Document:

ex101.htm

    
      Exhibit 10.1

       

      PURCHASE
AGREEMENT

      

      

      THIS PURCHASE AGREEMENT (“Agreement”)
is made as of the 19th day of
March, 2008, by and among Arkanova Energy Corp., a Nevada corporation (the
“Company”), and John Thomas Bridge & Opportunity Fund
(“Investor”).

      

      Recitals

      

      A.           The
Company and the Investor are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the provisions of
Regulation D (“Regulation D”), as promulgated by the U.S. Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended;
and

      

      B.           The
Investor wishes to purchase from the Company, and the Company wishes to sell and
issue to the Investor, upon the terms and conditions stated in this Agreement,
(i) a one-year debenture in the principal amount of $500,000, bearing interest
at the rate of 10% per annum, in the form attached hereto as Exhibit A (the
“Debenture”), and (ii) a warrant to purchase 250,000 shares of Company common
stock, par value $.001 per share (“Common Stock”), at an exercise price of $0.65
per share (subject to adjustment) in the form attached hereto as Exhibit B (the
“Warrant”).

      

      In consideration of the mutual promises
made herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      

      1.           Definitions.  In
addition to those terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the meanings set
forth below:

      

      “10-KSB” has the
meaning set forth in Section 4.6

      

      “Affiliate” means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.

      

      “Business Day” means a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.

      

      “Closing” has the
meaning set forth in Section 3.

      

      “Closing Date” has the
meaning set forth in Section 3.

      

      “Company’s Knowledge”
means the actual knowledge of the executive officers (as defined in Rule 405
under the 1933 Act) of the Company, after due inquiry.

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
 

      “Confidential
Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, business and marketing plans, and customer and supplier
lists and related information).

      

      “Control” (including
the terms “controlling”, “controlled by” or “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

      

      “Debenture” has the
meaning set forth in recitals.

      

      “Debenture Shares”
means the shares of Common Stock issuable to Investor upon a default of the
Debenture, should Investor elect to convert all or a part of such Debenture upon
such default.

      

      “Environmental Laws”
has the meaning set forth in Section 4.16.

      

      “Evaluation Date” has
the meaning set forth in Section 4.26.

      

      “GAAP” has the meaning
set forth in Section 4.18.

      

      “Infringe” has the
meaning set forth in Section 4.15(d).

      

      “Intellectual
Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; and (v) proprietary computer software (including but not limited
to data, data bases and documentation).

      

      “License Agreements”
has the meaning set forth in Section 4.15(b).

      

      “Material Adverse
Effect” means a material adverse effect on (i) the assets, liabilities,
results of operations, condition (financial or otherwise), business, or
prospects of the Company and its Subsidiaries taken as a whole, or (ii) the
ability of the Company to perform its obligations under the Transaction
Documents.

      

      “Person” means an
individual, corporation, partnership, limited liability company, trust, business
trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
 

      “Purchase Price” means
$500,000.

      

      “SEC Filings” has the
meaning set forth in Section 4.6.

      

      “Securities” means the
Debenture, the Warrant and the Underlying Shares.

      

      “Subsidiary” of any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first Person.

      

      “Transaction
Documents” means this Agreement, the Warrant, and the
Debenture.

      

      “Underlying Shares”
means the Warrant Shares and the Debenture Shares.

      

      “Warrants” has the
meaning set forth in the recitals.

      

      “Warrant Shares” means
the shares of Common Stock issuable upon the exercise of the
Warrant.

      

      “1933 Act” means the
Securities Act of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.

      

      “1934 Act” means the
Securities Exchange Act of 1934, as amended, or any successor statute, and the
rules and regulations promulgated thereunder.

      

      2.           Purchase and Issuance of the
Debenture and Warrant.  Subject to the terms and conditions of
this Agreement, on the Closing Date the Investor shall purchase, and the Company
shall sell and issue to the Investor, the Debenture and Warrant in the amount
set forth opposite the Investor’s name on the signature page attached hereto in
exchange for the Purchase Price.

      

      3.           Closing.  Within
one Business Day of the date of executing this Agreement, the Company shall
cause the delivery of the certificates representing the Debenture and the
Warrant, registered in the names and amounts of the Investor as set forth on the
signature pages attached hereto to the Investor and the Investor shall wire to
the Company in same day funds an amount representing such Investor’s Purchase
Price, as set forth on the signature page hereto (“Closing” or “Closing
Date”).  The Closing shall occur upon confirmation that the conditions
to Closing in Section 6 hereof have been satisfied.  The Closing of
the purchase and sale of the Debenture and Warrant shall take place at the
offices of Brewer & Pritchard, P.C., 3 Riverway, Suite 1800, Houston, Texas
77056.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      4.           Representations and
Warranties of the Company.  The Company hereby represents and
warrants to the Investor that, except as set forth in the schedules delivered
herewith (collectively, the “Disclosure Schedules”):

      

      4.
1           Organization, Good Standing
and Qualification.  Each of the Company and its Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted and to own its
properties.  Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not had and could not reasonably be expected to have a
Material Adverse Effect.  The Company’s Subsidiaries are listed in the
SEC Filings.

      

      4.2           Authorization.  The
Company has full power and authority and has taken all requisite
action on the part of the Company, its officers, directors and stockholders
necessary for (i) the authorization, execution and delivery of the Transaction
Documents, (ii) the authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities.  The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally.

      

      4.3           Capitalization.  Schedule 4.3 sets
forth (a) the authorized capital stock of the Company on the date hereof; (b)
the number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (excluding the Underlying Shares) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the
Company.  All of the issued and outstanding shares of the Company’s
capital stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights and were issued in full compliance
with applicable state and federal securities law and any rights of third
parties.  Except as described on Schedule 4.3, all of
the issued and outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights, were issued in full compliance with applicable state and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim.  Except as described on Schedule 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company.  Except as described on
Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind.  Except as described on Schedule 4.3, there
are no voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by
them.  Except as described on Schedule 4.3, no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

      Except as described on Schedule 4.3, the
issuance and sale of the Securities hereunder will not obligate the Company to
issue shares of Common Stock or other securities to any other Person (other than
the Investor) and will not result in the adjustment of the exercise, conversion,
exchange or reset price of any outstanding security.

      

      Except as described on Schedule 4.3, the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase any
equity interest in the Company upon the occurrence of certain
events.

      

      4.4           Valid
Issuance.  The Debenture and the Debenture Shares have been
duly and validly authorized and, when issued and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and shall be
free and clear of all encumbrances and restrictions (other than those created by
the Investor), except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws.  The Warrant and
Warrant Shares have been duly and validly authorized and will be validly issued,
fully paid and non-assessable free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws.  The Company has
reserved a sufficient number of shares of Underlying Shares for issuance upon
the exercise of the Warrant and conversion of the Debenture in the case of
default, free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws.

      

      4.5           Consents.  The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods.  Subject to the
accuracy of the representations and warranties of the Investor set forth in
Section 5 hereof, the Company has taken all action necessary to exempt (i) the
issuance and sale of the Securities, (ii) the issuance of the Warrant Shares
upon due exercise of the Warrants, (iii) the issuance of the Debenture Shares in
the case of a default of the Debenture, and (iv) the other transactions
contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other “poison pill” arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company’s Articles of Incorporation or Bylaws that is or could reasonably
be expected to become applicable to the Investor as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investor or the exercise of any right granted to the Investor pursuant to this
Agreement or the other Transaction Documents.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
 

      4.6           Delivery of SEC Filings;
Business.  The Company has made available to the Investor
through the EDGAR system, true and complete copies of the Company’s most recent
Annual Report on Form 10-KSB for the fiscal year ended September 30, 2007 (the
“10-KSB”), and all other reports filed by the Company pursuant to the 1934 Act
since the filing of the 10-KSB and prior to the date hereof (collectively, the
“SEC Filings”).  The SEC Filings are the only filings required of the
Company pursuant to the 1934 Act for such period.  The Company and its
Subsidiaries are engaged in all material respects only in the business described
in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.

      

      4.7           Use of
Proceeds.  The net proceeds of the sale of the Debenture and
the Warrant hereunder shall be used by the Company for working
capital.

      

      4.8           No Material Adverse
Change.  Since September 30, 2007, except as identified and
described in the SEC Filings or as described on Schedule 4.18, there
has not been:

      

      (i)           any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the Company’s Quarterly Report on Form 10-QSB for the quarter ended December
31, 2007, except for changes in the ordinary course of business which have not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;

      

      (ii)           any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;

      

      (iii)           any
material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;

      

      (iv)           any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;

      

      (v)           any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
 

      (vi)           any
change or amendment to the Company's Articles of Incorporation or Bylaws, or
material change to any material contract or arrangement by which the Company or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;

      

      (vii)           any
material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;

      

      (viii)                      any
material transaction entered into by the Company or a Subsidiary other than in
the ordinary course of business;

      

      (ix)           the
loss of the services of any key employee, or material change in the composition
or duties of the senior management of the Company or any
Subsidiary;

      

      (x)           the
loss or threatened loss of any customer which has had or could reasonably be
expected to have a Material Adverse Effect; or

      

      (xi)           any
other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.

      

      4.9           SEC
Filings.

      

      (a)           Since
March 1, 2007, at the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.  All SEC
comments on any filing made pursuant to the 1933 Act or 1934 Act have been
resolved to the satisfaction of the SEC.

      

      (b)           Each
registration statement and any amendment thereto filed by the Company since
January 1, 2006 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
 

      4.10           No Conflict, Breach,
Violation or Default.  The execution, delivery and performance
of the Transaction Documents by the Company and the issuance and sale of the
Securities will not conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under (i) the Company’s
Articles of Incorporation or the Company’s Bylaws, both as in effect on the date
hereof (true and complete copies of which have been made available to the
Investor through the EDGAR system), or (ii)(a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject.

      

      4.11           Tax
Matters.  The Company and each Subsidiary has timely prepared
and filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it.  The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid
assessments against the Company or any Subsidiary nor, to the Company’s
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole.  All taxes and other assessments and
levies that the Company or any Subsidiary is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due.  There are no tax liens
or claims pending or, to the Company’s Knowledge, threatened against the Company
or any Subsidiary or any of their respective assets or
property.  There are no outstanding tax sharing agreements or other
such arrangements between the Company and any Subsidiary or other corporation or
entity.

      

      4.12           Title to
Properties.  Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

      

      4.13           Certificates, Authorities
and Permits.  The Company and each Subsidiary possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by it, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or such Subsidiary, could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      
 

                            4.14           Labor Matters.

      

                            (a)           The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor
organizations.  The Company has not violated in any material respect
any laws, regulations, orders or contract terms, affecting the collective
bargaining rights of employees, labor organizations or any laws, regulations or
orders affecting employment discrimination, equal opportunity employment, or
employees’ health, safety, welfare, wages and hours.

      

                            (b)           (i) There are no labor disputes existing, or to the
Company's Knowledge, threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes, lockouts or any other disruptions of or by the Company's
employees, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the Company's employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company's Knowledge, the Company enjoys
good labor and employee relations with its employees and labor
organizations.

      

                            (c)           The Company is, and at all times has been, in compliance
in all material respects with all applicable laws respecting employment
(including laws relating to classification of employees and independent
contractors) and employment practices, terms and conditions of employment, wages
and hours, and immigration and naturalization.  There are no claims
pending against the Company before the Equal Employment Opportunity Commission
or any other administrative body or in any court asserting any violation of
Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967,
42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law, statute or
ordinance barring discrimination in employment.

      

                            (d)           Except as disclosed in the SEC Filings or as described on Schedule 4.14, the Company is not a party to, or bound by, any
employment or other contract or agreement that contains any severance, termination pay or change of
control liability or obligation, including, without limitation, any “excess
parachute payment,” as defined in Section 2806(b) of the Internal Revenue
Code.

      

                            (e)           Each of the Company's employees is a Person who is
either a United States citizen or a permanent resident entitled to work in the
United States.  To the Company's Knowledge, the Company has no
liability for the improper classification by the Company of such employees as
independent contractors or leased employees prior to the
Closing.

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      
 

      4.15           Intellectual
Property.

      

      (a)           All
Intellectual Property of the Company and its Subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable.  No Intellectual
Property of the Company or its Subsidiaries which is necessary for the conduct
of Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has been or is now involved
in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no
such action is threatened.  No patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.

      

      (b)           All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Intellectual Property which are necessary for the conduct of the
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted to which the Company or any
Subsidiary is a party or by which any of their assets are bound (other than
 generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, “License Agreements”) are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company’s Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.

      

      (c)           The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free and
clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses.  The Company and its Subsidiaries have a
valid and enforceable right to use all third party Intellectual Property and
Confidential Information used or held for use in the respective businesses of
the Company and its Subsidiaries.

      

      (d)           The
conduct of the Company’s and its Subsidiaries’ businesses as currently conducted
does not infringe or otherwise impair or conflict with (collectively,
“Infringe”) any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party, and, to the Company’s
Knowledge, the Intellectual Property and Confidential Information of the Company
and its Subsidiaries which are necessary for the conduct of Company’s and each
of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted are not being Infringed by any third
party.  There is no litigation or order pending or outstanding or, to
the Company’s Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property or Confidential Information of the Company and its
Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual
Property or Confidential Information owned by a third party, and, to the
Company’s Knowledge, there is no valid basis for the same.

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      
 

      (e)           The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Intellectual Property or Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be
conducted.

      

      (f)           The
Company and its Subsidiaries have taken reasonable steps to protect the
Company’s and its Subsidiaries’ rights in their Intellectual Property and
Confidential Information.  Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company’s standard forms thereof.  Except under confidentiality
obligations, there has been no material disclosure of any of the Company’s or
its Subsidiaries’ Confidential Information to any third party.

      

      4.16           Environmental
Matters.  Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company’s Knowledge, threatened
investigation that might lead to such a claim.

      

      4.17           Litigation.  There
are no pending actions, suits or proceedings against or affecting the Company,
its Subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or
contemplated.

      

      4.18           Financial
Statements.  The financial statements included in each SEC
Filing filed on or after March 1, 2007 present fairly, in all material respects,
the consolidated financial position of the Company as of the dates shown and its
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the case of
quarterly financial statements, as permitted by Form 10-QSB under the 1934
Act).  Except as set forth in the financial statements of the Company
included in the SEC Filings filed prior to the date hereof or as described on
Schedule 4.18,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.

      

      4.19           Insurance
Coverage.  The Company and each Subsidiary maintains in full
force and effect insurance coverage that is customary for comparably situated
companies for the business being conducted and properties owned or leased by the
Company and each Subsidiary, and the Company reasonably believes such insurance
coverage to be adequate against all liabilities, claims and risks against which
it is customary for comparably situated companies to insure.

      

      4.20           Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company, other than a $40,000
fee to be paid to John Thomas Financial, Inc.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      
 

      4.21           No Directed Selling Efforts
or General Solicitation.  Neither the Company nor any Person
acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.

      

      4.22           No Integrated
Offering.  Neither the Company nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section 4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
1933 Act.

      

      4.23           Private
Placement.  The offer and sale of the Securities to the
Investor as contemplated hereby is exempt from the registration requirements of
the 1933 Act.

      

      4.24           Questionable
Payments.  Neither
the Company nor any of its Subsidiaries, nor their respective directors,
officers or employees nor, to the Company’s Knowledge, any of their respective
current or former stockholders, agents or other Persons acting on behalf of the
Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in
connection with their respective businesses: (a) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company
or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.

      

      4.25           Transactions with
Affiliates.  Except as disclosed in the SEC Filings, none of
the officers or directors of the Company and, to the Company’s Knowledge, none
of the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

      

      4.26           Internal
Controls.  The Company is in
material compliance with the provisions of the Sarbanes-Oxley Act of 2002
currently applicable to the Company.  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 1934 Act Rules 13a-14 and 15d-14) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including the 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 period report under the
1934 Act, 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 end of the period covered by the most recently filed
periodic report under the 1934 Act (such date, the "Evaluation
Date").  The Company presented in its most recently filed periodic
report under the 1934 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 308 of Regulation S-B) or, to the Company's
Knowledge, in other factors that could significantly affect the Company's
internal controls.  The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the 1934
Act.

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      
 

      4.27           Solvency.  Based
on the financial condition of the Company as of the Closing Date and giving
effect to the net proceeds from the Closing, (i) the Company's fair saleable
value of its assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the 2008
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the proceeds the Company receives,
giving effect to the Closing, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its debt when such amounts are required to be
paid.  As of Closing, the Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt).

      

      4.28           Disclosures.  Neither
the Company nor any Person acting on its behalf has provided the Investor or its
agent or counsel with any information that constitutes or might constitute
material, non-public information.  The written materials delivered to
the Investor in connection with the transactions contemplated by the Transaction
Documents do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.

      

      5.           Representations and
Warranties of the Investor.  The Investor hereby represents and
warrants to the Company that:

      

      5.1           Organization and
Existence.  Investor is a validly existing corporation, limited
partnership or limited liability company and has all requisite corporate,
partnership or limited liability company power and authority to invest in the
Securities pursuant to this Agreement.

      

      5.2           Authorization.  The
execution, delivery and performance by Investor of the Transaction Documents to
which Investor is a party have been duly authorized and will each constitute the
valid and legally binding obligation of such Investor, enforceable against
Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors’ rights
generally.

      

      5.3           Purchase Entirely for Own
Account.  The Securities to be received by Investor hereunder
will be acquired for Investor’s own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the 1933 Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
1933 Act without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities
laws.  Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any
period of time.  Investor is not a broker-dealer registered
with the SEC under the 1934 Act or an entity engaged in a business that would
require it to be so registered.

      

      5.4           Investment
Experience.  Investor acknowledges that it can bear the
economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated
hereby.

      

      5.5           Disclosure of
Information.  Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and
receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Securities.  Investor
acknowledges receipt of copies of the SEC Filings.  Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, amend or affect Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.

      

      5.6           Restricted
Securities.  Such Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      
 

      5.7           Legends.  It
is understood that, except as provided below, certificates evidencing the
Securities may bear the following or any similar legend:

      

      (a)           “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities Act
of 1933 or qualification under applicable state securities
laws.  Notwithstanding the foregoing, the securities may be pledged in
connection with a bona fide margin account secured by the
securities.”

      

      (b)           If
required by the authorities of any state in connection with the issuance of sale
of the Securities, the legend required by such state authority.

      

      5.8           Accredited
Investor.  Investor is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act.

      

      5.9           No General
Advertisement.  Investor did not learn of the investment in the
Securities as a result of any public advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television, radio or internet or presented at
any seminar or other general advertisement.

      

      5.10           Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor, except as set forth
in Section 4.20.

      

      5.11           Patriot
Act.  Neither Investor nor any of its Affiliates has been
designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224.  None of the cash used to fund such
Investor’s portion of the Purchase Price has been, and none of the cash used to
fund any cash exercise of such Investor’s Warrants will be, or derived from, any
activity that could cause the Company to be in violation of the United States
Bank Secrecy Act, the United States International Money Laundering Control Act
of 1986 or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001.

      

      6.  Conditions to
Closing.

      

      6.1           Conditions to the Investor’s
Obligations. The obligation of Investor to purchase the Debenture and the
Warrant at the Closing is subject to the fulfillment to Investor’s satisfaction,
on or prior to the Closing Date, of the following conditions, any of which may
be waived by Investor:

      

      (a)           The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such earlier date.  The Company shall have performed in all
material respects all obligations and covenants herein required to be performed
by it on or prior to the Closing Date.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      
 

      (b)           The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers (excluding stockholder approval of the Proposal)
necessary or appropriate for consummation of the purchase and sale of the
Securities and the consummation of the other transactions contemplated by the
Transaction Documents, all of which shall be in full force and
effect.

      

      (c)           No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

      

      (d)           The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), and (c) of this Section 6.1.

      

      (e)           The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents, and the issuance of the
Securities, certifying the current versions of the Articles of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.

      

      (f)           The
Investor shall have received an opinion from Sichenzia Ross Friedman Ference
LLP, the Company's counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investor and addressing such legal matters as the
Investor may reasonably request.

      

      (g)           No
stop order or suspension of trading shall have been imposed by the SEC or any
other governmental or regulatory body with respect to public trading in the
Common Stock.

      

      (h)           The
Company shall have delivered the Securities to the Investor.

      

      6.2           Conditions to Obligations of
the Company. The Company's obligation to sell and issue the Debenture and
the Warrant at the Closing is subject to the fulfillment to the satisfaction of
the Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:

      

      (a)           The
representations and warranties made by the Investor in Sections 5.1 and 5.2
hereof (the “Investment Representations”), shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.  The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.  The Investor shall have performed in all
material respects all obligations and covenants herein required to be performed
prior to the Closing Date.

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      
 

      (b)           The
Investor shall have delivered the Purchase Price to the Company.

      

      6.3           Termination by Either
Company or Investor.  Either the Company or Investor shall have
the right to terminate this Agreement if the Closing hasn’t occurred prior to
April 1, 2008.

      

      7.           Covenants and Agreements of
the Company.

      

      7.1           Reservation of Common
Stock.  The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Warrant and the conversion of
the Debenture, such number of shares of Common Stock as shall from time to time
equal the number of Underlying Shares issuable pursuant to this Agreement in
accordance with their respective terms.

      

      7.2           Reports.  The
Company will furnish to the Investor and/or assignee such information relating
to the Company and its Subsidiaries as from time to time may reasonably be
requested by the Investor and/or assignee; provided, however, that the Company
shall not disclose material nonpublic information to the Investor, or to
advisors to or representatives of the Investor, unless prior to disclosure of
such information the Company identifies such information as being material
nonpublic information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and Investor enters into an appropriate
confidentiality agreement with the Company with respect thereto.

      

      7.3           No Conflicting
Agreements.  The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Investor under the
Transaction Documents.

      

      7.4           Insurance.  The
Company shall maintain in full force and effect insurance coverage that is
customary for comparably situated companies for the business being conducted and
properties owned or leased by the Company and each Subsidiary, in amounts the
Company reasonably believes to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to
insure.

      

      7.5           Compliance with
Laws.  The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities.

      

      7.6           Listing of Common
Stock.  The Company will use commercially reasonable efforts to
continue the listing and trading of its Common Stock on the OTC Electronic
Bulletin Board and, in accordance, therewith, will use commercially reasonable
efforts to comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such market.

      

      7.7           Removal of
Legends.  Upon the earlier of (i) registration for resale of
the Underlying Shares or (ii) Rule 144 becoming available, the Company shall (A)
deliver to the transfer agent for the Common Stock (the “Transfer Agent”)
irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such
Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by the Investor that Rule 144(k) applies
to the shares of Common Stock represented thereby or (2) a statement by the
Investor that such Investor has sold the shares of Common Stock represented
thereby in accordance with the plan of distribution contained in the
registration statement and, if applicable, in accordance with any prospectus
delivery requirements, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such
legends in such circumstances may be effected under the 1933
Act.  From and after the earlier of such dates, upon an Investor’s
written request, the Company shall promptly cause certificates evidencing the
Investor’s Securities to be replaced with certificates which do not bear such
restrictive legends, and Underlying Shares subsequently issued upon due exercise
of the Warrant or conversion of the Debenture shall not bear such restrictive
legends provided the provisions of either clause (i) or clause (ii) above, as
applicable, are satisfied with respect to such Underlying
Shares.  When the Company is required to cause unlegended certificates
to replace previously issued legended certificates, if unlegended certificates
are not delivered to Investor within three (3) Business Days of submission by
Investor of legended certificate(s) to the Transfer Agent as provided above (or
to the Company, in the case of the Warrant or Debenture), the Company shall be
liable to the Investor for liquidated damages in an amount equal to 3% of the
aggregate purchase price of the Securities evidenced by such certificate(s) for
each thirty (30) day period (or portion thereof) beyond such three (3) Business
Day that the unlegended certificates have not been so delivered.

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      
 

      7.8           Prohibited
Transactions.  From the date hereof until the date the
Debenture is repaid in full, the Company shall be prohibited from effecting or
entering into an agreement to effect any subsequent financing involving a
“Variable Rate Transaction”.  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 or
(ii) enters into any agreement, including, but not limited to, an equity line of
credit, whereby the Company may sell securities at a future determined
price.

      

                            7.9           Other Negative
Covenants.  Unless such
transaction is approved in writing by the Investor, the Company hereby further
covenants and agrees that it will not:

      (i)           Sell,
lease, or otherwise dispose of all or substantially all of its
assets;

      

      (ii)           Dissolve,
liquidate, or wind up its business;

      

      (iii)           Conduct
its business other than in its ordinary and usual course;

      

      (iv)           Issue
any debt obligations in excess of $1,000,000, unless all of the obligations of
the Debenture are retired with such proceeds;

      

      (v)           Pay
any dividend or make any other distributions of cash or property to any of the
holders of its capital stock;

      

      (vi)           Merge
or consolidate with another entity; or

      

      (vii)           Enter
into any transaction with an affiliate other than in the ordinary
course.

      

      8.           Survival and
Indemnification.

      

      8.1  Survival.  The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement.

      

      8.2  Indemnification.  The
Company agrees to indemnify and hold harmless the Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.

      

      8.3  Conduct of Indemnification
Proceedings.  Promptly
after receipt by any Person (the “Indemnified Person”) of
notice of any demand, claim or circumstances which would or might give rise to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section 8.2, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is materially
prejudiced by such failure to notify.  In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to
such Indemnified Person representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between
them.  The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.  Without the prior
written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such
proceeding.

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      
 

      9.           Miscellaneous.

      

      9.1           Successors and
Assigns.  This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investor, as applicable,
provided, however, that an Investor may assign its rights and delegate its
duties hereunder in whole or in part to an Affiliate or to a third party
acquiring some or all of its Securities in a private transaction without the
prior written consent of the Company, after notice duly given by Investor to the
Company provided, that no such assignment or obligation shall affect the
obligations of Investor hereunder.  The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties.  Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

      

      9.2           Counterparts;
Faxes.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement
may also be executed via facsimile, which shall be deemed an
original.

      

      9.3           Titles and
Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

      

      9.4           Notices.  Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one Business Day after delivery to such carrier.  All
notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:

      

      If to the Company:

      

      Arkanova
Energy Corp.

      2635
Crescent Ridge Drive

      The
Woodlands, Texas 77381

      Attention:  Pierre
Mulacek

      Facsimile:  (281)
872-8585

      

      With a copy to:

      

      Sichenzia
Ross Friedman Ference LLP

      61
Broadway

      New York,
NY 10006

      Attention:  Thomas
A. Rose, Esq.

      Facsimile:  212-930-9725

      

      If to the Investor, to the address set
forth on the signature page.

      

      9.5           Expenses.  The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay $5,000 of the fees and expenses of Brewer
& Pritchard; it being understood that Brewer & Pritchard has only
rendered legal advice to the Investor and not to the Company in connection with
the transactions contemplated hereby, and that the Company has relied for such
matters on the advice of its own respective counsel.  Such expenses
shall be paid not later than the Closing.  The Company shall reimburse
the Investor upon demand for all reasonable out-of-pocket expenses incurred by
the Investor, including without limitation reimbursement of attorneys’ fees and
disbursements, in connection with any amendment, modification or waiver of this
Agreement or the other Transaction Documents.  In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      
 

      9.6           Amendments and
Waivers.  Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor.  Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.

      

      9.7           Publicity.  Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investor
without the prior consent of the Company (in the case of a release or
announcement by the Investor) or the Investor (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investor, as the case may be, shall allow the
Investor or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance.  By 8:30 a.m. (New York City time) on the
trading day immediately following the Closing Date, the Company shall issue a
press release, reviewed and approved by the Investor, disclosing the
consummation of the transactions contemplated by this Agreement.  No
later than the third trading day following the Closing Date, the Company will
file a Current Report on Form 8-K, reviewed and approved by the Investor,
attaching the press release described in the foregoing sentence as well as
copies of the Transaction Documents.  In addition, the Company will
make such other filings and notices in the manner and time required by the
SEC.

      

      9.8           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 but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  To the
extent permitted by applicable law, the parties hereby waive any provision of
law which renders any provision hereof prohibited or unenforceable in any
respect.

      

      9.9           Entire
Agreement.  This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      
 

      9.10                      Further
Assurances.  The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

      

      9.11                      Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial.  This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
Texas without regard to the choice of law principles thereof.  Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of Texas located in Harris County and the United States
District Court for the Southern District of Texas for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby.  Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement.  Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court.  Each
party hereto irrevocably waives any objection to the laying of venue of any such
suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.

       

       

      
 

      [signature
page follows]

       

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

      

      IN WITNESS WHEREOF, the parties have
executed this Agreement or caused their duly authorized officers to execute this
Agreement as of the date first above written.

       

      
        
          	 The
      Company:   	ARKANOVA
      ENERGY CORP.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ PIERRE
      MULACEK	 
	 	 	Name:  Pierre
      Mulacek	 
	 	 	Title:    CEO	 
	 	 	 	 

        

       

        
          	The
      Investor:	JOHN
      THOMAS BRIDGE & OPPORTUNITY FUND	 
	 	 	 	 
	
                  Date

                	
                  By:
      

                	/s/ GEORGE
      R. JARKESY, JR	 
	 	 	Name:  George
      R. Jarkesy, Jr.	 
	 	 	Title:    Managing
      Member of the General Partner	 
	 	 	 	 

        
 

      Aggregate
Purchase Price:  $500,000

      Principal
Amount of Debenture:  $500,000

      

      

      21ex104.htm

    Exhibit 10.4

     

    LEASE

     

    THIS
LEASE made this 29th day of June, 2007 by and between WALES REALTY, LLC, a
Connecticut Limited Liability Company with a principal place of business located
at 275 New State Road, in the Town of Manchester County of Hartford, State of
Connecticut, (hereinafter referred to a "Landlord"), and VeruTEK TECHNOLOGIES,
INC. a Connecticut corporation with a place of business located at 65 West
Dudley Town Road, in the Town of Bloomfield, County of Hartford, State of
Connecticut (hereinafter referred to as "Tenant");

     

    WITNESS
ETH:

     

    1.       Lease of Premises -
For and in consideration of the rents herein reserved, and the covenants and
conditions herein contained, the Landlord hereby leases to the Tenant and the
Tenant hereby hires from the Landlord, that certain tract of land situated in
Bloomfield, Connecticut (hereinafter, "Land") consisting of approximately 2.0
acres, as further described in Exhibit A which is attached hereto, together with
all improvements thereon (hereinafter, "Building"). The Building is further
described as a free standing building containing approximately 24,000 square
feet having a street address of 65 West Dudley Town Road. The Tenant hereby
hires from the Landlord and Landlord leases to Tenant a 8,800 square feet
portion of the Building as per the attached plan (hereinafter, "Improvements").
The Land and Improvements are sometimes collectively referred to in this Lease
as the "Premises." In addition, Tenant shall have use of twenty five (25)
parking spaces.

     

    2.             Use of Premises - The
Tenant shall use and occupy the Improvements for office, laboratory and
manufacturing operations, only and for no other purpose without the prior
written consent of the Landlord which consent shall not be unreasonably withheld
or delayed. The Tenant hereby warrants that no toxic or hazardous materials
shall be stored, utilized or disposed of on the Premises in excess of amounts
permitted under applicable law. In the event of any such storage, use or
disposal, Tenant shall be liable for any costs reasonably incurred by the
Landlord in connection with, or arising out of, the storage, use or disposal of
said toxic or hazardous materials. The term "toxic or hazardous materials" shall
be as defined by applicable State and Federal laws and regulations. Landlord
acknowledges that Tenant's operation on the Premises will require the use of
certain materials which may be considered "toxic or hazardous materials" under
applicable law. Landlord hereby consents to the use of such materials, provided
that all such materials are used, stored and disposed of in accordance with the
requirements of applicable laws.

     

    3. Term of Lease - The
term of this lease shall be for a period of five (5) years, commencing on August
1, 2007 (the "Commencement Date") and ending July 31, 2012. From the date of
mutual execution of this Lease, through the Commencement Date, the Landlord
shall permit the Tenant to have access to the Premises for the purpose of
permitting the Tenant and its agents and contractors to make alterations to the
Improvements so that the Premises, as of the Commencement Date will be fit
for the
conduct of the Tenant's business thereon. During the period prior to the
Commencement Date, the Landlord and the Tenant will cooperate and coordinate
with one another so that the work for which they are each responsible for prior
to the Commencement Date can be done in as efficient and expeditious manner as
possible.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    4.       Base Rent -The Tenant
agrees to pay the Landlord as rent, without rights of set off, deduction, or
necessity for demand, for each of the years as follows. The first month's rent
shall be paid prior to the Tenant obtaining possession of the
Premises.

     

    
      	
              YEAR

            	
              YEARLY RENT

            	
              MONTHLY RENT

            
	
              Commencement
      Date –July 31, 2008

            	
              $38,000.00

            	
              $3,166.67

            
	
              August
      1, 2008 – July 31, 2009

            	
              $39,000.00

            	
              $3,250.00

            
	
              August
      1, 2008 – July 31, 2010

            	
              $40,000.00

            	
              $3,333.33

            
	
              August
      1,
      2008                                July
      31, 2011

            	
              $41,000.00

            	
              $3,416.67

            
	
              August
      1, 2008 – July 31, 2012

            	
              $42,000.00

            	
              $3,500.00

            

    

    

     

    The
foregoing rent is allocated as follows:

     

    $3,166.67
base rent adjusted as provided above

    $ 833.33
initial estimated additional rent due under Paragraph 33 until such time as
adjusted pursuant to Paragraph 33.

     

    The
foregoing rent shall be payable in equal monthly installments in advance,
commencing on the first day of the first full calendar month following the
Commencement Date and on the first day of each and every calendar month
thereafter. If the Commencement Date is not the first day of the month, rent for
the initial partial month shall be pro-rated based upon the actual number of
days in such month and the number of days from the Commencement Date until the
last day of such month. In the event said rent is not actually received by the
Landlord within ten (10) days, the Tenant shall be responsible for a late charge
of $10.00 per day for every day that said rent is late beyond the ten (10) days
up to a maximum charge of $150.00. Said late charges shall be considered
liquidated damages for said late payment, but shall in no event affect any other
damages to which the Landlord may be entitled as a result of the Tenant's late
payment, i.e. back rent, unpaid charges, costs of collection, etc. In the event
that the Landlord elects to terminate this lease the Tenant's liability for said
late charge payment shall cease on the date of said election but the Tenant
shall be liable for damages in accordance with Paragraph 11 hereof following the
date of said election to terminate. The first installment of rent shall be paid
prior to the Tenant taking possession of the Premises.

     

    5.             Assignment and Subletting
- The Tenant agrees not to assign this lease or any interest therein or
sublet the Premises or any portion thereof, without the prior written approval
of Landlord, which approval shall not be unreasonably withheld or delayed, but
notwithstanding any assignment
or subleasing, Tenant shall remain liable for all the terms, covenants, and
conditions of this lease. If the Tenant is a corporation, a transfer of 50% or
more of the Tenant's stock shall be considered to be an assignment or sublet for
purposes of this Paragraph. Any such sublet or assignment shall be subject to
the terms and provisions of this lease and the termination or other expiration
of this lease shall terminate any such sublease or assignment.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    6.             Indemnity - The
Tenant agrees to indemnify and save Landlord harmless against and from any and
all claims, damages, costs and expenses, including reasonable attorney's fees,
arising from the conduct or management of the business conducted by the Tenant
in the leased Premises, or from any breach or default on the part of the Tenant
in the performance of any covenant or agreement on the part of the Tenant to be
performed pursuant to the terms of this lease, or from any act or negligence of
the Tenant, its agents, contractors, servants, employees, subleases,
concessionaires or licensees in or about the leased Premises. In case any action
or proceeding be brought against the Landlord by reason of any such claim,
Tenant, upon notice from Landlord, covenants to defend such action or proceeding
and reimburse the Landlord for its reasonable expenses in connection
therewith,

     

    7.             Limitation of Landlord's
Liability - The Landlord shall not be liable for:

    (a) Loss of
or damage to any property of the Tenant or of any other person entrusted to the
Tenant;

     

    (b) Loss of
or damage to any property of the Tenant or of any person by theft or
otherwise;

    (c) Any
injury or damage to any person or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, dust, water or snow or leaks from any
part of the building or from the pipes, appliances or plumbing system or any
other place or by dampness or from any other cause whatsoever;

     

    (d) Any
damage caused by other occupants or persons in the building leased to Tenant;
or

     

    (e) Any
latent defects in the building;

    (f) Any
interruption of services, utilities, or similar items to be provided for by the
Landlord pursuant to this lease.

    The
foregoing provisions of this Paragraph 7 shall not excuse Landlord from its own
negligence or willful misconduct or the negligence or willful misconduct of its
employees, agents and contractors. Landlord shall indemnify, defend and save
Tenant harmless from any and all claims, damages, losses costs and expenses
resulting from the negligence and/or willful misconduct and acts of Landlord,
its employees, agents and contractors on or about the Premises,

     

    8. Insurance - The
Tenant shall keep in force during the term of this lease public liability
insurance with recognized companies licensed in the State of Connecticut with
liability limits of not less than $1,000,000.00 for bodily injury and other
casualty and arising out of the occupancy, maintenance and use of the Premises
and $1,000,000.00 for contents/personal property damage.

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    In the
event that Tenant wishes to maintain contents/personal property limits at an
amount less than $1,000,000, Tenant shall provide sufficient proof of adequate
coverage and shall make no claim against Landlord in the event that said
coverage is insufficient.. Tenant will name the Landlord as an additional
insured on all policies of insurance, and will furnish the Landlord with a copy
of the policy or policies within ten (10) days of the execution of this lease
and further proof of said insurance as the Landlord may require. Neither party
shall be liable for damages covered by insurance.

     

    Throughout
the term of this Lease, Landlord shall maintain a policy of fire and extended
casualty insurance covering the Premises in an amount equal to the full
replacement cost of the Premises and liability coverage with respect to the
Premises with limits of not less that $1,000,000.00 for bodily injury and
$1,000,000.00 for property damage with the Tenant named as an additional insured
thereunder. All such insurance shall be issued by recognized companies licensed
in the State of Connecticut. Tenant shall be responsible for payment of its
proportionate share as provided in Paragraph 33.

     

    Landlord
and Tenant each hereby waives on behalf of all insurers under all policies of
insurance (casualty or liability) carried by either covering the Premises or any
part thereof or any operations or activities thereon, all rights of subrogation
which any insurer might otherwise have, if at all, to any claims of Landlord or
Tenant against the other.

     

    9.       Compliance With Law -
Tenant agrees to comply and operate its business in accordance with all
statutes, laws, ordinances, regulations and rules of the United States, the
State of Connecticut, the town in which the Premises are located and any other
governmental subdivisions claiming jurisdiction so far as the Premises are or
may be concerned.

     

    10.             Subordination to Mortgages
- This lease shall not take precedence over any mortgage with any
individual, savings bank, commercial bank or insurance company or other
recognized lending institution, which may be placed, or arranged upon the
Premises, but any mortgage so placed or arranged at all times after the
execution hereof until the end of the term of this lease shall be prior to any
rights the Tenant may have in the Premises by reason of this lease, to the same
effect as though said mortgage had been executed before this lease and recorded
within a reasonable time thereafter, provided that no such subordination shall
occur unless the lender in question delivers to Tenant an agreement in form and
substance reasonably satisfactorily to Tenant pursuant to which such lender
agrees not to name Tenant as a defendant in a foreclosure action or disturb
Tenant in its enjoyment of the Premises and recognizing the rights of Tenant
under this Lease, so long as Tenant is not in default hereunder.

     

    11. Default - If default
be made in the payment of rent herein reserved or any part thereof for ten (10)
days after written notice from Landlord or if default be made in any of the
other covenants and agreements herein contained to be kept by the Tenant which
default (other than nonpayment of rent) is not cured within thirty (30) days
following notice to the Tenant, provided however, if such default cannot
reasonably be cured within thirty (30) days, Tenant shall not be in
default hereunder as long as Tenant commences such cure within such thirty (30)
day period, or if the Tenant shall make an assignment for the benefit of
creditors, or if a receiver or trustee of the Tenant's property shall be
appointed which is not removed within sixty (60) days, then it shall be lawful
for the Landlord at the Landlord's election to declare said term ended and to
re-enter the Premises or any part thereof without such re-entry working a
forfeiture of rents to become due hereunder, either with or without process of
law, and to expel, remove, and put out the Tenant or any person or persons
occupying the same, using such force as may be necessary so as to repossess and
enjoy the demised Premises as before this demise, without prejudice to any
remedies which the Landlord might otherwise have.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    (a) In the
event that this lease is terminated, the Landlord shall make reasonable effort
to re-let the Premises, but shall have the sole authority to determine and
receive the rent therefore, applying the same to the payment of the rent due by
these presents, including reasonable expenses of re-rental such as advertising,
rental commission, decorating and repairs and, if the full rental herein
provided shall not be realized by the Landlord over and above such expenses of
reletting, the said Tenant shall pay any deficiency in all events and shall
remain liable for failure to comply with all the other terms, covenants and
conditions of this lease. Said deficiency shall be computed by subtracting the
amount of rent that the Landlord is scheduled to receive from any re-rental from
the amount of rent that the Tenant would have paid throughout the term of this
lease. The Landlord shall compute the amount of said damages and shall render a
statement to the Tenant for said amount. The Tenant shall each month make a
payment equal to the difference between the rent due under this Lease and the
rent due under such sublease for such month. In addition to the foregoing, the
Tenant shall be liable for all other damages suffered by the Landlord in the
event of a breach of this lease.

     

    (b) The
Landlord shall have, in addition to the rights and remedies of the Landlord
enumerated in this lease (which shall be cumulative), such other rights and
remedies as may be allowed by law or in equity. If the Landlord engages the
services of an attorney-at-law after a default as aforesaid, the Tenant shall
reimburse the Landlord for the actual amount of costs reasonably incurred plus a
reasonable attorney's fee. In the event there are any sums due the Landlord by
the Tenant following said breach, and said sums are not paid within thirty (30)
days after the time they become due, the Tenant shall pay to the Landlord
interest on said sums at the rate of one percent (1%) per month.

     

    12. Alterations
-

     

    (a) The
Tenant may, at its own expense, make improvements to the property as it may deem
necessary or expedient in the operation of the leased property, provided the
Tenant, without the written consent of the Landlord, shall not tear down or
materially demolish any of the improvements on the leased property, or make any
material changes or alterations in such improvements without the prior consent
of the Landlord, which consent shall not be unreasonably withheld or delayed.
Tenant shall not make any change in or alteration to the leased property which
would violate the terms of any mortgage on the leased property, or of any policy
of insurance in force with respect to the leased property.

    

     

    Landlord
hereby acknowledges that Tenant has informed Landlord of its plans for
alteration as set forth in Schedule 12, attached hereto, to be made to the
Premises by Tenant at a future date and Landlord consents to such
alterations.

     

    (b)
Subject to the foregoing, the Tenant shall have the right to make changes or
alterations to the building on the leased property so long as:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

     

    (i) No change
or alteration shall at any time be made which shall impair the structural
soundness or diminish the value of the building on the leased
property.

     

    (ii) Before
commencing any changes or alterations the Tenant shall procure and deliver to
the Landlord the written consent of the mortgagee to which the lease is
subordinate and Landlord shall assist Tenant in procuring such
consent.

    (iii) No change
or alteration shall be undertaken until the Tenant shall have procured and paid
for all required municipal and other governmental permits and authorizations of
the various municipal departments and governmental subdivisions having
jurisdiction.

     

    (iv) All work
done in connection with any change or alteration shall be done in a good and
workmanlike manner and in compliance with the building and zoning laws, and with
all other laws, ordinances, orders, rules, regulations, and requirements of all
Federal, State, and municipal governments in the appropriate departments,
commissions, boards, and their officers thereof, and in accordance with the
orders, rules, and regulations of the Board of Fire Underwriters or any other
body now or hereafter constituted exercising similar functions, and the Tenant
shall procure certificates of occupancy and other certificates required by
law.

     

    (v) At
all times when any change or alteration is in progress, there shall be
maintained, at the Tenant's expense, Workers Compensation Insurance in
accordance with the law covering all persons employed in connection with the
change or alteration, and general liability insurance for the mutual benefit of
the Tenant and the Landlord expressly covering the additional hazards due to the
change or alteration.

     

    (c) The
Landlord and Tenant agree to make the improvements to the Premises as set forth
in Schedule 12 prior to or in a reasonable time after the Commencement Date.
Landlord and Tenant agree that Landlord shall contribute the reasonable cost of
said improvements up to a maximum amount of Ninety Thousand ($90,000) Dollars
which improvements do not include the construction of the laboratory. Payments
of Landlord's payment shall be made by Landlord directly to the provider of
goods and/or services within thirty (30) days and shall be conditioned upon the
delivery of a mechanic's lien waiver.

     

    13. Non-Waiver - The
failure of the Tenant to seek redress for violation of, or to insist upon the
strict performance of, any covenant or condition of this lease shall not
(notwithstanding any former waiver) prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by the Landlord of rent with knowledge of the
breach of any covenant or condition of this lease shall not be deemed a waiver
of such breach. It is further agreed that in the event any such rental payment
is made by the Tenant after written notice of a breach of any portion of this
agreement was given Tenant by Landlord,
all rental monies forwarded to Landlord after Tenant's receipt of said notice,
shall be accepted by the Landlord only as compensation for reasonable use and
occupancy of the demised Premises. No provision of this lease shall be deemed to
have been waived by the Landlord unless such waiver be in writing signed by the
Landlord. No payment by the Tenant or receipt by the Landlord of a lesser amount
than the rent due under this lease shall be deemed to be other than on account
of the earliest stipulated rent or shall any endorsement or statement on any
check or on any letter or document accompanying any such check or payment be
deemed an accord and satisfaction, and the Landlord may accept such check or
payment without prejudice to the Landlord's rights to recover the balance of
such payment or to pursue any other remedy in this lease provided.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    14.             Entire Agreement -
This lease contains the entire agreement between the parties, and any executory
agreement hereafter made shall be ineffective to change, modify, discharge, or
affect an abandonment of it in whole or in part unless such executory agreement
is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.

     

    15.             Notice - Whenever,
under the terms of this lease, notice is required to be given or a bill is
required to be sent by either party to the other, notice shall be deemed to be
given as of the date of mailing by certified or registered mail, return receipt
requested or as of the date of receipt of such mail by overnight
mail,

     

    to the
Landlord at:

    P.O. Box
8383

    Manchester,
Connecticut 06040

     

    with a
copy to:

    Fatima T.
Lobo, Esq.

    Lobo
& Associates, LLC Manchester, CT 06042-1975 Tel. (860) 645-0006

    Fax.
(860) 645-1110

     

    to the
Tenant at the address at the following address:

    VeruTEK
Technologies, Inc. 65 West Dudley Town Road Bloomfield, CT 06002

    with a
copy to:

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    16.             Recording - The
Tenant agrees not to record this lease and in the event of such recording, this
lease shall be at the option of the Landlord void. Either party to this lease
may, upon notice from the other party, request that a notice of lease be filed
in accordance with the Connecticut Statutes relating to Notices of Lease, which
notice of lease may be recorded by Landlord or Tenant.

     

    17.             Condemnation - If at
any time during the term of this lease the Premises shall be taken or
appropriated by virtue of eminent domain or similar proceedings or be condemned
by any public or quasi-public use which shall prevent normal occupancy and use
by the Tenant, the Tenant shall not share in the damages or awards paid in
respect to the taking or appropriation of its leasehold interest. If a
condemnation results in the taking of the whole or substantially whole Premises,
this Lease shall terminate as of the date of such taking. If less that the
entire Premises is taken and the portion remaining is not sufficient, in the
Tenant's reasonable discretion, for the conduct of its business thereon, or
materially reduces the amount of parking available at the Premises or adversely
affects street access to the Premises, then Tenant may terminate this Lease as
of the date of such taking by written notice to Landlord. If Tenant does not
terminate this Lease, then, Landlord shall use commercially reasonable efforts
to restore the Premises to the condition that existed prior to such taking and,
from and after the date of such taking, rent due under this Lease shall be
abated on a proportional basis in relation to the portion subject to such
taking.

     

    18. Destruction of Premises
- In case of the total destruction of the Premises by fire, the elements,
external violence or other casualty, then and thenceforth this lease shall cease
and come to an end at the option of either Landlord or Tenant by written notice
to the other delivered within thirty (30) days after the occurrence of such
casualty. If neither party elects to terminate this Lease, then Landlord shall
at its sole expense rebuild the Premises to substantially the same condition as
existed prior to such casualty. The Tenant's liability for rent during the
period of rebuilding shall cease. In the event the Landlord rebuilds the
Premises, then said rebuilding shall be substantially completed within 6 months
of the date of the casualty. In case the Premises shall be partially damaged by
fire, the elements, external violence or other casualty, the same shall be
repaired as speedily as practicable by the Landlord. Should such damage be so
extensive as to render the Premises untenantable, the Landlord may, by giving
notice to the Tenant within thirty (30) days of such damage, terminate this
lease. If the Landlord does not give such notice, then the Landlord shall repair
and/or rebuild said Premises as soon as is reasonably possible. In the event the
Premises are not substantially rebuilt or repaired within ninety (90) days of
such damage, then the Tenant may, by notice to the Landlord, terminate this
lease upon ten (10) days written notice of Landlord's failure to make said
repairs within the 90-day period. If the damage materially interferes with the
Tenant's use of the property, Tenant shall have an abatement or an apportionment
of the rent until the damage has been repaired or until this lease has been
terminated pursuant to the terms hereof. If the Premises are damaged such that
they are untenantable during the last six (6) months of this lease or during the
last six (6) months of the first renewal option, this lease shall terminate
unless within thirty (30) days of such damage, Tenant
exercises the option to renew this lease.

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    19.             Quiet Enjoyment - The
Landlord covenants that so long as the Tenant is in possession, the Tenant shall
not be disturbed in the enjoyment of the Premises by the Landlord or by anyone
claiming by or under the Landlord.

     

    20.             Right of Entry - The
Landlord, its agents, employees, prospective purchasers, prospective mortgagees
and prospective lessees, may from time to time enter the Premises during the
term of this lease at reasonable business hours and may further make such
repairs as they are required to make under the terms of this lease provided that
they do not unreasonably interfere with the Tenant's business. Lessor or his
agents may enter upon the Premises at other than reasonable business hours to
make emergency repairs, provided however, that whenever possible, Landlord shall
refrain from entering the Premises unaccompanied by a representative of Tenant.
In the case of an emergency, prior to entering the Premises, the Landlord shall
call one or more members (up to a maximum of four), of the Tenant's "Emergency
Response Team", the members of which shall be designated in a written notice
delivered to Landlord contemporaneously with execution of this Lease and updated
in writing by Tenant from time to time thereafter.

     

    21.             Transfer by Landlord
- The term "Landlord" as used in this lease means only the owner or the
mortgagee in possession for the time being of the land and building (or the
owner of a lease subject to this lease of the building or of the land and
building) which constitutes the Premises, so that in the event of any sale or
sales of said land and building, or in the event of a lease subject to this
lease of the building or of the land and building, the said Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations
hereunder, except obligations existing under claims then existing and accrued;
and it shall be deemed and construed without further agreement between the
parties and the purchaser at any such sale, or the said Tenant of the building
or of the land and building, that such purchaser or such Tenant of the building
of the land and building, has assumed and agreed to carry out any and all
covenants and obligations of Landlord hereunder. It is agreed that no such sale
or lease shall be made unless such purchaser or lessee expressly assumes and
agrees to carry out all of the covenants and obligations of the Landlord
hereunder.

     

    22.             Responsibility for Repairs
- Landlord will deliver the Premises with all structural, mechanical, air
conditioning as set forth Schedule 12 heating, electrical and plumbing systems
in good working order. Landlord hereby warrants toTenant that as of the
Commencement Date the Premises shall be in good order and condition and in
compliance with all applicable laws and regulations. The Landlord agrees that
during the term of the lease, the Landlord will at its sole cost and expense
make all necessary repairs to the exterior and to the structure of the building,
(including without limitation, the roof, subfloor and load bearing walls and
including periodic repaving and restriping of the parking lot and entrance
drives in order to maintain them in good appearance and condition consistent
with other first class office/industrial buildings in the area). Tenant shall be
responsible for all other repairs including but not limited to repairs and
maintenance of the heating, air conditioning, electrical and plumbing systems.
Tenant's obligations shall not include any major repairs that would be
considered capital improvements under Generally Accepted Accounting
Principles.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    23. Utilities
-

    The
Tenant agrees to be solely responsible for the following:

    (a) Telephone
services; and

    (b) Dumpster
and rubbish removal;

     

    The
Landlord and Tenant agree that the gas and electricity shall not be separately
metered for Tenant and Visonic, Inc. (hereinafter, "Visonic"). The Tenant shall
pay such amount which is in excess of Visonic's use. Visonic's use shall be
established by taking the average kilowatt hours and units of gas for the prior
twelve (12) months. In the event that the Visonic lease terminates prior to the
Tenant's lease, Landlord shall be responsible for usage in excess of Tenant's
usage based on an average kilowatt hours and units of gas for the twelve (12)
months preceding the end of Visonic's lease. In the event that gas and/or
electricity become individually metered, then Tenant shall be responsible only
for its usage. In the event that a new tenant leases the Visonic location and
Tenant's usage based on kilowatt hours varies by ten per cent (10%) or more,
then the Landlord and Tenant shall equitably adjust the allocation hereof. In
the event that Tenant changes it use or intensifies its us of the Premises, then
the Landlord and Tenant shall equitably adjust the allocation
hereof.

     

    All other
utilities which are not separately metered shall be paid by Tenant as set forth
in Paragraph 33.

     

    24. Mechanic's Liens -
The Tenant shall not suffer or permit any mechanic's or materialman's lien to be
filed against the Premises or any part thereof by reason of work, labor,
services or materials performed or supplied on its order. If any such mechanic's
or materialman's liens shall be filed against the Premises, the Tenant shall
cause the same to be discharged of record within ninety (90) days of recording.
If Tenant cannot discharge such lien within such period then in addition to all
other rights and remedies of Landlord, the Landlord may discharge the same by
paying the amount claimed to be due without inquiry into the validity of such
claim. Such amount paid by the Landlord in procuring the discharge of such lien
and all reasonable expenses in connection with such discharge shall be paid as
additional rent by the Tenant to the Landlord within five (5) days of the date
of a bill therefore sent by the Landlord to the Tenant.

     

    25.            Signs - The Tenant
may erect on the exterior of the Premises and/or on the land surrounding the
building such signs as the Tenant may desire providing such permission of the
Zoning authorities of the town in which the Premises are located be obtained by
Tenant for the erection of any such signs and that said signs be erected at
Tenant's sole cost and expense.

     

    26.            Nonrecourse as to Landlord
- Notwithstanding anything to the contrary set forth in this lease, it is
specifically understood and agreed by Tenant than there shall be no personal
liability on the part of the Landlord, with respect to any of the terms,
covenants and conditions of this lease (except liability under Paragraph 7 of
this Lease), and the Tenant shall look solely to the equity, if any, of the
Landlord in the Premises for the satisfaction of each and every remedy of the
Tenant in the event of any breach by the Landlord of any of the terms, covenants
and conditions of this lease to be performed by the Landlord, except under
Paragraph 7.

     

    27. Security Deposit -
Landlord and Tenant agree to pay Four Thousand ($4,000) as a security deposit
shall be paid by Landlord.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    28.             Termination of Lease
- Upon termination of this lease, for any reason, the Tenant shall
surrender the leased Premises to the Landlord. At that time, the Tenant shall
surrender the leased Premises to the Landlord in the same condition it was in at
the commencement of the term, reasonable wear and tear excepted. The premises
shall be "broom clean" upon surrender. Upon expiration of the lease, any option
term or extensions, Tenant will not be responsible for the removal of any
improvements it has made to the Premises if such improvements have been made
with the approval of the Landlord.

     

    In the
event the Tenant continues in possession after the termination of this lease,
said continuation of possession shall not constitute a new term, but shall be a
month-to-month tenancy only with all of the other terms and conditions of the
lease binding upon the Tenant except that the rent or use and occupancy charge,
as the case may be, shall then be 150% of the then monthly rental
payment.

     

    29.             Captions - The
captions used in this lease are inserted only as a matter of convenience and in
no way define, limit or describe the scope of the lease nor the paragraph in
front of which it appears.

     

    30.             Force Majeure -
Neither Landlord nor Tenant shall be required to perform any term, condition or
covenant in this Lease so long as such performance is delayed or prevented by
force majeure, which shall mean acts of God, strikes, lockouts, material or
labor restriction by any governmental authority, civil riot, floors, financing,
and any other cause not reasonably within the control of such party, and which
by the exercise of due diligence Landlord is unable, wholly or in part, to
prevent or overcome.

     

    31.             Binding Effect - This
lease shall be binding upon the Landlord and Tenant, and their respective
successors, and assigns.

     

    32.             Invalidity of Particular
Provision - If any term or provision of this lease, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this lease shall not be affected thereby and
each term and provision of this lease shall be valid and enforceable to the
fullest extent permitted by law.

     

    33.             Additional Rent: Taxes,
Master Insurance and Maintenance Charges- As additional rent, Tenant
shall pay, on an annual basis, monthly in arrears (together with the base rent
as set forth in paragraph 4 herein) its proportionate share of all insurance
costs, real property taxes and Common Area Charges on the property in which the
Premises are located (all of which is collectively defined as the "Total Common
Areas Charges". The proportionate share of Total Common Area Charges shall be
determined by the use of a fraction, the numerator of which is the number of
square feet of floor space in the leased Premises and whose denominator is the
aggregate number of square feet of all floor space of the building within which
the Premises are located. Such fraction is 36.67%.

     

    "Taxes",
as used herein, shall mean all taxes, duties, assessments, or sewer liens or
other charges relating to the Premises or the rental thereon, or any charge
levied in lieu of the foregoing taxes, duties, assessments, or sewer liens
levied or imposed against the land and buildings or rent paid thereon of which
the leased Premises form a part whether said sums are payable to the Town in
which the Premises are located or to any other governmental taxing authority
having jurisdiction
of the leased Premises.

     

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Said
taxes and insurance shall be determined upon receipt of a bill by the Landlord
and shall be amortized monthly over the year following the receipt of said bill.
If said bill is received after the commencement of a lease year, the Tenant
shall make up any difference, within 30 days, between the amortized amount for
the next year and the then current tax installment for the prior
months.

     

    During
the first lease year and until first day of the second month immediately
following the end of the Landlords fiscal year, the Tenant's monthly pro-rata
share of the Total Common Area Charges, as defined herein, shall be based
on:

     

    
      	
              a.  

            	
              the
      Total Common Area Charges incurred by the Landlord in the last full fiscal
      year prior to the commencement of the lease, multiplied
  by

            

    

     

    
      	
              b.  

            	
              36.67%,
      and further multiplied by

            
	 	 
	c.
       	one
      twelfth (1/12th).

    

     

    Thereafter,
and commencing on the first day of the second month immediately following the
end of the Landlords fiscal year, the Tenant's pro-rata share of Total Common
Area Charges, shall be recomputed based on the Total Common Area Charges
incurred by the Landlord in the immediate preceding fiscal year. Tenant shall
pay Landlord one twelfth (1/12th) of the
Tenant's 36.67% proportionate share of the amount so determined, rounded to the
nearest dollar, on the first day of each calendar month during such Lease Year.
Landlord's and Tenant's obligations hereunder shall survive the expiration of
this Lease. Said adjustments shall be made on or about January 1 of each
year.

     

    Within
ninety (90) days after the end of each fiscal year, Landlord shall furnish
Tenant a statement in reasonable detail of the actual Common Area Charges for
such fiscal year prepared in accordance with sound accounting practices by
Landlord's accountant. If the Tenant does not object, in writing by certified
mail, return receipt requested, to said accountant's determination of its share
of the common charges, said charges be deemed accepted by the Tenant. If the
Tenants so objects, any dispute shall be settled within 60 days by binding
arbitration by an arbitrator selected by the Tenant from a list of three
independent accountants selected by the Landlord. Pending said arbitration the
Tenant shall continue to pay said additional rent, subject to adjustment by the
arbitrators.

     

    As
provided herein, Tenant shall pay, on a monthly basis, (together with the base
rent as set forth in paragraph 4 herein) Tenant's share of the Maintenance
Charges. For the purposes of this Lease, the term Maintenance Charges shall mean
all out-of-pocket amounts actually paid or incurred by Landlord or its designee
which are reasonable and customary for properties similar to the Premises to
perform Landlord's obligations under Paragraphs 23(a) and (b) of this
Lease.

     

    For the
purposes of this Lease, the term Common Area Charges shall mean all amounts paid
or incurred by Landlord or its designee to operate, maintain and repair the
Common Areas (and any common improvements therein, thereon or thereunder),
including but not limited to, water, sewer charges, cleaning, snow and ice
removal, lighting, maintaining and repairing exterior of the building;
landscaping; water and sewerage charges related to the Common Areas; premiums
for liability, fire (including all extended coverages and endorsements) and
workmen's compensation insurance related to the Common Areas, sales and use
taxes on material, equipment, supplies and services purchased to operate and
maintain the Common Areas; fees for required licenses and permits, supplies,
policing, security and traffic control of the Common Areas and
affording protection thereto against fire to the extent that such fire
protection is furnished by Landlord; annual costs relating to the sprinkler
system, e.g., stand-by water charge and alarm system, repair and maintenance of
the common areas.

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Landlord
shall not charge Tenant, at any time during the lease or option periods, for any
improvements to the building common areas necessary to make the property adhere
to current ADEA regulations and specifications.

     

    To the
best of Landlord's actual knowledge, the Premises are in compliance with all
environmental laws, regulations, orders, etc.

     

    Common
Area Charges shall not include any major repairs that would be considered
capital improvements under Generally Accepted Accounting
Principles.

     

    34.             Option to Renew - The
Tenant shall have the option to renew this lease for one term of five (5) years,
upon the same terms and conditions as provided herein, except that the base rent
shall be adjusted upwards only as provided herein.

     

    Said
option shall be exercised by Tenant giving notice in writing, pursuant to this
agreement, to Landlord at least six (6) months before the expiration of the
initial term. It shall be a condition of the exercise of the foregoing option
that at the time of the exercise of said option, Tenant shall not be in default
under any of the terms of this lease.

    Commencing
with the rent due August 1, 2009 and each August 1st
thereafter, the monthly payments of rent shall be adjusted by any
increase in the Index (as defined herein). Such increase shall be determined by
multiplying the base rent of $3,166.67 as set forth in Paragraph 4 herein by a
fraction, the numerator of which is the last Index published for the month
immediately preceding the anniversary date of this Lease (i.e. July), and any
renewal thereof, and the denominator of which is the last Index published for
the month prior to the initial term of the Lease as set forth in Paragraph 3. In
the event that, in any year, said fraction indicates a negative adjustment,
there shall be no decrease in the monthly rent.

     

    As used
herein, "Index" means the Consumer Price Index for All Urban Consumers
(1982-84=100) as promulgated by the Bureau of Labor Statistics of the United
States Department of Labor (currently found at www.bls.gov); or, if
that Consumer Price Index ceases to be published, any successor similar
publication (using any appropriate conversion factor therein provided) or if
there is no such successor, then any comparable index selected by the Landlord
that is in general use as a mechanism for measuring changes in purchasing
power.

     

    35.             Consent - If any
provision of this lease requires the consent of the Landlord or the Tenant, such
consent shall not be unreasonably withheld.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties have set their hands and seals the day and year
first above written.

    
    

     

    
      	Signed,
      Sealed and Delivered in the Presence of	 	LANDLORD,	 
	 	 	 	 
	 	 	By	 
	 	 	Wales Realty,
      LLC	 
	 	 	Roger
      W. Talbot, Sr, Member	 
	 	 	 	 
	 	 	TENANT	 
	 	 	 	 
	 	 	VeruTEK
      Technologies, Inc.	 
	 	 	By John
      Collins	 
	 	 	Its President and
      CEO	 

    

     

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

     

    
      EXHIBIT
A

      Page 1 of
2

      

    

    

     

     

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

     

    
      EXHIBIT
A

      Page 2 of
2

      

    

    

     

     

     

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    Schedule
12

    Improvements subject to
$90,000 Landlord contribution per paragraph 12 (c)

     

    
      	
               
      

            	
              Heating
      and Air Conditioning Replace 3
units

            

    

     

    Electrical

    As
necessary to support separation from other Tennant Disconect fire and burglar
system - Visonic responsibility Install exit signs and lighting as
required

     

    Stairways

    Requires
a second staircase to be added.

     

    Walls

    Add a
wall to divide warehouse area

    First and
second floor separation partitions

     

    Restrooms

    Add
handicapped compliant restroom on first floor.

     

    Other

    Paint,
prime and repair 1st
and 2nd floor officces as necessary

    Repair
all doors to ensure they close properly / weather stip if necessary Replace
existing fl000ring and install new as necessary

    Replace
damaged or mismatched ceiling tiles as necessary

    

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
       

       

      

    

     

    
       

       

       

       

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

     

     

    

     

     

     

     

     

    19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]