Document:

GUARANTY AND PLEDGE AGREEMENT

      GUARANTY AND PLEDGE  AGREEMENT (this  "Agreement"),  dated as of September
10, 2004, among ROO Group, Inc., a Delaware corporation (the "Company"),  Robert
Petty (the  "Pledgor"),  and the pledgees  signatory hereto and their respective
endorsees, transferees and assigns (collectively, the "Pledgees").

                              W I T N E S S E T H:
                               - - - - - - - - - -

      WHEREAS,  pursuant  to a  Securities  Purchase  Agreement,  dated the date
hereof, between Company and the Pledgees (the "Purchase Agreement"), Company has
agreed to issue to the Pledgees and the  Pledgees  have agreed to purchase  from
Company  certain of Company's 8% Callable  Secured  Convertible  Notes,  due two
years from the date of issue (the "Notes"), which are convertible into shares of
Company's  Common  Stock,  par value $.0001 per share (the "Common  Stock").  In
connection  therewith,  Company  shall issue the Pledgees  certain  Common Stock
purchase warrants (the "Warrants"); and

      WHEREAS,  as a  material  inducement  to the  Pledgees  to enter  into the
Purchase Agreement, the Pledgees have required and the Pledgor has agreed (i) to
unconditionally guarantee the timely and full satisfaction of all obligations of
the Company,  whether matured or unmatured, now or hereafter existing or created
and  becoming  due  and  payable  (the  "Obligations")  to the  Pledgees,  their
successors,  endorsees,  transferees or assigns under the Transaction  Documents
(as  defined in the  Purchase  Agreement)  to the extent of the  Collateral  (as
defined  in  Section  5  hereof),  and  (ii) to  grant  to the  Pledgees,  their
successors,  endorsees, transferees or assigns a security interest in the number
of shares of Common Stock  currently owned by the Pledgor as set forth below the
Pledgor's signature on the signature page hereto  (collectively,  the "Shares"),
as collateral security for Obligations.  Terms used and not defined herein shall
have the meaning ascribed to them in the Purchase Agreement.

      NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants contained herein, the parties hereby agree as follows:

      1.  Guaranty.  To  the  extent  of  the  Collateral,  the  Pledgor  hereby
absolutely,  unconditionally and irrevocably  guarantees to the Pledgees,  their
successors,  endorsees, transferees and assigns the due and punctual performance
and  payment  of the  Obligations  owing  to  the  Pledgees,  their  successors,
endorsees, transferees or assigns when due, all at the time and place and in the
amount  and  manner  prescribed  in,  and  otherwise  in  accordance  with,  the
Transaction  Documents,  regardless of any defense or set-off counterclaim which
the Company or any other person may have or assert, and regardless of whether or
not the Pledgees or anyone on behalf of the Pledgees  shall have  instituted any
suit,  action or  proceeding  or  exhausted  its  remedies or taken any steps to
enforce any rights  against  the Company or any other  person to compel any such
performance  or observance or to collect all or part of any such amount,  either
pursuant to the provisions of the Transaction  Documents or at law or in equity,
and regardless of any other condition or contingency.  The Pledgor shall have no
obligation  whatsoever  to the Pledgees  beyond the  Collateral  pledged for the
Obligations set forth herein.

<PAGE>

      2. Waiver of Demand.  The Pledgor hereby  unconditionally:  (i) waives any
requirement that the Pledgees,  in the event of a breach in any material respect
by the Company of any of its  representations  or warranties in the  Transaction
Documents,  first make demand upon,  or seek to enforce  remedies  against,  the
Company or any other person before demanding  payment of enforcement  hereunder;
(ii) covenants  that this  Agreement  will not be discharged  except by complete
performance of all the Obligations to the extent of the Collateral; (iii) agrees
that this Agreement shall remain in full force and effect without regard to, and
shall not be affected  or  impaired,  without  limitation,  by, any  invalidity,
irregularity  or  unenforceability  in  whole  or in  part  of  the  Transaction
Documents or any limitation on the liability of the Company  thereunder,  or any
limitation  on the  method  or  terms of  payment  thereunder  which  may now or
hereafter  be  caused or  imposed  in any  manner  whatsoever;  and (iv)  waives
diligence, presentment and protest with respect to, and notice of default in the
performance  or payment of any  Obligation by the Company under or in connection
with the Transaction Documents.

      3.  Release.  The  obligations,  covenants,  agreements  and duties of the
Pledgor hereunder shall not be released,  affected or impaired by any assignment
or  transfer,  in  whole  or in  part,  of  the  Transaction  Documents  or  any
Obligation,  although made without  notice to or the consent of the Pledgor,  or
any  waiver by the  Pledgees,  or by any other  person,  of the  performance  or
observance  by the Company or the Pledgor of any of the  agreements,  covenants,
terms or conditions contained in the Transaction Documents, or any indulgence in
or the  extension  of the  time  or  renewal  thereof,  or the  modification  or
amendment  (whether  material or  otherwise),  or the  voluntary or  involuntary
liquidation,  sale or other  disposition  of all or any  portion of the stock or
assets  of  the  Company  or  the  Pledgor,  or  any  receivership,  insolvency,
bankruptcy,  reorganization, or other similar proceedings, affecting the Company
or the  Pledgor or any assets of the Company or the  Pledgor,  or the release of
any proper from any security for any  Obligation,  or the impairment of any such
property or security,  or the release or discharge of the Company or the Pledgor
from the performance or observance of any agreement, covenant, term or condition
contained in or arising out of the Transaction Documents by operation of law, or
the merger or consolidation of the Company, or any other cause,  whether similar
or dissimilar to the foregoing.

      4. Subrogation.

            (a) Unless and until complete  performance of all the Obligations to
the extent of the Collateral,  the Pledgor shall not be entitled to exercise any
right of subrogation to any of the rights of the Pledgees against the Company or
any  collateral  security or guaranty  held by the  Pledgees  for the payment or
performance  of the  Obligations,  nor shall the Pledgor seek any  reimbursement
from the Company in respect of payments made by the Pledgor hereunder.

            (b) In the extent that the Pledgor shall become obligated to perform
or pay any sums  hereunder,  or in the event that for any reason the  Company is
now or shall hereafter  become  indebted to the Pledgor,  the amount of such sum
shall at all times be subordinate  as to lien,  time of payment and in all other
respects,  to the amounts owing to the Pledgees under the Transaction  Documents
and the  Pledgor  shall  not  enforce  or  receive  payment  thereof  until  all
Obligations  due to the Pledgees  under the  Transaction  have been performed or
paid.  Nothing herein contained is intended or shall be construed to give to the
Pledgor any right of subrogation in or under the Transaction  Documents,  or any
right to participate in any way therein,  or in any right,  title or interest in
the assets of the Pledgees.

                                       2
<PAGE>

      5.  Security.   As  collateral  security  for  the  punctual  payment  and
performance, when due, by the Company of all the Obligations, the Pledgor hereby
pledges  with,  hypothecates,  transfers  and assigns to the Pledgees all of the
Shares and all proceeds,  shares and other  securities  received,  receivable or
otherwise  distributed  in respect of or in exchange for the Shares,  including,
without  limitation,  any shares and other securities into which such Shares may
be convertible or exchangeable  (collectively,  the "Additional  Collateral" and
together with the Shares,  the  "Collateral").  Within ten (10) business days of
the date of this  Agreement,  the  Pledgor  shall  deliver to the  Pledgees  the
certificate(s) representing the Shares, stamped with a bank medallion guarantee,
along with a stock transfer  power duly executed in blank by the Pledgor,  to be
held by the Pledgees as security.  Any Collateral  received by the Pledgor on or
after the date hereof shall be  immediately  delivered to the Pledgees  together
with any executed  stock  powers or other  transfer  documents  requested by the
Pledgees,  which  request  may be made at any time  prior  to the date  when the
Obligations shall have been paid and otherwise satisfied in full.

      6. Voting Power, Dividends, Etc. and other Agreements.

            (a) Unless and until an Event of Default  (as set forth in Section 7
hereof) has occurred, the Pledgor shall be entitled to:

                  (i) Exercise all voting and/or consensual powers pertaining to
the Collateral, or any part thereof, for all purposes;

                  (ii)  Receive and retain  dividends  paid with  respect to the
Collateral; and

                  (iii)  Receive  the  benefits  of any  income  tax  deductions
available to the Pledgor as a shareholder of the Company.

            (b) The  Pledgor  agrees  that it will not sell,  assign,  transfer,
pledge, hypothecate, encumber or otherwise dispose of the Collateral.

            (c) The Pledgor and the Company  jointly and severally  agree to pay
all costs including all reasonable attorneys' fees and disbursements incurred by
the Pledgees in enforcing this Agreement in accordance with its terms.

      7. Default and Remedies.

            (a) For the  purposes of this  Agreement,  "Event of Default"  shall
mean:

                  (i)  default  in or under  any of the  Obligations  after  the
expiration, without cure, of any applicable cure period;

                                       3
<PAGE>

                  (ii) a breach in any material respect by the Company of any of
its representations or warranties in the Transaction Documents; or

                  (iii) a breach in any  material  respect by the Pledgor of any
of its representations or warranties in this Agreement.

            (b) the Pledgees  shall have the following  rights upon any Event of
Default:

                  (i) the rights and remedies provided by the Uniform Commercial
Code as  adopted  by the State of New York (the  "UCC")  (as said law may at any
time be amended);

                  (ii) the right to receive and retain all  dividends,  payments
and other distributions of any kind upon any or all of the Collateral;

                  (iii) the right to cause  any or all of the  Collateral  to be
transferred  to its  own  name or to the  name of its  designee  and  have  such
transfer recorded in any place or places deemed appropriate by the Pledgees; and

                  (iv) the  right to sell,  at a public  or  private  sale,  the
Collateral or any part thereof for cash, upon credit or for future delivery, and
at such price or prices in  accordance  with the UCC (as such law may be amended
from time to  time).  Upon any such sale the  Pledgees  shall  have the right to
deliver,  assign and transfer to the purchaser  thereof the  Collateral so sold.
The Pledgees  shall give the Pledgor not less than ten (10) days' written notice
of its  intention  to make any such sale.  Any such sale,  shall be held at such
time or times during ordinary  business hours and at such place or places as the
Pledgees may fix in the notice of such sale.  The Pledgees may adjourn or cancel
any sale or cause the same to be adjourned from time to time by  announcement at
the time and place fixed for the sale,  and such sale may be made at any time or
place to which the same may be so  adjourned.  In case of any sale of all or any
part of the  Collateral  upon terms  calling for  payments  in the  future,  any
Collateral  so sold may be retained by the Pledgees  until the selling  price is
paid by the purchaser thereof,  but the Pledgees shall incur no liability in the
case of the failure of such  purchaser to take up and pay for the  Collateral so
sold and, in the case of such failure,  such  Collateral  may again be sold upon
like notice.  The Pledgees,  however,  instead of  exercising  the power of sale
herein  conferred  upon them, may proceed by a suit or suits at law or in equity
to foreclose  the  security  interest  and sell the  Collateral,  or any portion
thereof,  under  a  judgment  or  decree  of a  court  or  courts  of  competent
jurisdiction,  the Pledgor having been given due notice of all such action.  The
Pledgees shall incur no liability as a result of a sale of the Collateral or any
part thereof.  All proceeds of any such sale,  after  deducting  the  reasonable
expenses and reasonable  attorneys'  fees incurred in connection with such sale,
shall be applied in reduction of the  Obligations,  and the  remainder,  if any,
shall be paid to the Pledgor.

                                       4
<PAGE>

      8.  Application  of  Proceeds;  Release.  The  proceeds  of  any  sale  or
enforcement of or against all or any part of the Collateral,  and any other cash
or  collateral at the time held by the Pledgees  hereunder,  shall be applied by
the Pledgees  first to the payment of the  reasonable  costs of any such sale or
enforcement,  then to reimburse the Pledgees for any damages,  costs or expenses
incurred by the Pledgees as a result of an Event of Default, then to the payment
of the  principal  amount or stated valued (as  applicable)  of, and interest or
dividends  (as  applicable)  and any  other  payments  due in  respect  of,  the
Obligations.  The remainder,  if any,  shall be paid to the Pledgor.  As used in
this  Agreement,  "proceeds"  shall mean  cash,  securities  and other  property
realized in respect of, and distributions in kind of, the Collateral,  including
any thereof received under any reorganization, liquidation or adjustment of debt
of any issuer of securities included in the Collateral.

      9. Representations and Warranties.

            (a) The Pledgor hereby represents and warrants to the Pledgees that:

                  (i) the Pledgor has full power and  authority  and legal right
to pledge the  Collateral  to the Pledgees  pursuant to this  Agreement and this
Agreement  constitutes  a legal,  valid and binding  obligation  of the Pledgor,
enforceable in accordance with its terms.

                  (ii) the execution, delivery and performance of this Agreement
and other instruments  contemplated herein will not violate any provision of any
order or decree of any court or governmental instrumentality or of any mortgage,
indenture,  contract  or other  agreement  to which the Pledgor is a party or by
which the Pledgor and the  Collateral  may be bound,  and will not result in the
creation  or  imposition  of any lien,  charge or  encumbrance  on, or  security
interest in, any of the Pledgor's  properties pursuant to the provisions of such
mortgage, indenture, contract or other agreement.

                  (iii) the Pledgor is the sole record and  beneficial  owner of
all of the Shares; and

                  (iv) the  Pledgor  owns the  Collateral  free and clear of all
Liens.

            (b) The Company represents and warrants to the Pledgees that:

                  (i) it has no  knowledge  that any of the  representations  or
warranties of the Pledgor herein are incorrect or false in any material respect;
(ii) all of the Shares were validly issued, fully paid and non-assessable; and

                  (iii) the Pledgor is the record holder of the Shares.

      10. No Waiver;  No  Election  of  Remedies.  No failure on the part of the
Pledgees to exercise,  and no delay in  exercising,  any right,  power or remedy
hereunder  shall  operate as a waiver  thereof;  nor shall any single or partial
exercise by the  Pledgees of any right,  power or remedy  preclude  any other or
further  exercise  thereof or the exercise of any other right,  power or remedy.
The  remedies  herein  provided  are  cumulative  and are not  exclusive  of any
remedies  provided by law. In  addition,  the exercise of any right or remedy of
the Pledgees at law or equity or under this  Agreement  or any of the  documents
shall not be deemed to be an election of Pledgee's rights or remedies under such
documents or at law or equity.

                                       5
<PAGE>

      11.  Termination.  This Agreement shall terminate on the date on which all
Obligations have been performed, satisfied, paid or discharged in full.

      12. Further  Assurances.  The parties hereto agree that, from time to time
upon the written request of any party hereto, they will execute and deliver such
further documents and do such other acts and things as such party may reasonably
request in order fully to effect the  purposes of this  Agreement.  The Pledgees
acknowledge  that  they  are  aware  that  Pledgor  shall  have  no  obligations
whatsoever to the Pledgees beyond the Collateral pledged for the Obligations set
forth herein,  and no request for further  assurance may or shall  increase such
Obligations.

      13. Miscellaneous.

            (a) Modification.  This Agreement contains the entire  understanding
between the parties with respect to the subject  matter hereof and  specifically
incorporates  all prior oral and  written  agreements  relating  to the  subject
matter  hereof.  No portion  or  provision  of this  Agreement  may be  changed,
modified,  amended,  waived,  supplemented,  discharged,  canceled or terminated
orally or by any course of dealing,  or in any manner other than by an agreement
in writing, signed by the party to be charged.

            (b)  Notice.  Any  and  all  notices  or  other   communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 6:30 p.m. (New
York City time) on a Business Day (as defined in the Purchase  Agreement),  (ii)
the Business Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile  telephone  number specified in this
Agreement later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m.  (New York City time) on such date,  (iii) the Business Day following
the  date of  mailing,  if  sent  by  nationally  recognized  overnight  courier
services,  or (iv) upon  actual  receipt  by the  party to whom  such  notice is
required to be given. The address for such notices and  communications  shall be
as follows:

         If to the Company:           ROO Group, Inc.
                                      62 White Street, Suite 3A
                                      New York, New York  10013
                                      Attention:  Chief Executive Officer
                                      Telephone:  646-352-0260
                                      Facsimile:  801-749-5756

                                       6
<PAGE>

         With copies to:              Sichenzia Ross Friedman Ference LLP
                                      1065 Avenue of the Americas
                                      New York, New York 10018
                                      Attention:  Gregory Sichenzia, Esq.
                                      Telephone:  (212) 930-9700
                                      Facsimile:  (212) 930-9725

         If to the Pledgor:           Robert Petty
                                      c/o ROO Group, Inc.
                                      62 White Street, Suite 3A
                                      New York, New York  10013
                                      Telephone:  646-352-0260
                                      Facsimile:  801-749-5756

         If to the Pledgees:          AJW Partners, LLC
                                      AJW Offshore, Ltd.
                                      AJW Qualified Partners, LLC
                                      New Millennium Capital Partners II, LLC
                                      1044 Northern Boulevard
                                      Suite 302
                                      Roslyn, New York  11576
                                      Facsimile:  516-739-7115
                                      Attn:  Corey S. Ribotsky

         With copies to:              Ballard Spahr Andrews & Ingersoll, LLP
                                      1735 Market Street, 51st Fl.
                                      Philadelphia, PA 19103
                                      Facsimile: 215-864-8999
                                      Attn:  Gerald J. Guarcini, Esquire

            (c)  Invalidity.  If any  part of this  Agreement  is  contrary  to,
prohibited  by, or deemed invalid under  applicable  laws or  regulations,  such
provision  shall be  inapplicable  and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

            (d) Benefit of Agreement.  This Agreement  shall be binding upon and
inure to the parties hereto and their respective successors and assigns.

            (e) Mutual  Agreement.  This  Agreement  embodies  the arm's  length
negotiation  and mutual  agreement  between the parties  hereto and shall not be
construed against either party as having been drafted by it.

            (f) New York Law to Govern.  This Agreement shall be governed by and
construed and enforced in accordance  with the internal laws of the State of New
York without  regard to the  principals of conflicts of law thereof.  Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
Federal  courts sitting in the city of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the jurisdiction of any such court or that
such suit,  action or  proceeding  is improper.  Each party  hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding by mailing a copy thereof to such party at the
address in effect for  notices to it under this  agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       7
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have  caused this  Guaranty  and
Pledge Agreement to be duly executed by their respective  authorized  persons as
of the date first indicated above.

                                      ROO GROUP, INC.

                                      By: /s/ Robert Petty
                                         ---------------------------------------
                                           Robert Petty
                                           Chief Executive Officer

                                      PLEDGEES:

                                      AJW PARTNERS, LLC
                                      By: SMS Group, LLC

                                      By: /s/ Corey S. Ribotsky
                                         ---------------------------------------
                                         Corey S. Ribotsky
                                         Manager

                                      AJW OFFSHORE, LTD.
                                      By:  First Street Manager II, LLC

                                      By: /s/ Corey S. Ribotsky
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager

                                      AJW QUALIFIED PARTNERS, LLC
                                      By:  AJW Manager, LLC

                                      By: /s/ Corey S. Ribotsky
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager

                                      NEW MILLENNIUM CAPITAL PARTNERS II, LLC
                                      By:  First Street Manager II, LLC

                                      By: /s/ Corey S. Ribotsky
                                          --------------------------------------
                                          Corey S. Ribotsky
                                          Manager

                    [Signatures Continued on Following Page]

                                       8
<PAGE>

                     PLEDGOR:

                     /s/ Robert Petty
                     ----------------------------------------------------
                     Robert Petty

                     Number of Shares subject to this pledge:  36,000,000
                                                               ----------

                     Date such Shares were acquired:  December 12, 2003
                                                      -------------------

                                       9Exhibit 10.1
                                                                    ------------

                             Phase III Medical, Inc.
                             -----------------------

                             SUBSCRIPTION AGREEMENT
                             ----------------------

     This SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of September 13,
2004, is by and between Phase III Medical, Inc., a Delaware corporation (the
"Company"), and Aholt Jr. Family Trust dated 2/17/97 (the "Investor").

     WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, shares of common stock, $0.001
par value per share, of the Company (the "Common Stock"), upon and subject to
the terms and conditions hereinafter set forth.

     NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements of the parties set forth in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:

     1. Purchase and Sale of the Shares.

     1.1. Agreement to Sell and Purchase Shares. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Investor and the
Investor agrees to purchase from the Company, at the Closing (as defined below),
an aggregate of 7,282,9131 shares of Common Stock (the "Shares"), for an
aggregate purchase price of $650,000 (the "Purchase Price"), payable in
immediately available funds at the Closing.

     1.2. Delivery of Shares; Legend.

     (a) As soon as reasonably practicable after the Closing, the Company shall
deliver to the Investor one or more certificates, registered in the name of the
Investor, representing the Shares. Delivery of certificates representing the
Shares shall be made against receipt by the Company of a check payable to the
order of the Company or a wire transfer of U.S. funds to an account designated
by the Company in the full amount of the Purchase Price.

     (b) The certificates representing the Shares delivered pursuant to Section
1.2(a), and any securities issued in exchange for or in respect thereof, shall
bear a legend to the following effect.

--------

1 The aggregate number of shares shall be equal to the quotient of $650,000
divided by the Per Share Purchase Price. The Per Share Purchase Price shall be
equal to 85% of the average of the closing price of one share of Common Stock on
the NASD Over-The-Counter Bulletin Board for the five (5) days immediately
preceding the date of this Agreement. Notwithstanding the foregoing, the Per
Share Purchase Price shall not be more than $0.10 per share nor less than $0.085
per share.

<PAGE>

                    "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
                     BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
                     AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS
                     OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
                     OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
                     STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
                     SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
                     FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
                     ACT AND SUCH STATE SECURITIES LAWS."

     1.3. Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place on the date hereof at the offices of the
Company.

     1.4 Additional Purchase/Conversion of Note. The Investor has also loaned to
the Company on or about August 30, 2004 the sum of $100,000 pursuant to a six
month promissory note bearing interest at 20% per annum (the "Note"). The
Investor and the Company hereby irrevocably agree that upon the Maturity of that
Note, the Company shall repay the Note in shares of its Common Stock, at a
conversion price equal to a per share purchase price equal to 85% of the average
of the closing price of one share of Common Stock on the NASD Over-the-Counter
Bulletin Board for the five (5) days immediately preceding the Maturity Date of
the Note, or, if the Company's Common Stock is not then traded on the OTC
Bulletin Board, at 85% of fair market value as determined by the Board of
Directors of the Company.

     2. Representations, Warranties and Covenants of the Investor.

     2.1. Authorization; Enforceability. The Investor is (i) a bona fide
resident of the state contained in the address set forth on the signature page
as the Investor's home address, (ii) at least 21 years of age and (iii) legally
competent to execute this Agreement. This Agreement has been duly executed and
delivered by the Investor and, assuming the due authorization, execution and
delivery of this Agreement by the other party hereto, constitutes the legal,
valid and binding obligation of the Investor, enforceable against the Investor
in accordance with its terms, subject to the effects of any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
general laws of applicability affecting creditors' rights generally and to
general equitable principles.

     2.2. No Conflict. The execution, delivery and performance by the Investor
of this Agreement will not result in the violation by the Investor of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Investor is bound, and will
not conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Investor is a party or
by which he is bound or to which any of his properties or assets is subject.

<PAGE>

     2.3. Governmental Consents. No consent, approval, authorization or other
order of any governmental authority or other third party is required to be
obtained by the Investor in connection with the authorization, execution,
delivery and performance by the Investor of this Agreement.

     2.4. Investment Representations.

     (a) The Investor hereby represents and warrants to the Company that the
Investor is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Specifically, the Investor certifies that (initial all
appropriate spaces on the following pages):

<TABLE>
<CAPTION>

<S>                                       <C>
                           /s/ RA         (1)   The Investor is an accredited  investor  because he has an individual
                           -------------        net worth,  or with his  spouse  has a joint net worth,  in excess of
                           (Initial)            $1,000,000.  For  purposes of this  Agreement,  "net worth" means the
                                                excess of total assets at fair market  value,  including  home,  home
                                                furnishings and automobiles, over total liabilities.

                           /s/ RA         (2)   The  Investor is an  accredited  investor  because he has  individual
                          --------------        income  (exclusive of any income  attributable to his spouse) of more
                           (Initial)            than  $200,000  in each of the past two years,  or joint  income with
                                                his spouse in excess of  $300,000  in each of those  years,  and such
                                                investor  reasonably  expects to reach the same  income  level in the
                                                current year.

                           /s/ RA         (3)   The  Investor  is an  accredited  investor  because he is a director,
                            -------------       executive officer or managing member of the Company.
                            (Initial)
</TABLE>

     (b) The Investor hereby certifies that he is not a non-resident alien for
purposes of income taxation (as such term is defined in the Internal Revenue
Code of 1986, as amended, and Income Tax Regulations). The Investor hereby
agrees that if any of the information in this Section 2.4(b) changes, the
Investor will notify the Company within 60 days thereof. The Investor
understands that the information contained in this Section 2.4(b) may be
disclosed to the Internal Revenue Service by the Company and that any false
statement contained in this Section 2.4(b) could be punished by fine,
imprisonment or both.

<PAGE>

     (c) The Investor will not sell or otherwise transfer the Shares without
registration under the Securities Act or an exemption therefrom, and fully
understands and agrees that he must bear the economic risk of his investment for
an indefinite period of time because, among other reasons, the Shares have not
been registered under the Securities Act or under the securities laws of certain
states and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
applicable securities laws of such states or an exemption from such registration
is available. The Investor understands that the Company is under no obligation
to register the Shares on his behalf or to assist him in complying with any
exemption from such registration under the Securities Act, except that if any
sale proposed by the Investor is exempt from registration, the Company will
cause its counsel, at the Company's expense, to provide an appropriate opinion
to that effect to the Company's transfer agent. It also understands that sales
or transfers of the Shares are further restricted by state securities laws. The
Investor further understands that the Company is not registered as an investment
company under the Investment Company Act of 1940, as amended.

     (d) The Investor acknowledges that in making a decision to subscribe for
the Shares, the Investor has relied solely upon independent investigations made
by the Investor. The Investor understands the business objectives and policies
of, and the strategies which may be pursued by, the Company. The Investor's
investment in the Shares is consistent with the investment purposes and
objectives and cash flow requirements of the Investor and will not adversely
affect the Investor's overall need for diversification and liquidity. The
Investor acknowledges that he is not subscribing pursuant hereto for any Shares
as a result of or subsequent to (a) any advertisement, article, notice or other
communications published on-line, in any newspaper, magazine or similar media or
broadcast over television or radio, or (b) any seminar or meeting whose
attendees, including the Investor, had been invited as a result of, subsequent
to or pursuant to any of the foregoing.

     (e) The Investor has not reproduced, duplicated or delivered this Agreement
to any other person, except professional advisors to the Investor or as
instructed by the Company.

<PAGE>

     (f) The Investor has such knowledge and experience in financial and
business matters that the Investor is capable of evaluating the merits and risks
of the Investor's investment in the Shares and is able to bear such risks, and
has obtained, in the Investor's judgment, sufficient information from the
Company or its authorized representatives to evaluate the merits and risks of
such investment. The Investor has evaluated the risks of investing in the Shares
and has determined that the Shares is a suitable investment for the Investor.

     (g) The Investor can afford a complete loss of the investment in the
Shares, can afford to hold the investment in the Shares for an indefinite period
of time, and acknowledges that distributions may be paid in cash or in kind.

     (h) The Investor's overall commitment to investments that are not readily
marketable is not disproportionate to his net worth, and his investment in the
Shares will not cause such overall commitment to become excessive.

     (i) The Investor has adequate means of providing for his current needs and
contingencies and has no need for liquidity in its investment in the Shares.

     (j) The Investor is acquiring the Shares subscribed for herein for his own
account, for investment purposes only and not with a view to distribute or
resell such Shares in whole or in part.

     (k) The Investor agrees and is aware that:

                    (1)  the Company has a limited operating history under its
                         current business plan;

                    (2)  no federal or state agency has passed upon the Shares
                         or made any findings or determination as to the
                         fairness of this investment;

                    (3)  there are substantial risks of loss of investment
                         incidental to the purchase of the Shares; and

                    (4)  the Shares cannot be resold readily because the Shares
                         have not been registered by the Securities and Exchange
                         Commission and the Shares cannot be resold without (A)
                         the Company's consent, which may require an effective
                         registration statement, or (B) an opinion of counsel
                         that an exemption of registration is available, and the
                         Investor may have to bear the risk of this investment
                         for an indefinite period of time.

<PAGE>

     (l) The Investor and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares, which have been
requested by the Investor. The Investor and his advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Investor has had
access to all additional information necessary to verify the accuracy of the
information set forth in this Agreement and any other materials furnished
herewith, and has taken all the steps necessary to evaluate the merits and risks
of an investment as proposed hereunder. Except as set forth in this Agreement,
the Company has made no representation or warranty on which the Investor has
relied to enter into this Agreement and acquire the Shares.

     (m) The Investor does not have a present intention to sell the Shares nor a
present arrangement or intention to effect any distribution of any of the Shares
to or through any person or entity for purposes of selling, offering,
distributing or otherwise disposing of any of the Shares.

     (n) The Investor understands that the legend set forth in Section 1.2(b),
to the effect that the Shares have not been registered under the Securities Act
or applicable state securities laws, shall be placed on the certificate
evidencing the Shares and appropriate notations to such effect will be made in
the Company's stock books.

     (o) The Investor understands that the net proceeds to the Company from this
subscription will be used by the Company for general operating expenses.

     2.5. Brokers. There is no broker, investment banker, financial advisor,
finder or other person which has been retained by or is authorized to act on
behalf of the Investor who is entitled to any fee or commission in connection
with the execution of this Agreement.

     3. Indemnification. The Investor agrees to indemnify and hold harmless the
Company, and its managers, officers, directors, employees, agents and
shareholders, and each other person, if any, who controls or is controlled by,
within the meaning of Section 15 of the Securities Act, any thereof, against any
and all loss, liability, claim, damage, cost and expense whatsoever (including,
but not limited to, legal fees and disbursements and any and all other expenses
whatsoever incurred in investigating, preparing for or defending against any
litigation, arbitration proceeding, or other action or proceeding, commenced or
threatened, or any claim whatsoever) arising out of or in connection with, or
based upon or resulting from, (a) any false representation or warranty or breach
or failure by the Investor to comply with any covenant or agreement made by the
Investor in this Agreement or in any other document furnished by the Investor to
any of the foregoing in connection with this transaction or (b) any action for
securities law violations instituted by the Investor which is finally resolved
by judgment against the Investor.

<PAGE>

     4. Power of Attorney. The Investor, as a shareholder of the Company, hereby
appoints the Company as its true and lawful representative and attorney-in-fact,
in its name, place and stead to make, execute, sign, acknowledge, swear to and
file:

                    (a)  any Company certificate, business certificate,
                         fictitious name certificate, amendment thereto, or
                         other instrument or document of any kind necessary or
                         desirable to accomplish the business, purpose and
                         objectives of the Company, or required by any
                         applicable federal, state, or local or foreign law; and

                    (b)  any and all instruments, certificates and other
                         documents which may be deemed necessary or desirable to
                         effect the winding-up and termination of the Company
                         (including, but not limited to, a notice of dissolution
                         of the Shareholder).

This power of attorney is coupled with an interest, is irrevocable, and
shall survive and shall not be affected by the subsequent death, disability,
incompetency, termination, bankruptcy, insolvency or dissolution of the
Investor; provided, however, that this power of attorney will terminate upon the
substitution of another shareholder of the Company for the Investor, upon the
withdrawal of the Investor from the Company or upon the redemption of all of the
Shares owned by the Investor.

     5. Miscellaneous.

     5.1. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the address of such party set forth below or to such
changed address as such party may have fixed by written notice to the other
given in accordance with this Section 5.1; provided, however, that any notice of
change of address shall be effective only upon receipt:

                           If to the Company:

                           Phase III Medical, Inc.
                           330 South Service Road, Suite 120
                           Melville, NY 11747
                           Attn: Mark Weinreb, President and CEO

                           If to the Investor:

<PAGE>

                           the same address as indicated on the signature page
                           hereto.

     5.2. Entire Agreement; Amendment. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them. This Agreement may be amended only by mutual
written agreement of the Company and the Investor. No course of dealing between
or among any persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.

     5.3. Successors and Assigns. This Agreement shall be binding upon the
Investor and his heirs, legal representatives, successors, and permitted assigns
and shall inure to the benefit of the Company and its successors and assigns.
The Investor shall not assign any of its obligations hereunder without the prior
written consent of the Company.

     5.4. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York without regard to its choice of law
provisions.

     5.5. Jurisdiction. The Investor hereby irrevocably agrees that any suit,
action or proceeding with respect to this Agreement and any or all transactions
relating hereto and thereto may be brought in U.S. federal and state courts in
the State of New York. The Investor hereby irrevocably submits to the
jurisdiction of such courts with respect to any such suit, action or proceeding
and agrees and consents that service of process as provided by U.S. federal and
New York law may be made upon the Investor in any such suit, action or
proceeding brought in any of said courts, and may not claim that any such suit,
action or proceeding has been brought in an inconvenient forum. The Investor
hereby further irrevocably consents to the service of process out of any of the
aforesaid courts, in any such suit, action or proceeding, by the mailing of
copies thereof, by certified or registered mail, return receipt requested,
addressed to the Investor at the address of the Investor then appearing on the
records of the Company. Nothing contained herein shall affect the right of the
Company to commence any action, suit or proceeding or otherwise to proceed
against the Investor in any other jurisdiction or to serve process upon the
Investor in any manner permitted by any applicable law in any relevant
jurisdiction.

     5.6. Additional Information and Subsequent Changes to Representations.

     (a) The Company may request from time to time such information as it may
deem necessary to determine the eligibility of the Investor to hold Stock or to
enable the Company's compliance with applicable regulatory requirements or tax
status, and the Investor shall provide such information as may reasonably be
requested.

<PAGE>

     (b) The Investor agrees to notify the Company promptly if there is any
change with respect to any of the information or representations given or made
by the Company pursuant to this Agreement and to provide the Company with such
further information as the Company may reasonably require. In addition, the
Investor agrees that at any time in the future at which the Investor may acquire
additional shares of Common Stock, the Investor shall be deemed to have
reaffirmed, as of the date of such acquisition of additional shares of Common
Stock, each and every representation made by the Investor in this Agreement,
except to the extent modified in writing by the Investor and consented to by the
Company.

     5.7. Severability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless the provision held
invalid shall substantially impair the benefit of the remaining portion of this
Agreement.

     5.8. Headings. The headings of the sections hereof are inserted as a matter
of convenience and for reference only and in no way define, limit or describe
the scope of this Agreement or the meaning of any provision hereof.

     5.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto to the same extent as if delivered personally.

                            [Signature Pages Follow]

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above under penalties of perjury.

                                COMPANY:

                                PHASE III MEDICAL, INC.

                                By: /s/ Mark Weinreb
                                --------------------
                                Name:  Mark Weinreb
                                Title:  President

                                INVESTOR:

                                /s/ Rober Aholt, Jr.
                                --------------------
                                Robert Aholt, Jr. Trustee
                                Aholt Jr. Family Trust dated 2/17/97

                                Address:  20128 Cavern Court
                                          Saugus, California 91390
                                          Tax I.D. Number:

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