”
shall
      occur by the delivery: (i) to the Holder of the documents evidencing the
      Debenture and all other Documents, and (ii) to the Company the Purchase Price,
      including the Promissory Note, and the date on which the Closing occurs shall
      be
      referred to herein as the “Closing
      Date”.
      

     

    
      	
            	VII.	
              CONDITIONS
                TO THE COMPANY’S
                OBLIGATIONS

            

    

     

    Holder
      understands that the Company’s obligation to sell the Debenture on the Closing
      Date to Holder pursuant to this Agreement is conditioned upon:

     

    A.  Delivery
      by Holder to the Company of the Purchase Price, including the Promissory Note
      evidencing such applicable portion of the Purchase Price;

     

    B.  The
      accuracy on the Closing Date of the representations and warranties of Holder
      contained in this Agreement as if made on the Closing Date (except for
      representations and warranties which, by their express terms, speak as of and
      relate to a specified date, in which case such accuracy shall be measured as
      of
      such specified date) and the performance by Holder in all material respects
      on
      or before the Closing Date of all covenants and agreements of Holder required
      to
      be performed by it pursuant to this Agreement on or before the Closing Date;
      and

    
      

        
          	
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    C.  There
      shall not be in effect any law or order, ruling, judgment or writ of any court
      or public or governmental authority restraining, enjoining or otherwise
      prohibiting any of the transactions contemplated by this Agreement.

     

    
      	
            	VIII.	
              CONDITIONS
                TO HOLDER’S OBLIGATIONS

            

    

     

    The
      Company understands that Holder’s obligation to purchase the Securities on the
      Closing Date pursuant to this Agreement is conditioned upon:

     

    A.  Delivery
      by the Company of the Debenture (I/N/O Holder or I/N/O Holder’s nominee) to
      Holder;

     

    B.  The
      accuracy on the Closing Date of the representations and warranties of the
      Company contained in this Agreement as if made on the Closing Date (except
      for
      representations and warranties which, by their express terms, speak as of and
      relate to a specified date, in which case such accuracy shall be measured as
      of
      such specified date) and the performance by the Company in all respects on
      or
      before the Closing Date of all covenants and agreements of the Company required
      to be performed by it pursuant to this Agreement on or before the Closing Date,
      all of which shall be confirmed to Holder by delivery of the certificate of
      the
      chief executive officer of the Company to that effect;

     

    C.  The
      Company shall have delivered to the Holder a certificate of the Company executed
      by an officer of the Company, dated as of the Closing, certifying
      the resolutions adopted by the Company’s board of directors authorizing the
      execution of the Documents, the issuance of the Securities, and the transactions
      contemplated hereby, and copies of any required third party consents, approvals
      and filings required in connection with the consummation of the transactions
      contemplated by this Agreement;

     

    D.  There
      not
      having occurred (i) any general suspension of trading in, or limitation on
      prices listed for, the Common Stock on the Trading Market, (ii) the declaration
      of a banking moratorium or any suspension of payments in respect of banks in
      the
      United States, (iii) the commencement of a war, armed hostilities or other
      international or national calamity directly or indirectly involving the United
      States or any of its territories, protectorates or possessions or (iv) in
      the case of the foregoing existing at the date of this Agreement, a material
      acceleration or worsening thereof;

     

    E.  There
      not
      having occurred any event or development, and there being in existence no
      condition, having or which reasonably and foreseeably could have a Material
      Adverse Effect;

     

    F.  There
      shall not be in effect any law, order, ruling, judgment or writ of any court
      or
      public or governmental authority restraining, enjoining or otherwise prohibiting
      any of the transactions contemplated by this Agreement;

     

    G.  The
      Company shall have obtained all consents, approvals or waivers from governmental
      authorities and third persons necessary for the execution, delivery and
      performance of the Documents and the transactions contemplated
      thereby;

    
      

        
          	
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    H.  Holder
      shall have received such additional documents, certificates, payment,
      assignments, transfers and other deliveries as it or its legal counsel may
      reasonably request and as are customary to effect a closing of the matters
      herein contemplated;

     

    I.  Delivery
      by the Company of a legal opinion with respect to the Company and the
      Subsidiaries regarding the enforceability of this Agreement and the transactions
      contemplated hereunder from its outside counsel in form and substance
      satisfactory to Holder; and

     

    J.  Delivery
      by the Company of a valid waiver of any preemptive rights held by the
      individuals and/or parties listed on Schedule III.A.3 hereto in form and
      substance satisfactory to Holder.

     

    
      	
            	IX.	
              SURVIVAL;
                INDEMNIFICATION

            

    

     

    A.  The
      representations, warranties and covenants made by each of the Company and Holder
      in this Agreement, the annexes, schedules and exhibits hereto and in each
      instrument, agreement and certificate entered into and delivered by them
      pursuant to this Agreement, including without limitation the terms of this
      Article IX, shall survive the Closing and the consummation of the transactions
      contemplated hereby. In the event of a breach or violation of any of such
      representations, warranties or covenants, the party to whom such
      representations, warranties or covenants have been made shall have all rights
      and remedies for such breach or violation available to it under the provisions
      of this Agreement or otherwise, whether at law or in equity, irrespective of
      any
      investigation made by or on behalf of such party on or prior to the Closing
      Date.

     

    B.  The
      Company hereby agrees to indemnify and hold harmless Holder, its affiliates
      and
      their respective officers, directors, employees, consultants, partners, members
      and attorneys (collectively, the “Holder
      Indemnitees”)
      from
      and against any and all losses, claims, damages, judgments, penalties,
      liabilities and deficiencies (collectively, “Losses”)
      and
      agrees to reimburse Holder Indemnitees for all reasonable out-of-pocket expenses
      (including the reasonable fees and expenses of legal counsel), in each case
      promptly as incurred by Holder Indemnitees and to the extent arising out of
      or
      in connection with:

     

        1.  any
      misrepresentation, omission of fact or breach of any of the Company’s
      representations or warranties contained in this Agreement or the other
      Documents, or the annexes, schedules or exhibits hereto or thereto or any
      instrument, agreement or certificate entered into or delivered by the Company
      pursuant to this Agreement or the other Documents;

     

        2.  any
      failure by the Company to perform any of its covenants, agreements, undertakings
      or obligations set forth in this Agreement or the other Documents or any
      instrument, certificate or agreement entered into or delivered by the Company
      pursuant to this Agreement or the other Documents;

     

        3.  the
      purchase of the Debenture, the conversion of the Debenture, the payment of
      interest on the Debenture, the consummation of the transactions contemplated
      by
      this Agreement and the other Documents, the use of any of the proceeds of the
      Purchase Price by the Company, the purchase or ownership of any or all of the
      Securities, the performance by the parties hereto of their respective
      obligations hereunder and under the Documents or any claim, litigation,
      investigation, proceedings or governmental action relating to any of the
      foregoing, whether or not Holder is a party thereto; and/or

    
      

        
          	
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        4.  resales
      of the Common Stock by Holder in the manner and as contemplated by this
      Agreement and the Documents.

     

    C.  Promptly
      after receipt by a party seeking indemnification pursuant to this
      Article IX (an “Indemnified
      Party”)
      of
      written notice of any investigation, claim, proceeding or other action in
      respect of which indemnification is being sought (each, a “Claim”),
      the
      Indemnified Party promptly shall notify the Company against whom indemnification
      pursuant to this Article IX is being sought (the “Indemnifying
      Party”)
      of the
      commencement thereof, but the omission so to notify the Indemnifying Party
      shall
      not relieve it from any liability that it otherwise may have to the Indemnified
      Party except to the extent that the Indemnifying Party is materially prejudiced
      and forfeits substantive rights or defenses by reason of such failure. In
      connection with any Claim as to which both the Indemnifying Party and the
      Indemnified Party are parties, the Indemnifying Party shall be entitled to
      assume the defense thereof. Notwithstanding the assumption of the defense of
      any
      Claim by the Indemnifying Party, the Indemnified Party shall have the right
      to
      employ separate legal counsel and to participate in the defense of such Claim,
      and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
      and expenses of such separate legal counsel to the Indemnified Party if (and
      only if): (x) the Indemnifying Party shall have agreed to pay such fees,
      out-of-pocket costs and expenses, (y) the Indemnified Party and the
      Indemnifying Party reasonably shall have concluded that representation of the
      Indemnified Party and the Indemnifying Party by the same legal counsel would
      not
      be appropriate due to actual or, as reasonably determined by legal counsel
      to
      the Indemnified Party, potentially differing interests between such parties
      in
      the conduct of the defense of such Claim, or if there may be legal defenses
      available to the Indemnified Party that are in addition to or disparate from
      those available to the Indemnifying Party or (z) the Indemnifying Party
      shall have failed to employ legal counsel reasonably satisfactory to the
      Indemnified Party within a reasonable period of time after notice of the
      commencement of such Claim. If the Indemnified Party employs separate legal
      counsel in circumstances other than as described in clauses (x), (y) or (z)
      above, the fees, costs and expenses of such legal counsel shall be borne
      exclusively by the Indemnified Party. Except as provided above, the Indemnifying
      Party shall not, in connection with any Claim in the same jurisdiction, be
      liable for the fees and expenses of more than one firm of legal counsel for
      the
      Indemnified Party (together with appropriate local counsel). The Indemnifying
      Party shall not, without the prior written consent of the Indemnified Party
      (which consent shall not unreasonably be withheld), settle or compromise any
      Claim or consent to the entry of any judgment that does not include an
      unconditional release of the Indemnified Party from all liabilities with respect
      to such Claim or judgment.

     

    D.  In
      the
      event one party hereunder should have a claim for indemnification that does
      not
      involve a claim or demand being asserted by a third party, the Indemnified
      Party
      promptly shall deliver notice of such claim to the Indemnifying Party. If the
      Indemnifying Party disputes the claim, such dispute shall be resolved by mutual
      agreement of the Indemnified Party and the Indemnifying Party or by binding
      arbitration conducted in accordance with the procedures and rules of the
      American Arbitration Association. Judgment upon any award rendered by any
      arbitrators may be entered in any court having competent jurisdiction
      thereof.

    
      

        
          	
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            	X.	
              GOVERNING
                LAW

            

    

     

    This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of California, without regard to the conflicts of law principles
      of
      such state.

     

    
      	
            	XI.	
              SUBMISSION
                TO JURISDICTION

            

    

     

    Each
      of
      the parties hereto consents to the exclusive jurisdiction of the federal courts
      whose districts encompass any part of the City of San Diego or the state courts
      of the State of California sitting in the City of San Diego in connection with
      any dispute arising under this Agreement and the other Documents. Each party
      hereto hereby irrevocably and unconditionally waives, to the fullest extent
      it
      may effectively do so, any defense of an inconvenient forum or improper venue
      to
      the maintenance of such action or proceeding in any such court and any right
      of
      jurisdiction on account of its place of residence or domicile. Each party hereto
      irrevocably and unconditionally consents to the service of any and all process
      in any such action or proceeding in such courts by the mailing of copies of
      such
      process by registered or certified mail (return receipt requested), postage
      prepaid, at its address specified in Article XVII. Each party hereto agrees
      that
      a final judgment in any such action or proceeding shall be conclusive and may
      be
      enforced in other jurisdictions by suit on the judgment or in any other manner
      provided by law.

     

    
      
        	
              	XII.	
                WAIVER
                  OF JURY TRIAL

              

      

    

     

    TO
      THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
      KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A
      JURY
      TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
      AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
      SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
      CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
      HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE
      EVENT
      OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES
      THAT
      IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
      MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

     

    
      	
            	XIII.	
              COUNTERPARTS;
                EXECUTION

            

    

     

    This
      Agreement may be executed in counterparts, each of which when so executed and
      delivered shall be an original, but both of which counterparts shall together
      constitute one and the same instrument. A facsimile transmission of this signed
      Agreement shall be legal and binding on both parties hereto.

    
      

        
          	
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              	XIV.	
                HEADINGS

              

      

    

     

    The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    
      	
            	XV.	
              SEVERABILITY

            

    

     

    In
      the
      event any one or more of the provisions contained in this Agreement or in the
      other Documents should be held invalid, illegal or unenforceable in any respect,
      the validity, legality and enforceability of the remaining provisions contained
      herein or therein shall not in any way be affected or impaired thereby. The
      parties shall endeavor in good-faith negotiations to replace the invalid,
      illegal or unenforceable provisions with valid provisions, the economic effect
      of which comes as close as possible to that of the invalid, illegal or
      unenforceable provisions.

     

    
      	
            	XVI.	
              ENTIRE
                AGREEMENT; REMEDIES, AMENDMENTS AND
                WAIVERS

            

    

     

    This
      Agreement and the Documents constitute the entire agreement between the parties
      hereto pertaining to the subject matter hereof and supersede all prior
      agreements, understandings, negotiations and discussions, whether oral or
      written, of such parties. No supplement, modification or waiver of this
      Agreement shall be binding unless executed in writing by both parties. No waiver
      of any of the provisions of this Agreement shall be deemed or shall constitute
      a
      waiver of any other provision hereof (whether or not similar), nor shall such
      waiver constitute a continuing waiver unless otherwise expressly
      provided.

     

    
      	
            	XVII.	
              NOTICES

            

    

     

    Any
      notices, consents, waivers, or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      confirmation of receipt, when sent by facsimile; (iii) three (3) days after
      being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
      day
      after deposit with a nationally recognized overnight delivery service, in each
      case properly addressed to the party to receive the same. The addresses and
      facsimile numbers for such communications shall be: 

    
      

        
          	
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        24

        
          

        

      

      
        
        

      

    

    

      
        	 	
                A.

              	
                If
                  to the Company, to:

              
	 	 	 
	 	 	
                CSMG
                  Technologies, Inc.

              
	 	 	
                Attn:
                  Donald S. Robbins, President and CEO

              
	 	 	
                500
                  North Shoreline Drive, Suite 1005 North

              
	 	 	
                Corpus
                  Christi, Texas 78471

              
	 	 	
                Telephone:
                  361-887-7546

              
	 	 	
                Facsimile:
                  361-884-0792

              
	 	 	 
	 	
                B.

              	
                If
                  to Holder, to:

              
	 	 	 
	 	 	
                La
                  Jolla Cove Investors, Inc.

              
	 	 	
                1150
                  Silverado Street, Suite 220

              
	 	 	
                La
                  Jolla, California 92037

              
	 	 	
                Telephone:
                  858-551-8789

              
	 	 	
                Facsimile:
                  858-551-8779

              

      

    

     

    The
      Company or Holder may change the foregoing address by notice given pursuant
      to
      this Article XVII.

     

    
      	
            	XVIII.	
              CONFIDENTIALITY

            

    

     

    Each
      of
      the Company and Holder agrees to keep confidential and not to disclose to or
      use
      for the benefit of any third party the terms of this Agreement or any other
      information which at any time is communicated by the other party as being
      confidential without the prior written approval of the other party; provided,
      however, that this provision shall not apply to information which, at the time
      of disclosure, is already part of the public domain (except by breach of this
      Agreement) and information which is required to be disclosed by law (including,
      without limitation, pursuant to Item 601(b)(10) of Regulation S-K under the
      Securities Act and the Exchange Act).

     

    
      	
            	XIX.	
              MAXIMUM
                INTEREST RATE

            

    

     

    Notwithstanding
      anything herein to the contrary, if at any time the applicable interest rate
      as
      provided for herein shall exceed the maximum lawful rate which may be contracted
      for, charged, taken or received by the Holder in accordance with any applicable
      law (the “Maximum
      Rate”),
      the
      rate of interest applicable to this Agreement shall be limited to the Maximum
      Rate. To the greatest extent permitted under applicable law, the Company hereby
      waives and agrees not to allege or claim that any provisions of this Agreement
      could give rise to or result in any actual or potential violation of any
      applicable usury laws.

     

    
      	
            	XX.	
              ASSIGNMENT

            

    

     

    This
      Agreement shall not be assignable by the Company without the prior written
      consent of the Holder. The Holder may assign this Agreement upon 10 days prior
      written notice to the Company.

    
      

        
          	
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        25

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
      executed and delivered on the date first above written.

    

    

      
        	CSMG
                Technologies, Inc.	 	La
                Jolla Cove Investors, Inc.
	 	 	 	 	 
	By:
                	
                
                  /s/
                    Donald S. Robbins

                

              	 	
                By:

              	
                /s/
                  Travis William Huff

              
	 	 	 	 	 
	Name: 	
                Donald
                  S. Robbins

              	 	
                Name:

              	
                Travis
                  William Huff

              
	 	 	 	 	 
	Title: 	
                President
                  and CEO

              	 	
                Title:

              	
                Portfolio
                  Manager/Vice President

              

      

    

     

    

      
        	
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        26

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      III.A.1

     

    

    
      	
              Stock
                Options Date

            	
              Date
                exp

            	
              Shares

            	
              Exercise
                Price

            	
              Remaining
                1 

            
	 	 	 	 	 	 
	
              Robbins
                

            	 	
              Mar,
                2009

            	
              100,000

            	
              0.33

            	 
	 	 	
              Mar,
                2009

            	
              200,000

            	
              0.28

            	 
	
              Robbins
                

            	 	
              May-13

            	
              225,000

            	
              0.605

            	 
	
              Jones

            	 	
              May-13

            	
              100,000

            	
              0.55

            	 
	
              Jones
                

            	 	
              May-13

            	
              100,000

            	
              0.24

            	 
	
              Hanor
                

            	 	
              May-13

            	
              50,000

            	
              0.55

            	 
	
              Stern

            	 	
              May-13

            	
              50,000

            	
              0.55

            	 
	
              Hohauser

            	 	
              May-13

            	
              100,000

            	
              0.55

            	 
	
              Nemachek

            	
              2/7/2007

            	
              2/7/2017

            	
              50,000

            	
              0.625

            	 
	
              Scott
                Shaffer

            	 	 	
              100,000

            	
              0.75

            	 
	
              D
                Robbins 

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 
	
              R
                Machen

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 
	
              Bruce
                Jones

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 
	
              H
                Hohauser

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 
	
              C
                Derdeyn

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 
	
              E
                Robbins 

            	
              7/21/2008

            	
              7/21/2013

            	
              200,000

            	
              1.1

            	 

    

     

    ____________________

    
      1
        No options have been exercised.

      

        
          	
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    SCHEDULE
      III.A.3

     

    PREEMPTIVE
      RIGHTS

     

    None.

     

    

    
      

        
          	
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        28

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      III.L.

     

    REGISTRATION
      RIGHTS

    

      
        	
                Name

              	 
	 	 
	
                1.
                  Robert Machen

              	
                Right
                  to convert restricted shares of CSMG at $0.625/share.

              
	 	 
	
                2.
                  Don Robbins

              	
                Right
                  to convert restricted shares of CSMG at $0.625/share.

              
	 	 
	
                
                  3.
                    Jesup & Lamont Securities

                

              	
                Has
                  (i) one demand registration right for the Warrant Shares upon an
                  IPO of
                  Live Tissue Connect, Inc. and (ii) unlimited piggyback rights,
                  upon CSMG
                  filing a registration statement other than a Form S-4 or Form
                  S-8.

              
	 	 
	
                4.
                  Series A Preferred Stockholders

              	
                In
                  connection with the issuance of Series A convertible preferred,
                  each
                  holder has unlimited piggyback rights following the IPO of Live
                  Tissue
                  Connect, Inc. (“LTC”), CSMG’s subsidiary, either in shares of LTC or if
                  there is no IPO of LTC, then into shares of CSMG. The registration
                  rights
                  terminate at the earlier of five years after the IPO or at the
                  time any
                  holder of such conversion shares can sell their conversion shares
                  within a
                  three month period under Rule
                  144.

              

      

    

     

    
      

        
          	
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        29

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      III.P.

     

    SUBSIDIARIES

     

    Live
      Tissue Connect, Inc.

     

     

    
      

        
          	
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    SCHEDULE
      IV.I.

     

    SECURITY
      AGREEMENTS

     

    None.

     

     

    
      

        
          	
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    EXHIBIT
      A

     

    SECURED
      PROMISSORY NOTE

     

     

    
      

        
          	
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        32

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