Document:

Exhibit
10.1

AMENDED
AND RESTATED SECURITIES PURCHASE AGREEMENT

LAURUS
MASTER FUND, LTD.

and

TRUEYOU.COM INC.

Dated:
May 4, 2007

TABLE OF CONTENTS 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page 

	
 

	
 

	

	
1.

	
Agreement to Sell and
  Purchase

	
3

	
 

	
 

	
2.

	
Fees and Warrant. On the
  Closing Date:

	
3

	
 

	
 

	
3.

	
Closing, Delivery and
  Payment

	
4

	
 

	
3.1

	
Closing

	
4

	
 

	
3.2

	
Delivery

	
4

	
 

	
 

	
 

	
 

	
4.

	
Representations and
  Warranties of the Company

	
4

	
 

	
4.1

	
Organization, Good
  Standing and Qualification

	
4

	
 

	
4.2

	
Subsidiaries

	
5

	
 

	
4.3

	
Capitalization; Voting
  Rights

	
6

	
 

	
4.4

	
Authorization; Binding
  Obligations

	
6

	
 

	
4.5

	
Liabilities

	
7

	
 

	
4.6

	
Agreements; Action

	
7

	
 

	
4.7

	
Obligations to Related
  Parties

	
9

	
 

	
4.8

	
Changes

	
10

	
 

	
4.9

	
Title to Properties and
  Assets; Liens, Etc

	
11

	
 

	
4.10

	
Intellectual Property

	
12

	
 

	
4.11

	
Compliance with Other
  Instruments

	
13

	
 

	
4.12

	
Litigation

	
13

	
 

	
4.13

	
Tax Returns and Payments

	
13

	
 

	
4.14

	
Employees

	
14

	
 

	
4.15

	
Registration Rights and
  Voting Rights

	
14

	
 

	
4.16

	
Compliance with Laws;
  Permits

	
15

	
 

	
4.17

	
Environmental and Safety
  Laws

	
15

	
 

	
4.18

	
Valid Offering

	
15

	
 

	
4.19

	
Full Disclosure

	
16

	
 

	
4.20

	
Insurance

	
16

	
 

	
4.21

	
SEC Reports

	
16

	
 

	
4.22

	
Listing

	
16

	
 

	
4.23

	
No Integrated Offering

	
17

	
 

	
4.24

	
Stop Transfer

	
17

	
 

	
4.25

	
Dilution

	
17

	
 

	
4.26

	
Patriot Act

	
17

	
 

	
4.27

	
ERISA

	
18

	
 

	
 

	
 

	 

	
5.

	
Representations and
  Warranties of the Purchaser

	
19

	
 

	
5.1

	
No Shorting

	
19

	
 

	
5.2

	
Requisite Power and
  Authority

	
19

	
 

	
5.3

	
Investment
  Representations

	
19

	
 

	
5.4

	
The Purchaser Bears
  Economic Risk

	
20

	
 

	
5.5

	
Acquisition for Own
  Account

	
20

	
 

	
5.6

	
The Purchaser Can Protect
  Its Interest

	
20

	
 

	
5.7

	
Accredited Investor

	
20

	
 

	
5.8

	
Legends

	
20

i

	
 

	
 

	
 

	
 

	
 

	
 

	
Page(s) 

	
 

	
 

	

	
 

	
6.

	
Covenants of the Company

	
21

	
 

	
6.1

	
Stop-Orders

	
21

	
 

	
6.2

	
Listing

	
21

	
 

	
6.3

	
Market Regulations

	
21

	
 

	
6.4

	
Reporting Requirements

	
22

	
 

	
6.5

	
Use of Funds

	
23

	
 

	
6.6

	
Access to Facilities

	
23

	
 

	
6.7

	
Taxes

	
24

	
 

	
6.8

	
Insurance

	
24

	
 

	
6.9

	
Intellectual Property

	
25

	
 

	
6.10

	
Properties

	
25

	
 

	
6.11

	
Confidentiality

	
26

	
 

	
6.12

	
Required Approvals

	
26

	
 

	
6.13

	
Reissuance of Securities

	
27

	
 

	
6.14

	
Opinion

	
29

	
 

	
6.15

	
Margin Stock

	
29

	
 

	
6.16

	
Financing Right of First
  Refusal

	
29

	
 

	
6.17

	
Authorization and
  Reservation of Shares

	
29

	
 

	
 

	
 

	 

	
7.

	
Covenants of the
  Purchaser

	
29

	
 

	
7.1

	
Confidentiality

	
29

	
 

	
7.2

	
Non-Public Information

	
29

	
 

	
7.3

	
Limitation on Acquisition
  of Common Stock of the Company

	
30

	
 

	
 

	
 

	 

	
8.

	
Covenants of the Company
  and the Purchaser Regarding Indemnification

	
31

	
 

	
8.1

	
Company Indemnification

	
31

	
 

	
8.2

	
Purchaser’s
  Indemnification

	
31

	
 

	
 

	
 

	 

	
9.

	
Exercise of the Warrant

	
32

	
 

	
9.1

	
Mechanics of Exercise

	
32

	
 

	
 

	
 

	 

	
10.

	
Registration Rights

	
33

	
 

	
10.1

	
Registration Rights
  Granted

	
33

	
 

	
10.2

	
Offering Restrictions

	
 

	
 

	
 

	
 

	 

	
11.

	
Miscellaneous

	
33

	
 

	
11.1

	
Governing Law,
  Jurisdiction and Waiver of Jury Trial

	
33

	
 

	
11.2

	
Severability

	
34

	
 

	
11.3

	
Survival

	
35

	
 

	
11.4

	
Successors

	
35

	
 

	
11.5

	
Entire Agreement; Maximum
  Interest

	
35

	
 

	
11.6

	
Amendment and Waiver

	
36

	
 

	
11.7

	
Delays or Omissions

	
36

	
 

	
11.8

	
Notices

	
36

	
 

	
11.9

	
Attorneys’ Fees

	
37

	
 

	
11.10

	
Titles and Subtitles

	
38

	
 

	
11.11

	
Facsimile Signatures;
  Counterparts

	
38

	
 

	
11.12

	
Broker’s Fees

	
38

	
 

	
11.13

	
Construction

	
38

	 	11.14
	Restatement
	38

ii

LIST
OF EXHIBITS

	
 

	
 

	
Secured Term Note

	
Exhibit A

	
Warrant A

	
Exhibit B

	
Warrant B

	
Exhibit C

	
Warrant C

	
Exhibit D

	
Warrant D

	
Exhibit E

	
Warrant E

	
Exhibit F

AMENDED
AND RESTATED SECURITIES PURCHASE AGREEMENT

          THIS
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (as amended, modified,
restated and/or supplemented from time to time, this “Agreement”) is made and
entered into as of May 4, 2007, by and between TRUEYOU.COM INC., a Delaware corporation (the “Company”), and
LAURUS MASTER FUND, LTD., a Cayman Islands company (the “Purchaser”).

RECITALS

          WHEREAS,
pursuant to that certain Securities and Purchase Agreement by and between the
Company and the Purchaser dated June 30, 2006 (the “Original SPA”), the Company
had issued a Secured Term Note (as defined in the Original SPA) (the “Original
Note”) in the amount of Twenty Five Million Dollars ($25,000,000);

          WHEREAS,
the Company and the Purchaser desire to amend the Original SPA, the Original
Note and the other Related Agreements (as such term is defined in the Original
SPA) to increase the principal amount due and owing to the Purchaser to be
equal to Fifty Four Million Six Hundred Fifty Thousand Dollars ($54,650,000);

          WHEREAS,
the Company has authorized the sale to the Purchaser of an Amended and Restated
Secured Term Note in the aggregate principal amount of Fifty Four Million Six
Hundred Fifty Thousand Dollars ($54,650,000) in the form of Exhibit A hereto
(as amended, modified, restated and/or supplemented from time to time, the
“Note”), which Note shall amend, restate and completely replace the Original
Note and continue, evidence and govern all outstanding indebtedness previously
arising under the Original Note;

          WHEREAS,
the Company has previously issued to the Purchaser warrants, copies of which
are attached as Exhibit B hereto (as amended, modified, restated and/or
supplemented from time to time, “Warrant A”), Exhibit C hereto (as amended,
modified, restated and/or supplemented from time to time, “Warrant B”) Exhibit
D hereto (as amended, modified, restated and/or supplemented from time to time,
“Warrant C”) to purchase shares of the Company’s Common Stock (upon the terms
and subject to adjustment as set forth therein), and now wishes to issue to the
Purchaser warrants in the form of Exhibit E hereto to purchase 29,276,583,452
shares of the Company’s common stock (as amended, modified, restated and/or
supplemented from time to time, “Warrant D”, and Exhibit F hereto to purchase
9,245,236,880 shares of the Company’s common stock (as amended, modified,
restated and/or supplemented from time to time, “Warrant E” and, together with
Warrant D, collectively, the “New Warrants”) to purchase up to additional
shares of the Company’s Common Stock (upon the terms and subject to adjustment
as set forth therein) in connection with the Purchaser’s purchase of the Note
(the New Warrants together with Warrant A, Warrant B, and Warrant C shall
collectively be referred to as the “Warrants”).;

          WHEREAS,
the Purchaser desires to purchase the Note and the New Warrants on the terms
and conditions set forth herein; and

2

          WHEREAS,
the Company desires to issue and sell the Note and New Warrants to the
Purchaser on the terms and conditions set forth herein.

AGREEMENT

          NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend, restate and completely replace
the Original SPA as follows:

          1.
Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the “Offering”. The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note and New Warrants, together with the Warrant
Shares (as hereinafter defined), are referred to as the “Securities”. Upon
repayment in full of the unpaid principal due under the Note, together with
accrued and unpaid interest thereon and all other accrued and unpaid amounts,
fees and other indebtedness owed to Purchaser (collectively, the “Note
Amounts”), the Master Security Agreement, Subsidiary Guaranty, Stock Pledge
Agreement and IP Security Agreement and the security interests in the Collateral
pledged thereunder (and as defined therein) shall automatically terminate and
be of no further force or effect.

          2.
Fees and Warrants. On the Closing Date:

	
 

	
 

	
 

	
          (a)
  The Company will issue and deliver to the Purchaser the New Warrants in
  connection with and in consideration of the Purchaser’s purchase of the Note
  pursuant to Section 1 hereof. The shares of the Company’s Common Stock (as
  defined in Section 4.3(a) below) issued upon the due and timely exercise of
  the Warrants will be referred to as the “Warrant Shares”. Subject to Section
  11.4 hereof, all the representations, covenants, warranties, undertakings,
  and indemnification, and other rights made or granted to or for the benefit
  of the Purchaser by the Company are hereby also made and granted for the
  benefit of the Purchaser as holder of the Warrants. 

	
 

	
 

	
 

	
          (b)
  Subject to the terms of Section 2(d) below, the Company shall pay to Laurus
  Capital Management, LLC, the manager of the Purchaser, a closing payment in
  an amount equal to $890,225 (representing three and one-half percent (3.50%)
  of the aggregate principal amount of the Note. The foregoing fee is referred
  to herein as the “Closing Payment.”

	
 

	
 

	
 

	
          (c)
  The Company shall reimburse the Purchaser for its reasonable expenses
  (including legal fees and expenses) incurred in connection with the
  preparation and negotiation of this Agreement and the Related Agreements (as
  hereinafter defined), and expenses incurred in connection with the
  Purchaser’s due diligence review of the Company and its Subsidiaries (as
  defined in Section 4.2) and all related matters. Amounts required to be paid
  under this Section 2(c) will be paid on the Closing Date and 

3

	
 

	
 

	
 

	
shall be $10,000 for such expenses referred to in
  this Section 2(c), $15,000 of which has already been paid by the Company.

	
 

	
 

	
 

	
          (d)
  The Closing Payment and the expenses referred to in the preceding clause (c)
  shall be paid at closing out of funds held pursuant to the Escrow Agreement
  (as defined below) and a disbursement letter (the “Disbursement Letter”).

          3.
Closing, Delivery and Payment.

	
 

	
 

	
 

	
                    3.1
Closing. Subject to the terms and conditions herein, the closing of the
transactions contemplated hereby (the “Closing”), shall take place on the
date hereof, at such time or place as the Company and the Purchaser may
mutually agree (such date is hereinafter referred to as the “Closing Date”). 

	
 

	
 

	
 

	
                    3.2
Delivery. Pursuant to the Escrow Agreement, at the Closing on the Closing
Date, the Company will deliver to the Purchaser, among other things, the Note
and the Warrants and the Purchaser will deliver to the Company, among other
things, the amounts set forth in the Disbursement Letter by certified funds
or wire transfer. (it being understood that $25,900,000 of the proceeds of
the Note shall be placed in the Restricted Account (as defined in the
Restricted Account Agreement referred to below)) The Company hereby acknowledges and agrees that Purchaser’s
obligation to purchase the Note from the Company on the
Closing Date shall be contingent upon the satisfaction (or waiver by the
Purchaser in its sole discretion) of the items and matters set forth in the closing
checklist provided by the Purchaser to the Company on
or prior to the Closing Date. 

          4.
Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser as follows as of the date hereof (unless an
earlier date is indicated): 

	
 

	
 

	
 

	
 

	
                    4.1
  Organization, Good Standing and Qualification. Each of the Company and
  each of its Subsidiaries is a corporation, partnership or limited liability
  company, as the case may be, duly organized, validly existing and in good
  standing under the laws of its jurisdiction of organization. Each of the
  Company and each of its Subsidiaries has the corporate, limited liability
  company or partnership, as the case may be, power and authority to own and
  operate its properties and assets and, insofar as it is or shall be a party
  thereto, to (1) execute and deliver or reaffirm (as the case may be) (i) this
  Agreement, (ii) the Note and the Warrants to be issued in connection with
  this Agreement, (iii) the Reaffirmation, Ratification and Amendment Agreement
  dated as of the date hereof between the Company, certain Subsidiaries of the
  Company and the Purchaser (as amended, modified, restated and/or supplemented
  from time to time, the “Reaffirmation Agreement”), respecting (among other
  things) (a) the Master Security Agreement dated as of June 30, 2006, between
  the Company, certain Subsidiaries of the Company and the Purchaser (as the
  same may have been and hereafter may be amended, modified, restated and/or
  supplemented from time to time, the “Master Security Agreement”), (b) the
  Stock Pledge Agreement dated as of June 30, 2006, among the Company, certain
  Subsidiaries of the Company and the Purchaser (as the same may have been and
  hereafter may be amended, modified, restated and/or or supplemented from time
  to time, the “Stock Pledge

4

	
 

	
 

	
 

	
Agreement”), (c) the Intellectual Property Security
  Agreement dated as of June 30, 2006, among the Company, certain Subsidiaries
  of the Company and the Purchaser (as the same may have been and hereafter may
  be amended, modified, restated and/or or supplemented from time to time, the
  “IP Security Agreement”), and (d) the Subsidiary Guaranty dated as of June
  30, 2006, made by certain Subsidiaries of the Company (as the same may have
  been and hereafter may be amended, modified, restated and/or supplemented
  from time to time, the “Subsidiary Guaranty”); (iv) the Registration Rights
  Agreement relating to the Securities dated as of the date hereof between the
  Company and the Purchaser (as amended, modified, restated and/or supplemented
  from time to time, the “Registration Rights Agreement”); (v) the Amended and
  Restated Funds Escrow Agreement dated as of the date hereof among the
  Company, the Purchaser and the escrow agent referred to therein,
  substantially in the form of Exhibit E hereto (as amended, modified, restated
  and/or supplemented from time to time, the “Escrow Agreement”); (vi) the
  Warrants; (vii) the Restricted Account Agreement by and among the Purchaser,
  the Company and North Fork Bank, dated as of the date hereof (as amended,
  modified, restated and/or supplemented, the “Restricted Account Agreement”);
  (viii) the Restricted Account Side Letter by and among the Purchaser and the
  Company, dated as of the date hereof (as amended, modified restated and/or
  supplemented, the “Restricted Account Side Letter”); (ix) the letter
  agreement dated as of the date hereof between the Purchaser and the Company
  respecting the securities issueable pursuant to the Warrants (as amended,
  modified, restated and/or supplemented from time to time, the “Warrant Side
  Letter”; and (x) all other documents, instruments and agreements entered into
  on or after the date hereof in connection with the transactions contemplated
  hereby and thereby, as executed by the
  applicable parties and thereafter amended, modified, restated and/or
  supplemented from time to time (the documents, instruments and agreements
  referenced in the preceding clauses (ii) through (xii) (including sub-clauses
  (iii)(a), (iii)(b), (iii)(c) and (iii)(d) thereof), collectively, the
  “Related Agreements”); (2) issue and sell the Note; (3) issue and sell the
  Warrants and Warrant Shares; and (4) carry out the provisions of this
  Agreement and the Related Agreements and to carry on its business as
  presently conducted. Each of the Company and each of its Subsidiaries is duly
  qualified and is authorized to do business and is in good standing as a
  foreign corporation, partnership or limited liability company, as the case
  may be, in all jurisdictions in which the nature or location of its
  activities and of its properties (both owned and leased) makes such
  qualification necessary, except for those jurisdictions in which failure to
  do so has not, or could not reasonably be expected to have, individually or
  in the aggregate, a material adverse effect on the business, assets,
  liabilities, condition (financial or otherwise), properties, operations and
  prospects of the Company and its Subsidiaries, taken as a whole (a “Material
  Adverse Effect”).

	
 

	
 

	
 

	
                    4.2
   Subsidiaries. Each direct and indirect Subsidiary of the Company, the
   direct owner of such Subsidiary and its percentage ownership thereof, is set
   forth on Schedule 4.2. For the purpose of this Agreement, a “Subsidiary” of
   any person or entity means (i) a corporation or other entity whose shares of
   stock or other ownership interests having ordinary voting power (other than
   stock or other ownership interests having such power only by reason of the
   happening of a contingency) to elect a majority of the directors of such
   corporation, or other persons or entities performing similar functions for
   such person or entity, are owned, directly or indirectly, by such person or
   entity or (ii) a 

5

	
 

	
 

	
 

	
corporation or other entity in which such person or
   entity owns, directly or indirectly, more than 50% of the equity interests
   at such time.

	
 

	
 

	
 

	
                    4.3
   Capitalization; Voting Rights.

	
 

	
 

	
 

	
          (a)
   The authorized capital stock of the Company, as of the date hereof consists
   of 21,000,000 shares, of which 20,000,000 are authorized as shares of common
   stock, par value $0.001 per share (the “Common Stock”), and 16,756,438
   shares of Common Stock are issued and outstanding, and 1,000,000 are
   authorized as shares of preferred stock, par value $0.001 per share (the
   “Preferred Stock”), and 37,908.56 shares of Preferred Stock are issued and
   outstanding. The authorized, issued and outstanding capital stock of each
   Subsidiary of the Company is set forth on Schedule 4.3. 

	
 

	
 

	
 

	
          (b)
   Except (i) as disclosed on Schedule 4.3 or provided in any Related
   Agreement, (ii) the shares reserved for issuance under the stock option
   plans of the Company and its Subsidiaries, and (iii) warrants, rights and
   shares granted pursuant to this Agreement and the Related Agreements, there
   are no outstanding options, warrants, rights (including conversion or
   preemptive rights and rights of first refusal), proxy or stockholder
   agreements, or arrangements or agreements of any kind for the purchase or
   acquisition from the Company of any of its equity securities. Except as
   disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the
   Note or the Warrants, nor the issuance of any of the Warrant Shares, nor the
   consummation of any transaction contemplated hereby, will result in a change
   in the price or number of any equity securities of the Company outstanding
   under anti-dilution or other similar provisions contained in or affecting
   any such equity securities.

	
 

	
 

	
 

	
          (c)
   All issued and outstanding shares of the Company’s Common Stock and
   Preferred Stock: (i) have been duly authorized and validly issued and are
   fully paid and nonassessable; and (ii) were issued in compliance with all
   applicable state and federal laws concerning the issuance of securities.

	
 

	
 

	
 

	
          (d)
   The rights, preferences, privileges and restrictions of the shares of the
   Common Stock are as stated in the Company’s Certificate of Incorporation
   (the “Charter”). Except as disclosed on Schedule 4.3 or provided in any
   Related Agreement, the Warrant Shares have been duly and validly reserved
   for issuance. When issued in compliance with the provisions of this
   Agreement, the Related Agreements and the Company’s Charter, the Securities
   will be validly issued, fully paid and nonassessable, and will be free of
   any liens or encumbrances; provided, however, that the Securities are subject
   to the provisions of this Agreement, the Related Agreements and applicable
   law other than to the extent effectively waived hereunder or thereunder
   (including, without limitation, the Uniform Commercial Code in the case of
   the Note) and may be subject to restrictions on transfer under state and/or
   federal securities laws as set forth herein or as otherwise required by such
   laws at the time a transfer is proposed.

	
 

	
 

	
 

	
                    4.4
   Authorization; Binding Obligations. All corporate, partnership or
   limited liability company, as the case may be, action on the part of the
   Company and each of its Subsidiaries (including their respective officers
   and directors) necessary for the 

6

	
 

	
 

	
 

	
authorization of this Agreement and the Related
   Agreements, the performance of all obligations of the Company and its
   Subsidiaries hereunder and under the other Related Agreements at the Closing
   and, the authorization, sale, issuance and delivery of the Note and Warrants
   has been taken or will be taken prior to the Closing. This Agreement and the
   Related Agreements, when executed and delivered and to the extent it is a
   party thereto, will be valid and binding obligations of each of the Company
   and each of its Subsidiaries, enforceable against each such person or entity
   in accordance with their terms, except:

	
 

	
 

	
 

	
          (a)
   as limited by applicable bankruptcy, insolvency, reorganization, moratorium
   or other laws of general application affecting enforcement of creditors’
   rights; and

	
 

	
 

	
 

	
          (b)
   general principles of equity that restrict the availability of equitable or
   legal remedies.

The sale of the Note is not and will not be subject
 to any preemptive rights or rights of first refusal that have not been
 properly waived or complied with. The issuance of the Warrants and the
 subsequent exercise of the Warrants for Warrant Shares are not and will not be
 subject to any preemptive rights or rights of first refusal that have not been
 properly waived or complied with. 

	
 

	
 

	
 

	
                    4.5
   Liabilities. Neither the Company nor any of its Subsidiaries has any
   liabilities that should have been but were not disclosed in any of the
   Company’s filings under the Securities Act or Securities Exchange Act of
   1934 (“Exchange Act”) made on or prior to the date of this Agreement,
   including (without limitation) the SEC Reports, as hereinafter defined
   (collectively, the “Securities Filings”), except for (i) liabilities
   incurred in the ordinary course of business, and (ii) liabilities under
   documents governing Permitted Indebtedness and Permitted Guarantees, copies
   of which governing documents have been provided to the Purchaser.

	
 

	
 

	
 

	
                    4.6
   Agreements; Action. Except as set forth on Schedule 4.6 or as
   disclosed in any Securities Filings:

	
 

	
 

	
 

	
          (a)
   There are no agreements, understandings, instruments, contracts, proposed
   transactions, judgments, orders, writs or decrees to which the Company or
   any of its Subsidiaries is a party or by which it is bound containing any:
   (i) obligations (contingent or otherwise) of, or payments to, the Company or
   any of its Subsidiaries in excess of $50,000 (other than (A) obligations of,
   or payments to, the Company or any of its Subsidiaries arising from
   purchase, lease, license or sale agreements entered into in the ordinary
   course of business, (B) Permitted Indebtedness and Permitted Guarantees (as
   defined in Section 6.13(e) hereof), and (C) the matters disclosed in
   Schedule 4.7); or (ii) transfer or license of any patent, copyright, trade
   secret or other proprietary right to or from the Company or any of its
   Subsidiaries (other than licenses arising from the purchase of “off the
   shelf” or other standard products); or (iii) provisions restricting the
   development, manufacture or distribution of the Company’s or any of its Subsidiaries
   products or services; or (iv) indemnification by the Company or any of its
   Subsidiaries with respect to infringements of proprietary rights (other than
   indemnification provisions

7

	
 

	
 

	
 

	
protecting the licensor of licenses arising from
   the purchase of “off the shelf” or other standard products).

	
 

	
 

	
 

	
          (b)
Since March 31, 2007 (the “Balance Sheet Date”), neither the Company nor any
of its Subsidiaries has: (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock; (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than ordinary course obligations) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate,
other than Permitted Indebtedness and Permitted Guarantees; (iii) made any
loans or advances to any person or entity not in excess, individually or in
the aggregate, of $100,000, other than ordinary course advances for travel
expenses, and other than intercompany loans and advances among the Company
and its Subsidiaries set forth on Schedule 4.6; or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of
its inventory in the ordinary course of business.  

	
 

	
 

	
 

	
          (c)
   For the purposes of subsections (a) and (b) above, all such indebtedness,
   liabilities, agreements, understandings, instruments, contracts or proposed
   transactions involving the same person or entity (including persons or
   entities the Company or any Subsidiary of the Company has reason to believe
   are affiliated therewith) shall be aggregated for the purpose of meeting the
   individual minimum dollar amounts of such subsections.

	
 

	
 

	
 

	
          (d)
   The Company maintains all disclosure controls and procedures required under
   applicable law (“Disclosure Controls”) designed to ensure that information
   required to be disclosed by the Company in the reports that it files or
   submits under the Exchange Act is recorded, processed, summarized, and
   reported in accordance with and within the time periods specified in the
   rules and forms of the Securities and Exchange Commission (“SEC”).

	
 

	
 

	
 

	
          (e)
   The Company makes and keep books, records, and accounts, that, in reasonable
   detail, accurately and fairly reflect the transactions and dispositions of
   the Company’s assets. The Company maintains internal control over financial
   reporting (“Financial Reporting Controls”) designed by, or under the
   supervision of, the Company’s principal executive and principal financial
   officers, and effected by the Company’s board of directors, management, and
   other personnel, to provide reasonable assurance regarding the reliability
   of financial reporting and the preparation of financial statements for
   external purposes in accordance with generally accepted accounting
   principles (“GAAP”), including that:

	
 

	
 

	
 

	
          (i)
   material transactions are executed in accordance with management’s general
   or specific authorization or material deviations are timely detected;

	
 

	
 

	
 

	
          (ii)
   unauthorized acquisition, use, or disposition of the Company’s assets that
   could have a material effect on the financial statements are prevented or
   timely detected;

8

	
 

	
 

	
 

	
          (iii)
   transactions are recorded as necessary to permit preparation of financial
   statements in accordance with GAAP, and that the Company’s receipts and
   expenditures are being made only in accordance with the general or specific
   authorizations of, or policies and procedures established by, the Company’s
   management and/or board of directors; 

	
 

	
 

	
 

	
          (iv)
   transactions are recorded as necessary to maintain accountability for all
   material assets; and

	
 

	
 

	
 

	
          (v)
   the recorded accountability for assets is compared with the existing assets
   at reasonable intervals, and appropriate action is taken with respect to any
   differences.

	
 

	
 

	
 

	
 

	
          (f)
   There is no weakness in any of the Company’s Disclosure Controls or
   Financial Reporting Controls that is required to be disclosed in any of the
   Securities Filings, except as so disclosed.

	
 

	
 

	
 

	
                    4.7
   Obligations to Related Parties. Except as set forth on Schedule 4.7
   or in the Securities Filings, there are no obligations of the Company or any
   of its Subsidiaries to officers, directors, stockholders or employees of the
   Company or of any of its Subsidiaries other than:

	
 

	
 

	
 

	
          (a)
   for payment of salary for services rendered and for bonus payments;

	
 

	
 

	
 

	
          (b)
   reimbursement for reasonable expenses incurred on behalf of the Company and
   its Subsidiaries;

	
 

	
 

	
 

	
          (c)
   for other standard employee benefits made generally available to all
   employees (including stock option agreements outstanding under any stock
   option plan approved by the Board of Directors of the Company and each
   Subsidiary of the Company, as applicable); and

	
 

	
 

	
 

	
          (d)
   obligations listed in the Company’s and each of its Subsidiary’s financial
   statements or disclosed in any of the Company’s Securities Filings.

Except as described above, in the Securities Filings
 or set forth on Schedule 4.6 or 4.7: (i) none of the officers, directors or,
 to the best of the Company’s knowledge, key employees or stockholders of the
 Company or any of its Subsidiaries or any members of their immediate families,
 are indebted to the Company or any of its Subsidiaries, individually or in the
 aggregate, in excess of $50,000 or have any direct or indirect ownership
 interest in any firm or corporation with which the Company or any of its
 Subsidiaries is affiliated or with which the Company or any of its
 Subsidiaries has a business relationship, or any firm or corporation which
 competes with the Company or any of its Subsidiaries, other than passive
 investments in publicly traded companies (representing less than one percent
 (1%) of such company) which may compete with the Company or any of its
 Subsidiaries; (ii) no officer, director or stockholder of the Company or any
 of its Subsidiaries, or any member of their immediate families, is, directly
 or indirectly, interested in any material contract with the Company or any of
 its Subsidiaries and no agreements, understandings or proposed transactions
 are contemplated between the Company or

9

any of its Subsidiaries and any such person; and
 (iii) neither the Company nor any of its Subsidiaries is a guarantor or
 indemnitor of any indebtedness of any other person or entity other than
 pursuant to any of the Permitted Guarantees.

                    4.8
 Changes. Since the Balance Sheet Date, except as disclosed in any
 Securities Filing or in any Schedule to this Agreement or to any of the
 Related Agreements, there has not been:

	
 

	
 

	
 

	
          (a)
   any change in the business, assets, liabilities, condition (financial or
   otherwise), properties, operations or prospects of the Company or any of its
   Subsidiaries, which individually or in the aggregate has had, or could
   reasonably be expected to have, individually or in the aggregate, a Material
   Adverse Effect;

	
 

	
 

	
 

	
          (b)
   any resignation or termination of any officer, key employee or group of
   employees of the Company or any of its Subsidiaries; 

	
 

	
 

	
 

	
          (c)
   any material change, except in the ordinary course of business, in the
   contingent obligations of the Company or any of its Subsidiaries by way of
   guaranty, endorsement, indemnity, warranty or otherwise, other than (A) any
   Permitted Guarantees, or (B) any new licenses arising from the purchase of
   “off the shelf” or other standard products containing indemnification
   provisions protecting the licensor thereof;

	
 

	
 

	
 

	
          (d)
   any damage, destruction or loss, whether or not covered by insurance, which
   has had, or could reasonably be expected to have, individually or in the
   aggregate, a Material Adverse Effect;

	
 

	
 

	
 

	
          (e)
   any waiver by the Company or any of its Subsidiaries of a valuable right or
   of a material debt owed to it;

	
 

	
 

	
 

	
          (f)
   any direct or indirect loans made by the Company or any of its Subsidiaries
   to any stockholder, employee, officer or director of the Company or any of
   its Subsidiaries, other than advances made in the ordinary course of
   business;

	
 

	
 

	
 

	
          (g)
   any material change in any compensation arrangement or agreement with any
   employee, officer, director or stockholder of the Company or any of its Subsidiaries;
   

	
 

	
 

	
 

	
          (h)
   any declaration or payment of any dividend or other distribution of the
   assets of the Company or any of its Subsidiaries (for the sake of clarity,
   advances and repayments of intercompany loans and advances among the Company
   and its Subsidiaries are not such distributions);

	
 

	
 

	
 

	
          (i)
   any labor organization activity related to the Company or any of its
   Subsidiaries;

	
 

	
 

	
 

	
          (j)
   any debt, obligation or liability incurred, assumed or guaranteed by the
   Company or any of its Subsidiaries, except those for immaterial amounts, for
   current liabilities incurred in the ordinary course of business, and for
   Permitted Indebtedness and Permitted Guarantees;

10

	
 

	
 

	
 

	
          (k)
   any sale, assignment or transfer of any patents, trademarks, copyrights,
   trade secrets or other intangible assets owned by the Company or any of its
   Subsidiaries;

	
 

	
 

	
 

	
          (l)
   any change in any material agreement to which the Company or any of its
   Subsidiaries is a party or by which either the Company or any of its
   Subsidiaries is bound which either individually or in the aggregate has had,
   or could reasonably be expected to have, individually or in the aggregate, a
   Material Adverse Effect;

	
 

	
 

	
 

	
          (m)
   any other event or condition of any character that, either individually or
   in the aggregate, has had, or could reasonably be expected to have,
   individually or in the aggregate, a Material Adverse Effect; or

	
 

	
 

	
 

	
          (n)
   any arrangement or commitment by the Company or any of its Subsidiaries to
   do any of the acts described in subsection (a) through (m) above.

                    4.9
 Title to Properties and Assets; Liens, Etc. Except as set forth on
 Schedule 4.9, each of the Company and each of its Subsidiaries has good and
 marketable title to its properties and assets, and good title to its leasehold
 interests, in each case subject to no mortgage, pledge, lien, lease,
 encumbrance or charge, other than the following (each a “Permitted
 Encumbrance”):

	
 

	
 

	
 

	
 

	
          (a)
   those resulting from taxes which have not yet become delinquent or are being
   contested as permitted by Section 6.7;

	
 

	
 

	
 

	
          (b)
   statutory liens incurred or imposed in the ordinary course (i) of mechanics,
   carriers, warehouses, processors, suppliers and laborers, (ii) respecting
   worker’s compensation, unemployment insurance, or social security, or (iii)
   as a condition precedent to the operation of business or the exercise of any
   of any authorizations, licenses or privileges, in each case to the extent
   and only for so long as the underlying obligations are not delinquent or are
   being diligently contested in good faith;

	
 

	
 

	
 

	
          (c)
   liens incurred in respect of judgments and awards discharged within 30 days
   from the making thereof;

	
 

	
 

	
 

	
          (d)
   in the case of real estate, easements, rights-of-way, restrictions,
   covenants and other agreements of record and other similar charges or
   encumbrances that (i) do not secure indebtedness or guarantees, and (ii) do
   not interfere with the use of or conduct of any business of the Company or
   any of its Subsidiaries thereon;

	
 

	
 

	
 

	
          (e)
   any cash deposits made or bonds posted in the ordinary course to secure
   performance under any contract or applicable law;

	
 

	
 

	
 

	
          (f)
   in the case of any account, intangible, instrument, lease, agreement or
   document, any contractual right, power, privilege, remedy, interest, defect,
   restriction, covenant, claim, counterclaim, right of recoupment, abatement,
   reduction or setoff, or defense of any account debtor or other party thereto,
   whether now existing or hereafter arising, and whether pursuant to the
   applicable contractual provisions or applicable law;

11

	
 

	
 

	
 

	
          (g)
   the security interests or liens (including leases treated as security
   interests or liens) encumbering Equipment or other assets purchased or
   leased with Permitted Indebtedness so long as they respectively secure only
   the corresponding Permitted Indebtedness or capitalized lease obligations
   and encumber only the assets so purchased or leased (and the products and
   proceeds thereof, insurance therefor and warranty and other contract rights
   related thereto) and no other assets of the Company or any of its
   Subsidiaries;

	
 

	
 

	
 

	
          (h)
   each currently existing lien described in Schedule 4.9 hereto, or any
   continuation, restatement, or replacement thereof on terms no less favorable
   in all material respects to the Purchaser than the lien being continued,
   restated or replaced;

	
 

	
 

	
 

	
          (i)
   minor liens and encumbrances which do not materially detract from the value
   of the property subject thereto or materially impair the operations of the
   Company or any of its Subsidiaries, so long as in each such case, such liens
   and encumbrances have no effect on the lien priority of the Purchaser in
   such property; and

	
 

	
 

	
 

	
          (j)
   those that have otherwise arisen in the ordinary course of business, so long
   as they have no effect on the lien priority of the Purchaser therein.

All facilities, machinery, equipment, fixtures,
 vehicles and other properties owned, leased or used by the Company and its
 Subsidiaries are in good operating condition and repair and are reasonably fit
 and usable for the purposes for which they are being used. Except as set forth
 on Schedule 4.9, the Company and its Subsidiaries are in compliance with all
 material terms of each lease to which it is a party or is otherwise bound.

                    4.10
 Intellectual Property.

	
 

	
 

	
 

	
          (a)
   Each of the Company and each of its Subsidiaries owns or possesses
   sufficient legal rights to all patents, trademarks, service marks, trade
   names, copyrights, trade secrets, licenses, information and other
   proprietary rights and processes necessary for its business as now conducted
   and, to the Company’s knowledge, as presently proposed to be conducted (the
   “Intellectual Property”), without any known infringement of the rights of
   others. There are no outstanding options, licenses or agreements of any kind
   relating to the foregoing proprietary rights, nor is the Company or any of
   its Subsidiaries bound by or a party to any options, licenses or agreements
   of any kind with respect to the patents, trademarks, service marks, trade
   names, copyrights, trade secrets, licenses, information and other
   proprietary rights and processes of any other person or entity other than
   such licenses or agreements arising from the purchase of “off the shelf” or
   standard products.

	
 

	
 

	
 

	
          (b)
   Neither the Company nor any of its Subsidiaries has received any
   communications alleging that the Company or any of its Subsidiaries has
   violated any of the patents, trademarks, service marks, trade names,
   copyrights or trade secrets or other proprietary rights of any other person
   or entity, nor is the Company or any of its Subsidiaries aware of any basis
   therefor.

12

	
 

	
 

	
 

	
          (c)
   The Company does not believe it is or will be necessary to utilize any
   inventions, trade secrets or proprietary information of any of its employees
   made prior to their employment by the Company or any of its Subsidiaries,
   except for inventions, trade secrets or proprietary information that have
   been rightfully assigned to the Company or any of its Subsidiaries.

                    4.11
 Compliance with Other Instruments. Neither the Company nor any of its
 Subsidiaries is in violation or default of (x) any term of its Charter or
 Bylaws, or (y) any indebtedness, mortgage, indenture, contract, agreement or
 instrument to which it is party or by which it is bound or of any judgment,
 decree, order or writ, which violation or default, in the case of this clause
 (y), has had, or could reasonably be expected to have, either individually or
 in the aggregate, a Material Adverse Effect. The execution, delivery and
 performance of and compliance with this Agreement and the Related Agreements
 to which it is a party, and the issuance and sale of the Note by the Company
 and the other Securities by the Company each pursuant hereto and thereto, will
 not, with or without the passage of time or giving of notice, result in (i)
 any such violation or default, or be in conflict in any material respect with,
 any such indebtedness, mortgage, indenture, contract, agreement or instrument,
 (ii) result in the creation of any mortgage, pledge, lien, encumbrance or
 charge thereunder upon any of the properties or assets of the Company or any
 of its Subsidiaries, or (iii) result in the suspension, revocation,
 impairment, forfeiture or nonrenewal of any material permit, license,
 authorization or approval applicable to the Company, its business or
 operations or any of its assets or properties. 

                    4.12
 Litigation. Except as set forth on Schedule 4.12 hereto, there is no
 action, suit, proceeding or investigation pending or, to the Company’s
 knowledge, currently threatened against the Company or any of its
 Subsidiaries, and neither the Company nor any of its Subsidiaries is a party
 to or subject to the provisions of any order, writ, injunction, judgment or
 decree of any court or government agency or instrumentality, that (a) prevents
 the Company or any of its Subsidiaries (i) from entering into this Agreement
 or the other Related Agreements, or (ii) from consummating the transactions
 contemplated hereby or thereby, or (b) has had, or if adversely determined
 could reasonably be expected to have, either individually or in the aggregate,
 a Material Adverse Effect or any change in the current equity ownership of the
 Company or any of its Subsidiaries; and the Company has no knowledge of any
 reasonable basis to assert any of the foregoing. Except as set forth on
 Schedule 4.12 hereto, there is no action, suit, proceeding or investigation by
 the Company or any of its Subsidiaries (as plaintiff or investigator)
 currently pending or which the Company or any of its Subsidiaries intends to
 initiate other than collection and similar matters in the normal course.

                    4.13
 Tax Returns and Payments. Except as set forth on Schedule 4.13 hereto:
 (i) each of the Company and each of its Subsidiaries has timely filed all tax
 returns (federal, state and local) required to be filed by it; and (ii) all
 taxes shown to be due and payable on such returns, any assessments imposed,
 and all other taxes due and payable by the Company or any of its Subsidiaries
 on or before the Closing, have been paid or will be paid prior to the time
 they become delinquent other than those being diligently contested in good
 faith. Except as set forth on Schedule 4.13, neither the Company nor any of
 its Subsidiaries has been advised:

13

	
 

	
 

	
 

	
          (a)
   that any of its returns, federal, state or other, have been or are being
   audited as of the date hereof; or

	
 

	
 

	
 

	
          (b)
   of any adjustment, deficiency, assessment or court decision in respect of
   its federal, state or other taxes.

Except as set forth on Schedule 4.13, the Company has
 no knowledge of any liability for any tax to be imposed upon its properties or
 assets as of the date of this Agreement that is not adequately provided for. 

	
 

	
 

	
 

	
 

	
                    4.14
   Employees. Neither the Company nor any of its Subsidiaries has any
   collective bargaining agreements with any of its employees. There is no
   labor union organizing activity pending or, to the Company’s knowledge,
   threatened with respect to the Company or any of its Subsidiaries. Except as
   disclosed in the Securities Filings or on Schedule 4.14, neither the Company
   nor any of its Subsidiaries is a party to or bound by any currently
   effective employment contract, deferred compensation arrangement, bonus
   plan, incentive plan, profit sharing plan, retirement agreement or other
   employee compensation plan or agreement. To the Company’s knowledge: no
   employee of the Company or any of its Subsidiaries, nor any consultant with
   whom the Company or any of its Subsidiaries has contracted, is in violation
   of any term of any material employment contract, proprietary information
   agreement or any other agreement relating to the right of any such
   individual to be employed by, or to contract with, the Company or any of its
   Subsidiaries because of the nature of the business to be conducted by the
   Company or any of its Subsidiaries; and to the Company’s knowledge the
   continued employment by the Company and its Subsidiaries of their present
   employees, and the performance of the Company’s and its Subsidiaries’
   contracts with its independent contractors, will not result in any such
   violation. To the Company’s knowledge, no employee of the Company or any of
   its Subsidiaries is obligated under any material contract (including
   licenses, covenants or commitments of any nature) or other agreement, or
   subject to any judgment, decree or order of any court or administrative
   agency that would interfere with their duties to the Company or any of its
   Subsidiaries. To the Company’s knowledge, neither the Company nor any of its
   Subsidiaries has received any notice alleging that any such violation has
   occurred. Except for employees who have a current effective employment or
   severance agreement with the Company or any of its Subsidiaries and any
   rights that may be available under applicable law, and except for the
   general severance policies of the Company and its Subsidiaries, no employee
   of the Company or any of its Subsidiaries has been granted the right to
   continued employment by the Company or any of its Subsidiaries or to any
   material compensation following termination of employment with the Company
   or any of its Subsidiaries. Except as set forth on Schedule 4.14, to the
   knowledge of the Company, no officer, key employee or group of employees
   intends to terminate his, her or their employment with the Company or any of
   its Subsidiaries, nor does the Company or any of its Subsidiaries have a
   present intention to terminate the employment of any officer, key employee
   or group of employees.

	
 

	
 

	
 

	
                    4.15
   Registration Rights and Voting Rights. Except as set forth on
   Schedule 4.15, and except as disclosed in Securities Filings, neither the
   Company nor any of its Subsidiaries is presently under any obligation, and
   neither the Company nor any of its Subsidiaries has granted any rights, to
   register any of the Company’s or its Subsidiaries’

14

	
 

	
 

	
 

	
presently outstanding securities or any of its
   securities that may hereafter be issued. Except as set forth on Schedule
   4.15 and except as disclosed in Securities Filings, to the Company’s
   knowledge, no stockholder of the Company or any of its Subsidiaries has entered
   into any agreement with respect to the voting of equity securities of the
   Company or any of its Subsidiaries.

	
 

	
 

	
 

	
                    4.16
   Compliance with Laws; Permits. Neither the Company nor any of its
   Subsidiaries is in violation of any provision of the Sarbanes-Oxley Act of
   2002 or any SEC related regulation, or any other applicable statute, rule,
   regulation, order or restriction of any domestic or foreign government or
   any instrumentality or agency thereof in respect of the conduct of its business
   or the ownership of its properties, that has had, or could reasonably be
   expected to have, either individually or in the aggregate, a Material
   Adverse Effect. No governmental orders, permissions, consents, approvals or
   authorizations are required to be obtained and no registrations or
   declarations are required to be filed in connection with the execution and
   delivery of this Agreement or any other Related Agreement and the issuance
   of any of the Securities, except such as have been duly and validly obtained
   or filed, or with respect to any filings that must be made after the
   Closing, as will be filed by or on behalf of the Company in a timely manner
   or by or on behalf of the Purchaser. Each of the Company and its
   Subsidiaries has all material franchises, permits, licenses and any similar
   authority necessary for the conduct of its business as now being conducted
   by it, the lack of which could, either individually or in the aggregate,
   reasonably be expected to have a Material Adverse Effect.

	
 

	
 

	
 

	
                    4.17
   Environmental and Safety Laws. Neither the Company nor any of its
   Subsidiaries is in violation of any applicable statute, law or regulation
   relating to the environment or occupational health and safety, and to its
   knowledge, no material expenditures are or will be required in order to
   comply with any such existing statute, law or regulation. Except as set
   forth on Schedule 4.17, no Hazardous Materials (as defined below) are used
   or have been used, stored, or disposed of by the Company or any of its
   Subsidiaries or, to the Company’s knowledge, by any other person or entity
   on any property owned, leased or used by the Company or any of its
   Subsidiaries, other than in the normal course in accordance with such
   applicable statutes, laws or regulations. For the purposes of the preceding
   sentence, “Hazardous Materials” shall mean:

	
 

	
 

	
 

	
          (a)
   materials which are listed or otherwise defined as “hazardous” or “toxic”
   under any applicable local, state, federal and/or foreign laws and
   regulations that govern the existence and/or remedy of contamination on
   property, the protection of the environment from contamination, the control
   of hazardous wastes, or other activities involving hazardous substances,
   including building materials; or

	
 

	
 

	
 

	
          (b)
   any petroleum products or nuclear materials.

	
 

	
 

	
 

	
                    4.18
   Valid Offering. Assuming the accuracy of the representations and
   warranties of the Purchaser contained in this Agreement, the offer, sale and
   issuance of the Securities will be exempt from the registration requirements
   of the Securities Act of 1933, as amended (the “Securities Act”), and will
   have been registered or qualified (or are exempt

15

	
 

	
 

	
 

	
from registration and qualification) under the
   registration, permit or qualification requirements of all applicable state
   securities laws.

	
 

	
 

	
 

	
                    4.19
   Full Disclosure. Each of the Company and each of its Subsidiaries has
   provided to the Purchaser or its representatives all information requested
   by the Purchaser in connection with its decision to purchase the Note and
   Warrants, including all information the Company and its Subsidiaries believe
   is reasonably necessary to make such investment decision. Neither this
   Agreement, the Related Agreements, the exhibits and schedules hereto and
   thereto nor any other document delivered by the Company or any of its
   Subsidiaries to Purchaser or its attorneys or agents in connection herewith
   or therewith or with the transactions contemplated hereby or thereby,
   contain any untrue statement of a material fact nor omit to state a material
   fact necessary in order to make the statements contained herein or therein,
   in light of the circumstances in which they are made, not misleading. Any
   financial projections and other estimates provided to the Purchaser by the
   Company or any of its Subsidiaries were based on the Company’s and its
   Subsidiaries’ experience in the industry and on assumptions of fact and
   opinion as to future events which the Company or any of its Subsidiaries, at
   the date of the issuance of such projections or estimates, believed to be
   reasonable. 

	
 

	
 

	
 

	
                    4.20
   Insurance. Each of the Company and each of its Subsidiaries has
   general commercial, product liability, fire and casualty insurance policies
   with coverages that the Company believes are customary for companies
   similarly situated to the Company and its Subsidiaries in the same or
   similar business.

	
 

	
 

	
 

	
                    4.21
   SEC Reports. Except as set forth on Schedule 4.21, the Company has
   filed all proxy statements, reports and other documents required to be filed
   by it under the Securities Exchange Act 1934, as amended (the “Exchange
   Act”). The Company has furnished the Purchaser copies of: (i) its Annual
   Reports on Form 10-KSB for its fiscal years ended June 30, 2006; and (ii)
   its Quarterly Report on Form 10-Q for its fiscal quarter ended September 30,
   2006 and the Form 8-K filings which it has made since June 30, 2006, to date
   (collectively, the “SEC Reports”). Except as set forth on Schedule 4.21 or subsequent
   SEC Reports set forth in this Section 4.21, each SEC Report was, at the time
   of its filing, in substantial compliance with the requirements of its
   respective form and none of the SEC Reports, nor the financial statements
   (and the notes thereto) included in the SEC Reports, as of their respective
   filing dates, contained any untrue statement of a material fact or omitted
   to state a material fact required to be stated therein or necessary to make
   the statements therein, in light of the circumstances under which they were
   made, not misleading.

	
 

	
 

	
 

	
                    4.22
   Listing. The Company’s Common Stock is quoted on the Pink Sheets®
   under the symbol “TUYU.PK” and is not listed or quoted on a Principal Market
   (as hereafter defined). For purposes hereof, the term “Principal Market”
   means the NASD Over The Counter Bulletin Board, NASDAQ Capital Market,
   NASDAQ Global Select Market, NASDAQ Global Market, American Stock Exchange
   or New York Stock Exchange (whichever of the foregoing, if any, is at the time
   the principal trading exchange or market for the Common Stock).

16

	
 

	
 

	
 

	
                    4.23
   No Integrated Offering. Neither the Company, nor any of its
   Subsidiaries or affiliates, nor any person acting on its or their behalf,
   has directly or indirectly made any offers or sales of any security or
   solicited any offers to buy any security under circumstances that would
   cause the offering of the Securities pursuant to this Agreement or any of
   the Related Agreements to be integrated with prior offerings by the Company
   for purposes of the Securities Act that would prevent the Company from
   selling the Securities pursuant to Rule 506 under the Securities Act, or any
   applicable exchange-related stockholder approval provisions, nor will the
   Company or any of its affiliates or Subsidiaries take any action or steps
   that would cause the offering of the Securities to be integrated with other
   offerings.

	
 

	
 

	
 

	
                    4.24
   Stop Transfer. The Securities are restricted securities as of the
   date of this Agreement. Neither the Company nor any of its Subsidiaries will
   issue any stop transfer order or other order impeding the sale and delivery
   of any of the Warrant Shares at such time as the Warrant Shares are
   registered for public sale or an exemption from registration is available,
   except as required by state and federal securities laws.

	
 

	
 

	
 

	
                    4.25
   Dilution. The Company specifically acknowledges that its obligation
   to issue the shares of Common Stock upon exercise of the Warrants is binding
   upon the Company and enforceable regardless of the dilution such issuance
   may have on the ownership interests of other shareholders of the Company. 

	
 

	
 

	
 

	
                    4.26
   Patriot Act. (a) The Company certifies that, to the best of Company’s
   knowledge, neither the Company nor any of its Subsidiaries has been
   designated, nor is or shall be owned or controlled, by a “suspected
   terrorist” as defined in U.S. Federal Executive Order 13224. The Company
   hereby acknowledges that the Purchaser seeks to comply with all applicable
   laws concerning money laundering and related activities. In furtherance of
   those efforts, the Company hereby represents, warrants and covenants that:
   (i) none of the cash or property that the Company or any of its Subsidiaries
   will pay or will contribute to the Purchaser has been or shall be derived
   from, or related to, any activity that is deemed criminal under United
   States law; and (ii) no contribution or payment by the Company or any of its
   Subsidiaries to the Purchaser, to the extent that they are within the
   Company’s and/or its Subsidiaries’ control, shall cause the Purchaser 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. The Company shall promptly notify the Purchaser if any of these
   representations, warranties or covenants ceases to be true and accurate
   regarding the Company or any of its Subsidiaries. The Company shall provide
   the Purchaser all additional information regarding the Company or any of its
   Subsidiaries that the Purchaser deems necessary or convenient to ensure
   compliance with all applicable laws concerning money laundering and similar
   activities. The Company understands and agrees that if at any time it is
   discovered that any of the foregoing representations, warranties or
   covenants are incorrect, or if otherwise required by applicable law or
   regulation related to money laundering or similar activities, the Purchaser
   may undertake appropriate actions to ensure compliance with applicable law
   or regulation, including but not limited to segregation and/or redemption of
   the Purchaser’s investment in the Company. The Company further understands
   that the Purchaser may release

17

	
 

	
 

	
 

	
confidential information about the Company and its
   Subsidiaries and, if applicable, any underlying beneficial owners, to proper
   authorities if the Purchaser, in its sole discretion, determines that it is
   in the best interests of the Purchaser in light of relevant rules and
   regulations under the laws set forth in subsection (ii) above.

          (b)
 The Purchaser certifies that, to the best of Purchaser’s knowledge, neither
 the Purchaser nor any of its Subsidiaries has been designated, nor is or shall
 be owned or controlled, by a “suspected terrorist” as defined in U.S. Federal
 Executive Order 13224. The Purchaser hereby acknowledges that the Company
 seeks to comply with all applicable laws concerning money laundering and
 related activities. In furtherance of those efforts, the Purchaser hereby
 represents, warrants and covenants that: (i) none of the cash or property that
 the Purchaser or any of its Subsidiaries will pay or will contribute to the
 Company has been or shall be derived from, or related to, any activity that is
 deemed criminal under United States law; and (ii) no contribution or payment
 by the Purchaser or any of its Subsidiaries to the Company, to the extent that
 they are within the Purchaser’s and/or its Subsidiaries’ control, shall 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. The Purchaser shall promptly notify the Company if any of these
 representations, warranties or covenants ceases to be true and accurate
 regarding the Purchaser or any of its Subsidiaries. The Purchaser shall
 provide the Company all additional information regarding the Purchaser or any
 of its Subsidiaries that the Company deems necessary or convenient to ensure
 compliance with all applicable laws concerning money laundering and similar
 activities. The Purchaser understands and agrees that if at any time it is
 discovered that any of the foregoing representations, warranties or covenants
 are incorrect, or if otherwise required by applicable law or regulation
 related to money laundering or similar activities, the Company may undertake appropriate
 actions to ensure compliance with applicable law or regulation, including but
 not limited to segregation and/or redemption of the Company’s investment in
 the Purchaser. The Purchaser further understands that the Company may release
 confidential information about the Purchaser and its Subsidiaries and, if
 applicable, any underlying beneficial owners, to proper authorities if the
 Company, in its sole discretion, determines that it is in the best interests
 of the Company in light of relevant rules and regulations under the laws set
 forth in subsection (ii) above.

	
 

	
 

	
 

	
                    4.27
ERISA. To the extent the Company or any of its Subsidiaries has any
benefit plan subject to the Employee Retirement Income Security Act of 1974
(“ERISA”), and the regulations and published interpretations thereunder: (i)
neither the Company nor any of its Subsidiaries has engaged in any
Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975
of the Internal Revenue
Code of 1986, as amended (the “Code”)); (ii) each of the Company and each of
its Subsidiaries has met all applicable minimum funding requirements under
Section 302 of ERISA in respect of its plans; (iii) neither the Company nor
any of its Subsidiaries has any knowledge of any event or occurrence which
would cause the Pension Benefit Guaranty Corporation to institute
proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) neither the Company nor any of its Subsidiaries has any
fiduciary responsibility for investments with respect to any plan existing
for the benefit of persons other than the Company’s or such Subsidiary’s
employees; and (v) neither the Company nor any of its Subsidiaries has  

18

	
 

	
 

	
 

	
withdrawn, completely or partially, from any
    multi-employer pension plan so as to incur liability under the
    Multiemployer Pension Plan Amendments Act of 1980.

          5.
  Representations and Warranties of the Purchaser. The Purchaser hereby
  represents and warrants to and covenants and agrees with (as applicable) the
  Company as follows (it being understood that such representations and
  warranties do not lessen or obviate the representations and warranties of the
  Company set forth in this Agreement):

	
 

	
 

	
 

	
                    5.1
    No Shorting. The Purchaser or any of its affiliates and investment
    partners has not, will not and will not cause any person or entity to,
    directly or beneficially engage in “short sales” of the Company’s Common
    Stock or Preferred Stock as long as the Note and Warrants shall be
    outstanding.

	
 

	
 

	
 

	
                    5.2
    Requisite Power and Authority. The Purchaser has full all necessary
    power and authority under all applicable provisions of law, to execute and
    deliver this Agreement and the Related Agreements and to carry out their
    provisions. All corporate action on the Purchaser’s part required for the
    lawful execution and delivery of this Agreement and the Related Agreements
    have been or will be effectively taken prior to the Closing. Upon their
    execution and delivery, this Agreement and the Related Agreements will be
    valid and binding obligations of the Purchaser, enforceable in accordance
    with their terms, except:

	
 

	
 

	
 

	
          (a)
    as limited by applicable bankruptcy, insolvency, reorganization, moratorium
    or other laws of general application affecting enforcement of creditors’
    rights; and

	
 

	
 

	
 

	
          (b)
    as limited by general principles of equity that restrict the availability
    of equitable and legal remedies.

	
 

	
 

	
 

	
                    5.3
    Investment Representations. The Purchaser understands that the
    Securities are being offered and sold pursuant to an exemption from
    registration contained in the Securities Act based in part upon the
    Purchaser’s representations contained in this Agreement, including, without
    limitation, the Purchaser’s representation (in Section 5,7) that it is an
    “accredited investor” within the meaning of Regulation D under the
    Securities Act of 1933, as amended (the “Securities Act”). The Purchaser
    confirms that it has received or has had full access to all the information
    it considers necessary or appropriate to make an informed investment
    decision with respect to the Note and the Warrants to be purchased by it
    under this Agreement and the Warrant Shares acquired by it upon the
    exercise of the Warrants, respectively. The Purchaser further confirms that
    it has had the opportunity to ask questions and receive answers from the
    Company regarding the Company’s and its Subsidiaries’ business, management
    and financial affairs and the terms and conditions of the Offering, the Note,
    the Warrants and the Securities and obtain additional information (to the
    extent the Company possessed such information or could acquire it without
    unreasonable effort or expense) necessary to verify any information
    furnished to the Purchaser or to which the Purchaser had access.

19

	
 

	
 

	
 

	
 

	
                    5.4
    The Purchaser Bears Economic Risk. The Purchaser has substantial
    experience in evaluating and investing in private placement transactions of
    securities in companies similar to the Company so that it is capable of
    evaluating the merits and risks of its investment in the Company and has
    the capacity to protect its own interests. The Purchaser must bear the
    economic risk of this investment until the Securities are sold pursuant to:
    (i) an effective registration statement under the Securities Act; or (ii)
    an exemption from registration that is available with respect to such sale.

	
 

	
 

	
 

	
                    5.5
    Acquisition for Own Account. The Purchaser is acquiring the Note and
    Warrants and the Warrant Shares for the Purchaser’s own account for
    investment only, and not as a nominee or agent and not with a view towards
    or for resale in connection with their distribution.

	
 

	
 

	
 

	
                    5.6
    The Purchaser Can Protect Its Interest. The Purchaser represents
    that by reason of its, or of its management’s, business and financial
    experience, the Purchaser has the capacity to evaluate the merits and risks
    of its investment in the Note, the Warrants and the Securities and to
    protect its own interests in connection with the transactions contemplated
    in this Agreement and the Related Agreements. Further, the Purchaser is
    aware of no advertisement or other publication in connection with the
    transactions contemplated in the Agreement or the Related Agreements.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
                    5.8
    Legends.

	
 

	
 

	
 

	
          (a)
    The Warrant Shares, if not issued by DWAC system (as hereinafter defined),
    shall bear a legend which shall be in substantially the following form
    until such shares are covered by an effective registration statement filed
    with the SEC:

	
 

	
 

	
 

	
 

	
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
    NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
    APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
    SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
    STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION
    OF COUNSEL REASONABLY SATISFACTORY TO TRUEYOU.COM
    INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

	
 

	
 

	
 

	
          (b)
    The Warrants shall bear substantially the following legend:

	
 

	
 

	
 

	
 

	
“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
    EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
    OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
    AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
    SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
    EFFECTIVE REGISTRATION STATEMENT AS TO THIS

20

	
 

	
 

	
 

	
WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK
    UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
    COUNSEL REASONABLY SATISFACTORY TO TRUEYOU.COM
    INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

	
 

	
 

	
                      (c)
    The Note shall bear substantially the following legend:

	
 

	
 

	
 

	
“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
    SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
    LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
    IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
    APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
    SATISFACTORY TO TRUEYOU.COM INC.
    THAT SUCH REGISTRATION IS NOT REQUIRED.”

          6.
  Covenants of the Company. The Company covenants and agrees, with the
  Purchaser that, until such time as the Note Amounts have been fully paid,
  unless the Purchaser in its sole discretion consents otherwise (as provided
  in Section 11.4 and 11.6):

                    6.1
  Stop-Orders. The Company will advise the Purchaser, promptly after it
  receives notice of issuance by the SEC, any state securities commission or
  any other regulatory authority, of such issuance of any stop order or other
  order preventing or suspending any offering of any securities of the Company,
  or of the suspension of the qualification of the Common Stock of the Company
  for offering or sale in any jurisdiction, or the initiation of any proceeding
  for any such purpose.

                    6.2
  Listing. The Company shall, no later than December 31, 2007, make an
  application to the appropriate Principal Market to secure the listing or
  quotation, as applicable, of the shares of its Common Stock including,
  without limitation, those shares issuable upon the exercise of the Warrants,
  on a Principal Market (subject to official notice of issuance) and shall
  maintain such listing or quotation, as applicable, so long as any other
  shares of Common Stock shall be so listed or quoted, as applicable. The
  Company will maintain the listing or quotation, as applicable, of its Common
  Stock on the Principal Market, and will comply in all material respects with
  the Company’s reporting, filing and other obligations under the bylaws or
  rules of the National Association of Securities Dealers (“NASD”) and such
  exchanges, as applicable.

                    6.3
  Authorization of Common Stock. The Company shall, no later than
  December 31, 2007, have sufficient authorized shares of Common Stock for the
  exercise of the Warrants. In the event that the Company receives comments
  from the SEC on the documentation prepared in order to authorize such shares,
  the Company shall respond to such SEC comments within one week of receipt
  thereof. In the event that the Company has not complied with this Section
  6.3, the Company shall pay interest to the Purchaser at a rate that is two
  percent (2%) above the Contract Rate until such time as such shares have been
  authorized.

                    6.4
  Market Regulations. The Company shall notify the SEC and applicable
  state authorities, in accordance with their requirements, of the transactions
  contemplated by this

21

Agreement, and shall
  take all other necessary action and proceedings as may be required and
  permitted by applicable law, rule and regulation, for the legal and valid
  issuance of the Securities to the Purchaser and promptly provide copies
  thereof to the Purchaser.

                    6.5
  Reporting Requirements. The Company will deliver, or cause to be
  delivered, to the Purchaser each of the following, which shall be in form and
  detail acceptable to the Purchaser:

	
 

	
 

	
 

	
 

	
          (a)
As soon as available after the end of each fiscal year of the Company, and
in any event by no later than the first business day after the expiration
of the period (including any extensions) required for filing of its annual
report on Form 10-K with the SEC under the Exchange Act, a copy of such
annual report, including the consolidated audited financial statements of
the Company and its Subsidiaries together with a report of independent
certified public accountants of recognized standing selected by the Company
and reasonably acceptable to the Purchaser (the “Accountants”) (the current
accountants being acceptable), which annual financial statements shall
include each of the consolidated balance sheet of the Company and its
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income, retained earnings and cash flows of the Company and
its Subsidiaries for the fiscal year then ended, all in reasonable detail
and prepared in accordance with GAAP, together with (i) if and when
available, copies of any management letters prepared by the Accountants;
and (ii) a certificate of the Company’s President, Chief Executive Officer
or Chief Financial Officer stating that such financial statements have been
prepared to his knowledge in accordance with GAAP and whether or not such
officer has knowledge of the occurrence and/or continuance of any Event of
Default (as defined in the Note) and, if so, stating in reasonable detail
the facts with respect thereto; 

	
 

	
 

	
 

	
          (b)
    As soon as available after the end of each fiscal quarter of the Company,
    and in any event by no later than the first business day after the
    expiration of the period (including any extensions) required for filing of
    its quarterly report on Form 10-Q with the SEC under the Exchange Act, a
    copy of such quarterly report, including an unaudited consolidated balance
    sheet and statements of income, retained earnings and cash flows of the
    Company and its Subsidiaries as at the end of and for such quarter and for
    the year to date period then ended, in reasonable detail and prepared in
    accordance with GAAP, subject to year-end adjustments and accompanied by a
    certificate of the Company’s President, Chief Executive Officer or Chief
    Financial Officer, stating (i) that such financial statements have been
    prepared in accordance with GAAP to his knowledge, subject to year-end
    audit adjustments, and (ii) whether or not such officer has knowledge of
    the occurrence and/or continuance of any Event of Default (as defined in
    the Note) not theretofore reported and remedied and, if so, stating in
    reasonable detail the facts with respect thereto; 

	
 

	
 

	
 

	
          (c)
    As soon as available, and in any event within three (3) business days after
    the end of each week: (i) a report in the form of Exhibit G weekly and
    period to date actual and planned cash flow; (ii) accounts payable payment
    and balance information; (ii) month to date wholesales sales; (iii) weekly
    retail sales information from major customers (including Sephora and HSN)
    for so long as applicable; (iv) monthly P/Ls as

22

	
 

	
 

	
 

	
they are completed, and (v) , a copy of the
Company’s regularly prepared internal unaudited consolidated financial
statements, including (without limitation) balance sheets, statements of
income, retained earnings and cash flows, and in reasonable detail and
stating in comparative form to the figures for the corresponding Budget (as
such term is defined in the Restricted Account Side Letter) all prepared in
accordance with past practice, subject to year-end adjustments and
accompanied by a certificate of the Company’s President, Chief Executive
Officer or Chief Financial Officer, stating (A) that such financial
statements have been prepared in accordance with past practice, subject to
year-end audit adjustments; and (B) whether or not such officer has
knowledge of the occurrence of any Event of Default (as defined in the
Note) not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto; provided, however, that for the months in which the sales of the stores transaction and this
transaction are booked, the Company will have 30 days after the end of the
applicable month to prepare the monthly financial statements;  

	
 

	
 

	
 

	
          (d)
Promptly after (i) the filing thereof, copies of the Company’s most recent
registration statements and annual, quarterly, monthly or other regular
reports which the Company files with the Securities and Exchange Commission
(the “SEC”), and (ii) the issuance thereof, copies of such financial
statements, reports and proxy statements as the Company shall send to its
stockholders; and 

	
 

	
 

	
 

	
          (e)
    Promptly following request such other information respecting the Company
    and its Subsidiaries as the Purchaser shall reasonably request.

The Company shall
  timely file with the SEC all reports required to be filed pursuant to the
  Exchange Act and refrain from terminating its status as an issuer required by
  the Exchange Act to file reports thereunder even if the Exchange Act or the
  rules or regulations thereunder would permit such termination.

                    Use
  of Funds. The Company shall use the proceeds of the sale of the Note and
  the Warrants for general working capital purposes (it being understood that
  the amount of the Note includes, without limitation, (i) the $25,000,000
  previously advanced and outstanding under the Original Note, the proceeds of
  which have already been spent by the Company, (ii) $3,750,000 resulting from
  a Default Payment on the Original Note to be made on the date of the issuance
  of the Note. 

                    6.6
Access to Facilities. Each of the Company and each of its Subsidiaries will
permit any representatives designated by the Purchaser (or any successor of
the Purchaser), upon reasonable notice and during normal business hours, at
such person’s expense and accompanied by a representative of the Company or
any Subsidiary (provided that no such prior notice shall be required to be
given and no such representative of the Company or any Subsidiary shall be
required to accompany the Purchaser in the event the Purchaser believes such
access is necessary to preserve or protect the Collateral (as defined in the
Master Security Agreement) or following the occurrence and during the
continuance of an Event of Default (as defined in the Note)), to: 

23

	
 

	
 

	
 

	
 

	
          (a)
    visit and inspect any of the properties of the Company or any of its
    Subsidiaries;

	
 

	
 

	
 

	
          (b)
    examine the corporate and financial records of the Company or any of its
    Subsidiaries (unless such examination is not permitted by federal, state or
    local law or by contract) and make copies thereof or extracts therefrom;
    and

	
 

	
 

	
 

	
          (c)
    discuss the affairs, finances and accounts of the Company or any of its
    Subsidiaries with the directors, officers and independent accountants of
    the Company or any of its Subsidiaries.

Notwithstanding the
  foregoing, neither the Company nor any of its Subsidiaries will provide any
  material, non-public information to the Purchaser unless the Purchaser signs
  a confidentiality agreement and otherwise complies with Regulation FD and
  other applicable federal securities laws.

                    6.7
  Taxes. Each of the Company and each of its Subsidiaries will promptly
  pay and discharge, or cause to be paid and discharged, when due and payable,
  all taxes, assessments and governmental charges or levies imposed upon the
  income, profits, property or business of the Company and its Subsidiaries;
  provided, however, that any such tax, assessment, charge or levy need not be
  paid currently if (i) the validity thereof shall currently and diligently be
  contested in good faith by appropriate proceedings, (ii) such tax,
  assessment, charge or levy shall have no effect on the lien priority of the
  Purchaser’s liens (if any) on the affected property of the Company or any of
  its Subsidiaries, and (iii) the Company and/or such Subsidiary shall have set
  aside on its books adequate reserves with respect thereto in accordance with
  GAAP; and provided, further, that the Company and its Subsidiaries will pay
  all such taxes, assessments, charges or levies forthwith upon the
  commencement of proceedings to foreclose any lien which may have attached as
  security therefor.

                    6.8
  Insurance. Each of the Company and its Subsidiaries will keep its
  assets which are of an insurable character insured by financially sound and
  reputable insurers against loss or damage by fire, explosion and other risks
  customarily insured against by companies in similar business similarly
  situated as the Company and its Subsidiaries; and the Company and its
  Subsidiaries will maintain, with financially sound and reputable insurers,
  insurance against other hazards and risks and liability to persons and
  property to the extent and in the manner which the Company reasonably
  believes is customary for companies in similar business similarly situated as
  the Company and its Subsidiaries and to the extent available on commercially
  reasonable terms. The Company, and each of its Subsidiaries, will jointly and
  severally bear the full risk of loss from any loss of any nature whatsoever
  with respect to their respective assets pledged to the Purchaser as security
  for their respective obligations hereunder and under the Related Agreements.
  At the Company’s and each of its Subsidiaries’ joint and several cost and
  expense in amounts and with carriers reasonably acceptable to the Purchaser, each
  of the Company and each of its Subsidiaries shall (i) keep all its insurable
  properties and its insurable interests in properties in which it has an
  interest insured against the hazards of fire, flood, sprinkler leakage, those
  hazards covered by extended coverage insurance and such other hazards, and
  for such amounts and with such deductibles, as is reasonable and customary in
  the case of companies engaged in businesses similar to the Company’s or the
  respective Subsidiary’s; (ii) maintain a

24

bond in such amounts as
  is customary in the case of companies engaged in businesses similar to the
  Company’s or the respective Subsidiary’s insuring against larceny,
  embezzlement or other criminal misappropriation of insured’s officers and
  employees who may either singly or jointly with others at any time have
  access to the assets or funds of the Company or any of its Subsidiaries
  either directly or through governmental authority to draw upon such funds or
  to direct generally the disposition of such assets; (iii) maintain public and
  product liability insurance against claims for personal injury, death or
  property damage suffered by others; (iv) maintain all such worker’s
  compensation or similar insurance as may be required under the laws of any
  state or jurisdiction in which the Company or the respective Subsidiary is
  engaged in business; and (v) furnish the Purchaser with (x) copies of all
  policies and evidence of the maintenance of such policies at least thirty
  (30) days before any expiration date, (y) excepting the Company’s fidelity
  bonds, workers’ compensation policy, D&O Policies, and insurance that is
  part of a Permitted Encumbrance, endorsements to such policies naming the
  Purchaser as “co-insured” or “additional insured” and in the case of casualty
  losses to tangible personal property pledged to the Purchaser appropriate
  loss payable endorsements, in form and substance satisfactory to the
  Purchaser, naming the Purchaser as loss payee, and (z) evidence that as to
  the Purchaser the insurance coverage shall not be impaired or invalidated by
  any act or neglect of the Company or any Subsidiary and the insurer will
  provide the Purchaser with at least thirty (30) days notice prior to
  cancellation. The Company and each Subsidiary shall instruct the insurance
  carriers that in the event of any casualty loss thereunder for which the
  Purchaser is the applicable loss payee, the carriers shall make payment for
  such loss to the Company and/or the Subsidiary and the Purchaser jointly. In
  the event that as of the date of receipt of each such casualty loss recovery
  upon any such insurance, the Purchaser has not declared an Event of Default
  (as defined in the Note), then the Company and/or such Subsidiary shall be
  permitted to direct the application of such loss recovery proceeds toward
  investment in property, plant and equipment that would comprise “Collateral”
  secured by the Purchaser’s security interest pursuant to the Master Security
  Agreement or if not applicable, such other security agreement as shall be
  required by the Purchaser, with any surplus funds to be applied toward
  payment of the obligations of the Company to the Purchaser as a permitted
  voluntary prepayment without premium or penalty. In the event that the
  Purchaser has properly declared an Event of Default, then all such casualty
  loss recoveries received by the Purchaser upon any such insurance thereafter
  may be applied to the obligations of the Company hereunder and under the
  Related Agreements, in such order as the Purchaser may determine. Any surplus
  (following satisfaction of all of the Company’s outstanding obligations to
  the Purchaser) shall be paid by the Purchaser to the Company or applied as
  may be otherwise required by law. Any deficiency thereon shall be paid by the
  Company or the Subsidiary, as applicable, to the Purchaser, on demand. 

                    6.9
  Intellectual Property. Each of the Company and each of its
  Subsidiaries shall maintain in full force and effect its existence, rights
  and franchises and all licenses and other rights to use Intellectual Property
  owned or licensed by it and reasonably deemed to be necessary and of
  continued value to the conduct of its business.

                    6.10
  Properties. Each of the Company and each of its Subsidiaries will keep
  its equipment and real properties in good repair, working order and
  condition, reasonable wear and tear and retirement excepted, and from time to
  time make all needful and proper repairs, renewals, replacements, additions
  and improvements thereto; and each of the Company and each of its Subsidiaries
  will at all times comply with each provision of all leases to which it is a
  party

25

or under which it
  occupies property if the breach of such provision could, either individually
  or in the aggregate, reasonably be expected to have a Material Adverse
  Effect.

                    6.11
  Confidentiality. The Company will not, and will not permit any of its
  Subsidiaries to, disclose, and will not include in any public announcement,
  the name of the Purchaser, unless expressly agreed to by the Purchaser or
  unless and until such disclosure is required by law or applicable regulation,
  and then only to the extent of such requirement. Notwithstanding the
  foregoing, the Company may disclose the Purchaser’s identity and the terms of
  this Agreement to its current and prospective debt and equity financing
  sources. The Purchaser acknowledges that, promptly following execution and
  delivery, conformed copies of this Agreement and the Related Agreements and
  all amendments thereto may (notwithstanding the foregoing) be filed by the
  Company as material agreements with the SEC.

                    6.12
  Required Approvals. The Company, without the prior written consent of
  the Purchaser, shall not, and shall not permit any of its Subsidiaries to:

	
 

	
 

	
 

	
 

	
          (a)
    (i) directly or indirectly declare or pay any cash dividends, other than
    cash dividends paid to the Company or any of its wholly-owned Subsidiaries,
    (ii) issue any Preferred Stock that has a scheduled mandatory redemption
    date prior to the one year anniversary of the Maturity Date (as defined in
    the Note) or (iii) redeem any of its Preferred Stock or other equity
    interests;

	
 

	
 

	
 

	
          (b)
    liquidate, dissolve or effect a material reorganization (it being
    understood that in no event shall the Company or any of its Subsidiaries
    dissolve, liquidate or merge with any other person or entity (unless, in
    the case of such a merger involving the Company, the Company is the
    surviving entity, or, in the case of merger not involving the Company, any
    Subsidiary or any entity acquired by the Company or any Subsidiary, as
    applicable, is the surviving entity);

	
 

	
 

	
 

	
          (c)
    become subject to (including, without limitation, by way of amendment to or
    modification of) any agreement or instrument that by its terms would (under
    any circumstances) restrict the right of the Company or any of its
    Subsidiaries to perform the provisions of this Agreement, any Related
    Agreement or any of the currently and expressly agreements contemplated
    hereby or thereby; 

	
 

	
 

	
 

	
          (d)
    materially alter or change the scope of the business of the Company and its
    Subsidiaries taken as a whole; or

	
 

	
 

	
 

	
          (e)
    (i) create, incur, assume or suffer to exist any indebtedness (exclusive of
    Permitted Indebtedness, as hereinafter defined) whether secured or
    unsecured, other than (A) the Company’s indebtedness owed under this
    Agreement or any Related Agreement, (B) the pari passu debt aggregating
    $4,000,000 (the “Pari Passu Indebtedness”) listed in Schedule 6.13(e)
    hereto and made a part hereof, and the other indebtedness (if any) set
    forth on Schedule 6.13(e) attached hereto and made a part hereof, and any
    refinancings or replacements thereof on terms no less favorable as a whole
    to the Purchaser than the indebtedness being refinanced or replaced , as
    determined by Purchaser in its sole discretion, (C) any indebtedness
    incurred to finance the purchase of equipment not in

26

	
 

	
 

	
 

	
 

	
excess of five percent (5%) of the fair market
    value of the Company’s and its Subsidiaries’ assets, and any indebtedness
    incurred in connection with the purchase of assets (other than equipment),
    or any restatements, refinancings or replacements thereof on terms no less
    favorable as a whole to the Purchaser than the indebtedness being restated,
    refinanced or replaced, as determined by Purchaser in its sole discretion,
    so long as any lien relating thereto shall only encumber the fixed assets
    so purchased or leased (and the products and proceeds thereof, insurance
    therefor and warranty and other contract rights related thereto) and no
    other assets of the Company or any of its Subsidiaries, (D) intercompany
    loans and advance among the Company and its subsidiaries, (E) short-term
    unsecured trade obligations for the purchase of goods or services in the
    ordinary course, and (F) additional subordinated debt in such amounts and
    on such subordination and other terms as the Purchaser may approve from
    time to time, and any refinancings or replacements thereof on terms no less
    favorable as a whole to the Purchaser than the indebtedness being
    refinanced or replaced, as determined by Purchaser in its sole discretion,
    (the indebtedness permitted by clauses (A) through (F) being referred to as
    “Permitted Indebtedness”); (ii) cancel any indebtedness owing to it in
    excess of $50,000 in the aggregate during any 12 month period, excluding
    the settlement of any account in the ordinary course, and any intercompany
    loans and advances among the Company and its Subsidiaries,; (iii) assume,
    guarantee, endorse or otherwise become directly or contingently liable in
    connection with any obligations of any other person or entity, except for
    (A) the endorsement of negotiable instruments by the Company or any
    Subsidiary thereof for deposit or collection or similar transactions in the
    ordinary course of business, (B) any guarantees and indemnifications
    respecting indebtedness otherwise permitted to be outstanding pursuant to
    this clause (e), (C) guarantees by the Company or any Subsidiary of any
    obligation of any Subsidiary or the Company that could have been incurred
    directly by the guarantor without violating this Agreement or any Related
    Agreement, and (D) any guarantees of indebtedness set forth on Schedule
    6.13(e) attached hereto and made a part hereof (the guarantees permitted by
    clauses (A) through (F) being referred to as “Permitted Guarantees”);

	
 

	
 

	
 

	
          (f)
    Enter into any material contract (as such term is defined in Item 1.01 of
    Form 8-K promulgated by the SEC); 

	
 

	
 

	
 

	
          (g)
    Other than as set forth in the Budget, enter into any transaction in which
    the aggregate consideration to be paid by the Company, either individually
    or in the aggregate, exceeds $25,000; and

	
 

	
 

	
 

	
          (h)
    create or acquire any Subsidiary after the date hereof unless (i) such
    Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such
    Subsidiary becomes a party to the Master Security Agreement, the Stock
    Pledge Agreement and the Subsidiary Guaranty (either by executing a
    counterpart thereof or an assumption or joinder agreement in respect
    thereof) and, to the extent required by the Purchaser, satisfies each
    condition of this Agreement and the Related Agreements as if such
    Subsidiary were a Subsidiary on the Closing Date.

                    6.13
  Mandatory Prepayments. All net proceeds (after reasonable transaction
  expenses) obtained from any of the following must be applied, subject to the
  terms of the

27

Subordination
  Agreement, first, to any principal, interest, or fees outstanding pursuant to
  the Note, and second, to any other indebtedness owed to Purchaser:

	
 

	
 

	
 

	
 

	
          (a)
    Proceeds obtained from any asset sale, other than in the ordinary course of
    business;

	
 

	
 

	
 

	
          (b)
    Proceeds obtained from the sale of any securities of the Company or of any
    of the Subsidiaries, except for (i) any Qualified Financing (which shall be
    applied as set forth in Section 6.15)

	
 

	
 

	
 

	
          (c)
    Proceeds obtained from the sale of any of the Collateral, other than in the
    ordinary course of business.

                    6.14
  Application of Capital Raised in a Qualified Financing. The Company
  may not obtain capital in any financing other than a Qualified Financing.

	
 

	
 

	
 

	
 

	
 

	
          (a)
    A “Qualified Financing” shall mean a financing by the Company or any of the
    Subsidiaries, or sale of any assets of the Company or any Subsidiary,
    outside the ordinary course of business, that:

	
 

	
 

	
 

	
 

	
          (i)
    has been approved by the Board of Directors of the Company, management of
    the Company and the Purchaser;

	
 

	
 

	
 

	
 

	
 

	
          (ii)
    will proportionately dilute all shareholders inclusive of any warrant or
    options outstanding, if applicable;

	
 

	
 

	
 

	
 

	
          (b)
    All net proceeds (after reasonable transaction expenses) obtained in a
    Qualified Financing shall be applied as follows:

	
 

	
 

	
 

	
 

	
          (i)
    75% of the proceeds of a Qualified Financing shall be applied: first, to
    the Note; and secondly, to any other obligations of the Company to the
    Purchaser;

	
 

	
 

	
 

	
 

	
 

	
          (ii)
    25% of the proceeds of a Qualified Financing shall be used by the Company
    for working capital purposes.

                    6.15
  Reissuance of Securities. The Company agrees to reissue certificates
  representing the Warrant Shares without the legends set forth in Section 5.8
  above at such time as:

	
 

	
 

	
 

	
          (a)
    the holder thereof is permitted to dispose of such Warrant Shares pursuant
    to Rule 144(k) under the Securities Act; or

	
 

	
 

	
 

	
          (b)
    upon resale subject to an effective registration statement after such
    Warrant Shares are registered under the Securities Act.

The Company agrees to
  cooperate with the Purchaser in connection with all resales pursuant to Rule
  144(d) and Rule 144(k) and provide legal opinions necessary to allow such
  resales provided

28

the Company and its
  counsel receive reasonably requested representations from the Purchaser and
  broker, if any, including (without limitation) the representations required
  by applicable law.

                    6.16
  Opinion. On the Closing Date, the Company will deliver to the
  Purchaser an opinion acceptable to the Purchaser from the Company’s external
  legal counsel. The Company will provide, at the Company’s expense, such other
  legal opinions in the future as are deemed reasonably necessary by the
  Purchaser (and acceptable to the Purchaser) in connection with the exercise
  of the Warrants.

                    6.17
  Margin Stock. The Company will not permit any of the proceeds of the
  Note or the Warrants to be used directly or indirectly to “purchase” or
  “carry” “margin stock” or to repay indebtedness incurred to “purchase” or
  “carry” “margin stock” within the respective meanings of each of the quoted
  terms under Regulation U of the Board of Governors of the Federal Reserve
  System as now and from time to time hereafter in effect.

                    6.18
  Restricted Cash Disclosure. The Company agrees that, in connection with
  its filing of its 8-K Report with the SEC concerning the transactions
  contemplated by this Agreement and the Related Agreements (such report, the
  “Laurus Transaction 8-K”) in a timely manner after the date hereof, it will
  disclose in such Laurus Transaction 8-K the amount of the proceeds of the
  Note issued to the Purchaser that has been placed in a restricted cash
  account and is subject to the terms and conditions of this Agreement and the
  Related Agreements. Furthermore, the Company agrees to disclose in all public
  filings required by the Commission (where appropriate) following the filing
  of the Laurus Transaction 8-K the existence of the restricted cash referred
  to in the immediately preceding sentence, together with the amount thereof.

                    6.19
  No Restriction on Future Investment by Purchaser. The Company will
  not, and will not permit its Subsidiaries to, agree, directly or indirectly,
  to any restriction with any person or entity limiting the ability of the
  Purchaser to provide any additional funds and/or the sale or issuance any
  equity interests of the Company or any of its Subsidiaries with the Company
  or any of its Subsidiaries.

                    6.20
  Authorization and Reservation of Shares. Following the increase in the
  authorized shares of Common Stock required pursuant to Section 6.3 hereof,
  the Company shall at all times have authorized and reserved a sufficient
  number of shares of Common Stock to provide for the exercise of the Warrants.

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

                    7.1
  Confidentiality. The Purchaser will not disclose, and will not include
  in any public announcement, the name of the Company, unless expressly agreed
  to by the Company or unless and until such disclosure is required by law or
  applicable regulation, and then only to the extent of such requirement.

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

29

                    7.3
  Limitation on Acquisition of Common Stock of the Company.
  Notwithstanding anything to the contrary contained in this Agreement, any
  Related Agreement or any document, instrument or agreement entered into in
  connection with any other transactions between the Purchaser and the Company,
  the Purchaser may not acquire stock in the Company (including, without
  limitation, pursuant to a contract to purchase, by exercising an option or
  warrant, by converting any other security or instrument, by acquiring or
  exercising any other right to acquire, shares of stock or other security
  convertible into shares of stock in the Company, or otherwise, and such
  contracts, options, warrants, conversion or other rights shall not be
  enforceable or exercisable) to the extent such stock acquisition would cause
  any interest (including any original issue discount) payable by the Company
  to the Purchaser not to qualify as “portfolio interest” within the meaning of
  Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code,
  taking into account the constructive ownership rules under Section
  871(h)(3)(C) of the Code (the “Stock Acquisition Limitation”). The Stock
  Acquisition Limitation shall automatically become null and void without any
  notice to the Company upon the earlier to occur of either (a) the Company’s
  delivery to the Purchaser of a Notice of Redemption (as defined in the Note)
  or (b) the existence of an Event of Default (as defined in the Note).

                    7.4
  (a) Warrant Cancellations. If the following conditions (the
  “Cancellation Conditions”) have been met within thirty-six (36) months of the
  date hereof, then Warrant E shall be automatically cancelled. Furthermore, if
  the Cancellation Conditions have not been met, then the Company shall not be
  permitted to issue any warrants to any party including, without limitation,
  Richard Rakowski (“Rakowski”). Once the Cancellation Conditions have been
  met, Rakowski shall be issued a warrant for the same number of shares as are
  represented by Warrant E; however, at such time, the Company still shall not
  be permitted to issue any other warrants.

	
 

	
 

	
 

	
 

	
 

	
 

	
          (i)
    All of the Company’s outstanding obligations to the Purchaser have been
    repaid;

	
 

	
 

	
 

	
 

	
 

	
 

	
          (ii)
    The Company’s Total Debt (as defined below) divided by the aggregate amount
    of EBITDA (as defined below) for a twelve month period has not exceeded 4.0
    for four consecutive months.

	
 

	
 

	
 

	
 

	
 

	
          (iii)
    For purposes of this Agreement, “EBITDA” shall mean earnings before
    interest, taxes, depreciation and amortization, determined in accordance
    with generally accepted accounting principles as in effect from time to
    time in the United States of America, and for avoidance of doubt, shall not
    give effect to any extraordinary non-cash gains or non-cash losses.

	
 

	
 

	
 

	
 

	
          For
    purposes of this Agreement, “Total Debt” shall mean, for any person: (i) all
    indebtedness or other obligations of such person for borrowed money or for
    the deferred purchase price of property or services; (ii) all obligations
    evidenced by notes, bonds, debentures or similar instruments, including
    obligations so evidenced incurred in connection with the acquisition of
    property, assets or businesses; (iii) all indebtedness created or arising
    under any conditional sale or other title retention agreement with respect
    to property acquired by such person (even though the rights and remedies of
    the seller or lender under such agreement in the event of default are
    limited to repossession 

30

	
 

	
 

	
 

	
or sale of such property); (iv) all obligations
    under capital leases; (v) all reimbursement or other obligations of such
    person under or in respect of letters of credit and bankers acceptances,
    (vi) all reimbursement or other obligations of such person in respect of
    any bank guaranties, shipside bonds, surety bonds and similar instruments
    issued for the account of such person or as to which such person is
    otherwise liable for reimbursement of drawings or payments; (vii) all
    guaranty obligations of such person; and (viii) all indebtedness of another
    person (a “Third Party”) secured by any lien upon or in property owned by
    such person, whether or not such person has assumed or become liable for
    the payment of such indebtedness of such Third Party. For all purposes
    hereof, the Total Debt of any person shall include the Total Debt of any
    partnership or joint venture (other than a joint venture that is itself a
    corporation or limited liability company) in which such person is a general
    partner or a joint venturer, unless such Total Debt is expressly made
    non-recourse to such person (subject only to customary recourse
    exceptions). (b) Until the earlier to occur of (i) cancellation of Warrant
    E and (b) the thirty-sixth (36th) month anniversary of the date
    hereof, the Purchaser agrees that it shall not transfer Warrant E to any
    third party.

                    7.5
  Rakowski Employment Agreement. The Company shall not enter into any
  employment or compensation arrangement with Rakowski without the Purchaser’s
  written consent to the form and content of any such arrangement or agreement.

          8.
  Covenants of the Company and the Purchaser Regarding Indemnification.

                    8.1
Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser’s
officers, directors, agents, affiliates, control persons, and principal
shareholders, against all claims, costs, expenses, liabilities, obligations,
losses or damages (including reasonable legal fees) of any nature (“Purchaser
Losses”), incurred by or imposed upon the Purchaser that result, arise out of
or are based upon: (i) any misrepresentation by the Company or any of its
Subsidiaries or breach of any warranty by the Company or any of its
Subsidiaries in this Agreement, any Related Agreement or in any exhibits or
schedules attached hereto or thereto; or (ii) any breach or default in
performance by Company or any of its Subsidiaries of any covenant or
undertaking to be performed by Company or any of its Subsidiaries hereunder,
under any Related Agreement or under any other agreement entered into by the
Company and/or any of its Subsidiaries and the Purchaser relating hereto or
thereto; in each case excluding all Purchaser Losses to the extent occasioned
by the gross negligence, willful misconduct or bad faith of any such
indemnified person as finally determined pursuant to applicable law.  

                    8.2
Purchaser’s Indemnification. The Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each of the
Company’s officers, directors, agents, affiliates, control persons and principal shareholders, at all times against any claims,
costs, expenses, liabilities, obligations, losses or damages (including reasonable legal fees) of any nature (“Company Losses”),
incurred by or imposed upon the Company that result, arise out of or are based upon: (i) any misrepresentation by the Purchaser or
breach of any warranty by the Purchaser in this Agreement or any Related Agreement or in any exhibits or schedules attached hereto or
thereto; or (ii) any breach or default in performance by the Purchaser of any covenant or undertaking to be performed by the
Purchaser hereunder, under any Related 

31

Agreement or under any other agreement entered into by the Company and the Purchaser relating hereto or thereto; in each case
excluding all Company Losses to the extent occasioned by the gross negligence, willful misconduct or bad faith of any such
indemnified person as finally determined pursuant to applicable law.

          9.
  Exercise of the Warrants.

                              9.1
  Mechanics of Exercise.

	
 

	
 

	
 

	
          (a)
    Provided the Purchaser has notified the Company of the Purchaser’s
    intention to sell the Warrant Shares in accordance with the Warrants and
    the Warrant Shares are included in an effective registration statement or
    are otherwise exempt from registration in the amount to be sold: (i) upon
    the exercise of the Warrants or part thereof, the Company shall, at its own
    cost and expense, take all necessary action (including the issuance of an
    opinion of counsel reasonably acceptable to the Purchaser following a
    request by the Purchaser) to assure that the Company’s transfer agent shall
    issue shares of the Company’s Common Stock in the name of the Purchaser (or
    its nominee) or such other persons as designated by the Purchaser in
    accordance with Section 9.1(b) hereof and in such denominations to be
    specified representing the number of Warrant Shares issuable upon such
    exercise; and (ii) the Company warrants that no instructions other than
    these instructions have been or will be given by the Company to the
    transfer agent of the Company’s Common Stock and that after the
    Effectiveness Date (as defined in the Registration Rights Agreement) the
    registered Warrant Shares issued will be freely transferable subject to the
    prospectus delivery requirements of the Securities Act and the provisions
    of this Agreement, and will not contain a legend restricting the resale or
    transferability of the registered Warrant Shares.

	
 

	
 

	
 

	
          (b)
    The Purchaser will give notice of its decision to exercise its right to
    exercise the Warrants or part thereof by telecopying or otherwise
    delivering an executed and completed notice of the number of shares to be
    subscribed to the Company (the “Form of Subscription”). The Purchaser will
    not be required to surrender the Warrants until the Purchaser receives a
    credit to the account of the Purchaser’s prime broker through the DWAC
    system (as defined below), representing the Warrant Shares or until the
    Warrants have been fully exercised. Each date on which a Form of
    Subscription is telecopied or delivered to the Company in accordance with
    the provisions hereof shall be deemed a “Exercise Date.” Pursuant to the
    terms of the Form of Subscription, the Company will issue instructions to
    the transfer agent accompanied by an opinion of counsel within three (3)
    business days of the date of the delivery to the Company of the duly and
    timely completed Form of Subscription and payment therefore (the
    “Instruction Date”) and shall use its best efforts to cause the transfer
    agent to promptly transmit the certificates representing the Warrant Shares
    set forth in the applicable Form of Subscription to the Holder by crediting
    the account of the Purchaser’s prime broker with the Depository Trust
    Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”)
    system within three (3) business days after the Instruction Date (the
    “Delivery Date”).

32

	
 

	
 

	
 

	
          (c)
    The Company understands that a delay in the delivery of the Warrant Shares
    in the form required pursuant to Section 9 hereof beyond the Delivery Date
    could result in economic loss to the Purchaser. In the event that the
    Company fails to direct its transfer agent to deliver the Warrant Shares to
    the Purchaser via the DWAC system within the time frame set forth in
    Section 9.1(b) above and the Warrant Shares are not delivered to the
    Purchaser by the Delivery Date, as compensation to the Purchaser for such
    loss, the Company agrees to pay late payments to the Purchaser for late
    issuance of the Warrant Shares in the form required pursuant to Section 9
    hereof upon exercise of the Warrants in the amount equal to the greater of:
    (i) $500 per business day after the Delivery Date; or (ii) the Purchaser’s
    actual damages from such delayed delivery. The Company shall pay any
    payments incurred under this Section in immediately available funds upon
    demand and, in the case of actual damages, accompanied by reasonable
    documentation of the amount of such damages. Such documentation shall show
    the number of shares of Common Stock (if any) that the Purchaser was forced
    to purchase (in an open market transaction) which the Purchaser anticipated
    receiving upon such exercise, and shall be calculated as the amount by
    which (A) the Purchaser’s total purchase price (including customary
    brokerage commissions, if any) for the shares of Common Stock so purchased
    exceeds (B) the aggregate amount of the Exercise Price for the Warrants,
    for which such Form of Subscription was not timely honored. 

          10.
  Registration Rights.

	
 

	
 

	
 

	
                    10.1
  Registration Rights Granted. The Company hereby grants registration
  rights to the Purchaser pursuant to the Registration Rights Agreement. 

          11.
  Miscellaneous.

                                11.1
  Governing Law, Jurisdiction and Waiver of Jury Trial.

	
 

	
 

	
 

	
 

	
          (a)
    THIS AGREEMENT AND THE RELATED AGREEMENTS SHALL BE GOVERNED BY AND
    CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE
    OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
    WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS; PROVIDED, HOWEVER, THAT
    THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY
    INTERESTS CREATED PURSUANT TO THE RELATED AGREEMENTS SHALL BE GOVERNED BY
    AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE APPLICABLE LAWS OF (A)
    THE STATE IN WHICH THE APPLICABLE COMPANY OR SUBSIDIARY IS ORGANIZED IN THE
    CASE OF TYPES OF COLLATERAL IN WHICH SECURITY INTERESTS CAN BE PERFECTED BY
    THE FILING OF UCC FINANCING STATEMENTS IN THAT STATE OR (B) IN ALL OTHER
    CASES THE STATE IN WHICH THE APPLICABLE ASSET OR PROPERTY IS LOCATED OR
    DEEMED LOCATED.

	
 

	
 

	
 

	
          (b)
    THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
    LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
    JURISDICTION TO HEAR 

33

	
 

	
 

	
 

	
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND, PERTAINING
TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS;
PROVIDED, THAT THE PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE
COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE
MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS
DEFINED IN THE MASTER SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE COMPANY EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT
IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY FEDERAL EXPRESS OR REGISTERED OR CERTIFIED MAIL DELIVERED TO THE
COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE COMPANY’S ACTUAL RECEIPT THEREOF OR FOUR
(4) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS FOR DELIVERY BY SUCH MAIL
AND PROPER POSTAGE PREPAID. 

	
 

	
 

	
 

	
          (c)
    THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
    APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
    OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
    RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
    RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE
    BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH,
    RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
    CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENT OR THE TRANSACTIONS
    RELATED HERETO OR THERETO.

	
 

	
 

	
 

	
                    11.2
  Severability. Wherever possible each provision of this Agreement and
  the Related Agreements shall be interpreted in such manner as to be effective
  and valid under applicable law, but if any provision of this Agreement or any
  Related Agreement shall be prohibited by or invalid or illegal under
  applicable law such provision shall be ineffective to the extent of such
  prohibition or invalidity or illegality, without invalidating

34

	
 

	
 

	
 

	
the remainder of such provision
  or the remaining provisions thereof which shall not in any way be affected or
  impaired thereby.

	
 

	
 

	
 

	
                    11.3
  Survival. The representations, warranties, covenants and agreements of
  the parties made herein shall survive any investigation made by the parties
  and the closing of the transactions contemplated hereby to the extent
  provided therein. All statements as to factual matters contained in any
  certificate or other instrument delivered by or on behalf of the Company
  pursuant hereto in connection with the transactions contemplated hereby shall
  be deemed to be representations and warranties by the Company hereunder
  solely as of the date of such certificate or instrument. All indemnities set
  forth herein shall survive the execution, delivery and termination of this
  Agreement and the Note, and the making and repayment of the obligations
  arising hereunder, under the Note and under the other Related Agreements.

	
 

	
 

	
 

	
                    11.4
  Successors and Assigns. Except as otherwise expressly provided herein,
  this Agreement and the Related Agreements shall inure to the benefit of, and
  be binding upon and enforceable by, the successors, heirs, executors,
  administrators and permitted assigns of the parties hereto. The Purchaser
  shall not be permitted to assign this Agreement or Related Agreement or any
  of its rights hereunder or thereunder to a competitor of the Company unless
  an Event of Default (as defined in the Note) has occurred and is continuing.
  Notwithstanding anything to the contrary in this Agreement or any Related
  Agreement, and irrespective of any permitted assignment of this Agreement or
  any Related Agreement (in whole or in part): until the first anniversary of
  the date hereof: (a) the Company and its Subsidiaries shall be entitled at
  all times to deal exclusively with the Purchaser respecting this Agreement
  and the Related Agreements, the administration hereof and thereof and its
  performance hereunder and thereunder, including (without limitation) (i) any
  supplement to, modification, amendment, restatement or waiver of or departure
  from this Agreement or any Related Agreement or any release of Collateral
  (each a “Modification”), (ii) the delivery of any notice, report, other
  document or further assurance, or (iii) any payment or collateral
  administration; (b) the Purchaser shall not assign or delegate (in whole or
  in part) to any other person in its sole discretion its right or power to
  review, approve or sign any Modification or to administer this Agreement or
  any Related Agreement; and (c) no permitted assignee shall have any right or
  power whatsoever to review, approve or sign any Modification or to administer
  this Agreement or any Related Agreement, irrespective of its agreements and
  understandings with the Purchaser.

	
 

	
 

	
 

	
                    11.5
  Entire Agreement; Maximum Interest. This Agreement and the exhibits
  and schedules hereto constitute the full and entire understanding and
  agreement between the parties with regard to the subjects hereof, and
  supersede and completely replace any and all (and no party shall be liable or
  bound to any other in any manner by any) prior or other representations,
  warranties, covenants, promises, assurances or other agreements or
  understandings (whether written, oral, express, implied or otherwise) with
  regard to the subjects hereof except as specifically set forth herein.
  Nothing contained in this Agreement, any Related Agreement or in any document
  referred to herein or delivered in connection herewith shall be deemed to
  establish or require the payment of a rate of interest or other charges in
  excess of the maximum rate permitted by applicable law. In the event that the
  rate of interest or dividends required to be paid or other charges hereunder
  exceed the

35

	
 

	
 

	
 

	
 

	
maximum rate permitted by such
  law, any payments in excess of such maximum shall be credited against
  principal amounts owed by the Company to the Purchaser (as a permitted
  prepayment without premium or penalty) and thus refunded to the Company.

	
 

	
 

	
 

	
                    11.6
  Amendment and Waiver. Subject to Section 11.4 hereof:

	
 

	
 

	
 

	
          (a)
    Except as otherwise provided in subsection (b) or (c) of this Section with
    respect to waivers, this Agreement may be restated, supplemented, amended
    or modified only in a written agreement between the Company and the
    Purchaser.

	
 

	
 

	
 

	
          (b)
    The obligations of the Company and the rights of the Purchaser under this
    Agreement may be waived only with the written consent of the Purchaser. 

	
 

	
 

	
 

	
          (c)
    The obligations of the Purchaser and the rights of the Company under this
    Agreement may be waived only with the written consent of the Company.

	
 

	
 

	
 

	
                    11.7
  Delays or Omissions. It is agreed that no delay or omission to
  exercise any right, power or remedy accruing to any party, upon any breach,
  default or noncompliance by another party under this Agreement or the Related
  Agreements, shall impair any such right, power or remedy, nor shall it be
  construed to be a waiver of any such breach, default or noncompliance, or any
  acquiescence therein, or of or in any similar breach, default or
  noncompliance thereafter occurring. All remedies, either under this Agreement
  or the Related Agreements, by law or otherwise afforded to any party, shall
  be cumulative and not alternative.

	
 

	
 

	
 

	
                    11.8
  Notices. All notices required or permitted hereunder shall be in
  writing and shall be deemed effectively given:

	
 

	
 

	
 

	
          (a)
  upon personal delivery to the party to be notified;

	
 

	
 

	
 

	
          (b)
  when sent by confirmed facsimile if sent during normal business hours of the
  recipient, and if not, then on the next business day;

	
 

	
 

	
 

	
          (c)
  four (4) business days after having been sent by registered or certified
  mail, return receipt requested, postage prepaid; or

	
 

	
 

	
 

	
          (d) one (1) business day after deposit on a
  business day in time for that evening’s pickup with a nationally recognized
  overnight courier, specifying next day delivery, with written verification of
  receipt.

36

All communications shall be sent
  as follows:

	
 

	
 

	
 

	
 

	
If to the Company,

	
TRUEYOU.COM INC.

	
 

	
to:

	
          501
    Merritt 7, 5th Floor

	
 

	
 

	
          Norwalk,
    Connecticut 06851

	
 

	
 

	
          Attention: Chief Financial Officer

	
 

	
 

	
 

	
 

	
 

	
Attention: Chief
    Financial Officer

	
 

	
 

	
Facsimile: Facsimile: 203-295-2102

	
 

	
 

	
 

	
 

	
 

	
with a copy to:

	
 

	
 

	
 

	
 

	
 

	
          Troutman
    Sanders LLP

	
 

	
 

	
          405
    Lexington Avenue

	
 

	
 

	
          New
    York, New York 10174

	
 

	
 

	
 

	
 

	
 

	
Attention: Edward
    R. Mandell

	
 

	
 

	
Facsimile: 212-704-6160

	
 

	
 

	
 

	
 

	
If to the Purchaser,

	
Laurus Master Fund, Ltd.

	
 

	
to:

	
c/o M&C Corporate Services Limited

	
 

	
 

	
P.O. Box 309 GT

	
 

	
 

	
Ugland House

	
 

	
 

	
George Town

	
 

	
 

	
South Church Street

	
 

	
 

	
Grand Cayman, Cayman Islands

	
 

	
 

	
Facsimile: 345-949-8080

	
 

	
 

	
 

	
 

	
 

	
with a copy to:

	
 

	
 

	
 

	
 

	
 

	
John E. Tucker, Esq.

	
 

	
 

	
825 Third Avenue 14th Floor

	
 

	
 

	
New York, NY 10022

	
 

	
 

	
Facsimile: 212-541-4434

or at such other address as the
  Company or the Purchaser may designate by written notice to the other parties
  hereto given in accordance herewith.

	
 

	
 

	
 

	
                    11.9
    Attorneys’ Fees. In the event that any suit or action is instituted
    to enforce any provision in this Agreement or any Related Agreement, the
    prevailing party in such dispute shall be entitled to recover from the
    losing party all fees, costs and expenses of enforcing any right of such
    prevailing party under or with respect to this Agreement and/or such
    Related Agreement, including, without limitation, such reasonable fees and
    expenses of attorneys and accountants, which shall include, without
    limitation, all fees, costs and expenses of appeals.

37

	
 

	
 

	
 

	
 

	
                    11.10
Titles and Subtitles. The titles of the sections and subsections of this
Agreement and the Related Agreements are for convenience of reference only
and are not to be considered in construing this Agreement or any Related
Agreement. 

	
 

	
 

	
 

	
                    11.11
Facsimile Signatures; Counterparts. This Agreement or any Related Agreement
may be executed by facsimile signatures and in any number of counterparts
of any such document or any of its signature pages, each of which may be
delivered by fax, pdf or other electronic means, and each of which shall be
an original, but all of which together for such document shall constitute
one agreement. 

	
 

	
 

	
 

	
                    11.12
Broker’s Fees. Except as set forth on Schedule 11.12 hereof, each party
hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker’s or finder’s fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each
other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 11.12 being untrue. 

	
 

	
 

	
 

	
                    11.13
Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Agreement and the Related Agreements and,
therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement or any Related Agreement to favor any
party against the other. 

	
 

	
 

	
 

	
                    11.14
Restatement. This Purchase Agreement amends, restates and completely
replaces the Original SPA in its entirety. 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT
  BLANK

38

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

	
 

	
 

	
 

	
 

	
COMPANY:

	
 

	
PURCHASER:

	
 

	
 

	
 

	
 

	
 

	
TRUEYOU.COM INC.

	
 

	
LAURUS MASTER FUND, LTD.

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
By: 

	
 

	

	
 

	

	
 

	
Name:

	
 

	
Name: 

	
 

	

	
 

	

	
 

	
Title:

	
 

	
Title: 

	
 

	

	
 

	

	
 

39

EXHIBIT A

AMENDED AND RESTATED SECURED TERM NOTE

Filed separately with this Report

A-1

EXHIBIT B

Filed with June 30, 2006 agreement
    

B-1

  

EXHIBIT C

  Filed with June 30, 2006 agreement

C-1

  

EXHIBIT D

Filed with June 30, 2006 agreement

D-1

EXHIBIT E

Filed separately with this Report
  

E-1

EXHIBIT F 

Filed separately with this Report
  

F-1

Schedule 4.3

Capitalization; Voting Rights

Klinger Advanced Aesthetics, Inc.

	
 

	
 

	
1.

	
Common
  Stock, par value $0.01, authorized 70,000,000 shares; issued and outstanding
  43,209,498 shares.

	
 

	
 

	
2.

	
Series A
  Preferred Stock, par value $0.01, authorized 20,000 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
3.

	
Series B
  Preferred Stock, par value $0.01, authorized 600,000 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
4.

	
Series C
  Preferred Stock, par value $0.01, authorized 20,000 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
5.

	
Series D
  Preferred Stock, par value $0.01, authorized 8,200 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
6.

	
Series E
  Preferred Stock, par value $0.01, authorized 500 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
7.

	
Series G
  Preferred Stock, par value $0.01, authorized 12,000 shares; issued and
  outstanding 0 shares. 

	
 

	
 

	
8.

	
Series H
  Preferred Stock, par value $0.01, authorized 5,000 shares, issued and
  outstanding 0 shares.

Advanced Aesthetics Sub. Inc.

Common Stock,
par value $0.01, authorized 14,000,000 shares, issued and outstanding
10,000,000 shares.

Dischino Corporation

Common Stock,
par value $0.01, authorized 100 shares, issued and outstanding 50 shares.

Advanced Aesthetics, LLC

100 Units
issued and outstanding

Klinger Advanced Aesthetics, LLC

100 Units
issued and outstanding

Anushka Boca, LLC

100 Units
issued and outstanding

Wild Hare, LLC

100 Units issued
and outstanding

Anushka PBG, LLC

100 Units
issued and outstanding

Anushka PBG Acquisition Sub., LLC

100 Units
issued and outstanding

Anushka Boca Acquisition Sub., LLC

100 Units
issued and outstanding

Wild Hare Acquisition Sub., LLC

100 Units
issued and outstanding

Outstanding Options Warrants and Rights to
Purchase Equity Securities

	
 

	
 

	
1.

	
Warrant
  issued to Pequot Healthcare Institutional Fund, L.P. dated December 20, 2005.

	
 

	
 

	
2.

	
Warrant
  issued to Pequot Healthcare Fund, L.P. dated December 20, 2005.

	
 

	
 

	
3.

	
Warrant
  issued to Pequot Mariner Master Fund, L.P. dated December 20, 2005.

	
 

	
 

	
4.

	
Warrant
  issued to Premium Series PCC Ltd. – Cell 32 dated December 20, 2005.

	
 

	
 

	
5.

	
Warrant
  issued to Premium Series PCC Ltd. – Cell 33 dated December 20, 2005.

	
 

	
 

	
6.

	
Warrant
  issued to Pequot Navigator Offshore Fund, Inc. dated December 20, 2005.

	
 

	
 

	
7.

	
Warrant
  issued to Pequot Scout Fund, L.P. dated December 20, 2005.

	
 

	
 

	
8.

	
Warrant
  issued to Pequot Healthcare Offshore Fund, Inc. dated December 20, 2005.

	
 

	
 

	
9.

	
Warrant
  issued to Pequot Diversified Master Fund, Ltd. dated December 20, 2005.

	
 

	
 

	
10.

	
Warrant
  issued to Pequot Diversified Master Fund, Ltd. dated December 20, 2005.

	
 

	
 

	
11.

	
Warrant
  issued to Gruber and McBaine International dated December 20, 2005.

	
 

	
 

	
12.

	
Warrant
  issued to J. Patterson McBaine dated December 20, 2005.

	
 

	
 

	
13.

	
Warrant
  issued to Lagunitas Partners, L.P. dated December 20, 2005. 

	
 

	
 

	
14.

	
Warrant
  issued to Firefly Partners dated December 20, 2005.

	
 

	
 

	
15.

	
Warrant
  issued to Jon D. and Linda W. Gruber Trust dated December 20, 2005.

	
 

	
 

	
16.

	
Warrant
  issued to VFT Special Ventures, Ltd. dated December 20, 2005.

	
 

	
 

	
17.

	
Warrant
  issued to Seapine Investments, LLC dated December 20, 2005. 

	
 

	
 

	
18.

	
Warrant
  issued to Andrew D. Lipman dated December 20, 2005. 

	
 

	
 

	
19.

	
Warrant
  issued to Richard Rakowski dated December 20, 2005. 

	
 

	
 

	
20.

	
Warrant
  issued to Catherine M. Kidd Grantor Trust dated December 20, 2005. 

	
 

	
 

	
21.

	
Warrant
  issued to Cara E. Kidd dated December 20, 2005. 

	
 

	
 

	
22.

	
Warrant
  issued to Thomas C. Kidd dated December 20, 2005. 

	
 

	
 

	
23.

	
Warrant
  issued to Jessica Effress dated December 20, 2005. 

	
 

	
 

	
24.

	
Warrant
  issued to Claudine Singer dated December 20, 2005. 

	
 

	
 

	
25.

	
Warrant
  issued to Darrin Prescott dated December 20, 2005. 

	
 

	
 

	
26.

	
Warrant issued
  to Michael Paley dated December 20, 2005. 

	
 

	
 

	
27.

	
Warrant
  issued to Daniel T. Witcher, Jr. dated December 20, 2005. 

	
 

	
 

	
28.

	
Warrant
  issued to Patricia Mackey dated December 20, 2005. 

	
 

	
 

	
29.

	
Warrant
  issued to Joe Crace dated December 20, 2005. 

	
 

	
 

	
30.

	
Warrant
  issued to Dave Jordan dated December 20, 2005. 

	
 

	
 

	
31.

	
Warrant
  issued to Robyn Collins dated December 20, 2005. 

	
 

	
 

	
32.

	
Warrant
  issued to Steven Kenny dated December 20, 2005. 

	
 

	
 

	
33.

	
Warrant
  issued to Jon Lauck dated December 20, 2005. 

	
 

	
 

	
34.

	
Warrant
  issued to Marissa A. Timm Revocable Trust dated December 20, 2005. 

	
 

	
 

	
35.

	
Warrant
  issued to John True dated December 20, 2005. 

	
 

	
 

	
36.

	
Warrant
  issued to John O’Neil dated December 20, 2005. 

	
 

	
 

	
37.

	
Warrant
  issued to Ballyshannon Family Partnership, L.P. dated December 20, 2005. 

	
 

	
 

	
38.

	
Warrant
  issued to Ballyshannon Partners, L.P. dated December 20, 2005. 

	
 

	
 

	
39.

	
Warrant
  issued to Cabernet Partners, L.P. dated December 20, 2005. 

	
 

	
 

	
40.

	
Warrant
  issued to Northwood Capital Partners, L.P. dated December 20, 2005. 

	
 

	
 

	
41.

	
Warrant
  issued to Regina Pitaro dated December 20, 2005. 

	
 

	
 

	
42.

	
Warrant
  issued to Jay Seid dated December 20, 2005. 

	
 

	
 

	
43.

	
Warrant
  issued to GGCP, Inc. dated December 20, 2005. 

	
 

	
 

	
44.

	
Warrant
  issued to Clarice Webb dated December 20, 2005. 

	
 

	
 

	
45.

	
Warrant
  issued to Valesco Healthcare Overseas Fund, Ltd. dated December 22, 2005.

	
 

	
 

	
46.

	
Warrant
  issued to Valesco Healthcare Partners I LP dated December 22, 2005.

	
 

	
 

	
47.

	
Warrant
  issued to Valesco Healthcare Partners II LP dated December 22, 2005.

	
 

	
 

	
48.

	
Warrant
  issued to North Sound Legacy Institutional Fund LLC dated December 22, 2005.

	
 

	
 

	
49.

	
Warrant
  issued to North Sound Legacy International Ltd. dated December 22, 2005.

	
 

	
 

	
50.

	
Warrant
  issued to Pequot Navigator Offshore Fund, Inc. dated December 30, 2005.

	
 

	
 

	
51.

	
Warrant
  issued to Pequot Scout Fund, L.P. dated December 30, 2005.

	
 

	
 

	
52.

	
Warrant
  issued to Pequot Mariner Master Fund, L.P. dated December 30, 2005.

	
 

	
 

	
53.

	
Warrant
  issued to Pequot Diversified Master Fund, Ltd. dated December 30, 2005.

	
 

	
 

	
54.

	
Letter
  Agreement, dated July 11, 2005, among KAAI, Anushka PBG Acquisition Sub, LLC,
  Anushka Boca Acquisition Sub, LLC, Wild Hare Acquisition Sub, LLC, Dischino
  Corporation, Advanced K, LLC and Technology Investment Capital Corp.

	
 

	
 

	
55.

	
Certificate
  of Designation for the Series B Convertible Preferred Stock of the Company.

	
 

	
 

	
56.

	
Certificate
  of Designation for the Series C Convertible Preferred Stock of the Company.

	
 

	
 

	
57.

	
Certificate
  of Designation for the Series D Convertible Preferred Stock of the Company.

	
 

	
 

	
58.

	
Amended and
  Restated Securityholders Agreement dated December 20, 2005 among KAAI, FCRR,
  L Capital and certain shareholders of KAAI

	
 

	
 

	
59.

	
Common Stock
  Warrant Series A issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

	
 

	
 

	
60.

	
Common Stock
  Warrant Series B issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

	
 

	
 

	
61.

	
Common Stock
  Warrant Series C issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

	
 

	
 

	
62.

	
Warrant
  issued to Klinger Investments LLC dated July 11, 2006.

	
 

	
 

	
63.

	
Warrant
  issued to Pequot Healthcare Fund, L.P. dated July 11, 2006.

	
 

	
 

	
64.

	
Warrant
  issued to Pequot Healthcare Offshore Fund, Inc. dated July 11, 2006.

	
 

	
 

	
65.

	
Warrant
  issued to Premium Series PCC Limited – Cell 32 dated July 11, 2006.

	
 

	
 

	
66.

	
Warrant
  issued to Pequot Diversified Master Fund, Ltd. dated July 11, 2006.

	
 

	
 

	
67.

	
Warrant
  issued to Pequot Healthcare Institutional Fund, L.P. dated July 11, 2006.

	
 

	
 

	
68.

	
Warrant
  issued to North Sound Legacy Institutional Fund LLC dated July 11, 2006.

	
 

	
 

	
69.

	
Warrant
  issued to North Sound Legacy International Ltd. dated July 11, 2006.

	
 

	
 

	
70.

	
Warrant
  issued to Technology Investment Capital Corp. dated July 11, 2006.

	
 

	
 

	
71.

	
Warrant
  issued to Andrew D. Lipman dated July 11, 2006.

	
 

	
 

	
72.

	
Warrant
  issued to Jon Lauck dated July 11, 2006.

	
 

	
 

	
73.

	
Warrant
  issued to Klinger Investments LLC dated July 11, 2006.

	
 

	
 

	
74.

	
Warrant
  issued to Pequot Healthcare Fund, L.P. dated July 11, 2006.

	
 

	
 

	
75.

	
Warrant
  issued to Pequot Healthcare Offshore Fund, Inc. dated July 11, 2006.

	
 

	
 

	
76.

	
Warrant
  issued to Premium Series PCC Limited – Cell 32 dated July 11, 2006.

	
 

	
 

	
77.

	
Warrant
  issued to Pequot Diversified Master Fund, Ltd. dated July 11, 2006.

	
 

	
 

	
78.

	
Warrant
  issued to Pequot Healthcare Institutional Fund, L.P. dated July 11, 2006.

	
 

	
 

	
79.

	
Warrant
  issued to Laurus Master Fund, Ltd. dated December 22, 2006.

	
 

	
 

	
80.

	
Warrant
  issued to Vicis Capital Master Fund LLC dated December 22, 2006.

	
 

	
 

	
81.

	
Warrant
  issued to Klinger Investments LLC dated December 22, 2006.

	
 

	
 

	
82.

	
Warrant
  issued to Andrew D. Lipman dated December 22, 2006.

	
 

	
 

	
83.

	
Warrant
  issued to Richard Rakowski dated December 22, 2006.

	
 

	
 

	
84.

	
Warrant
  issued to Gerard DeBiasi dated December 22, 2006.

	
 

	
 

	
85.

	
Warrant
  issued to James Benedict dated December 22, 2006.

	
 

	
 

	
86.

	
Warrant
  issued to Dan Richardson dated December 22, 2006.

	
 

	
 

	
87.

	
Warrant
  issued to Amal Devani dated December 22, 2006.

	
 

	
 

	
88.

	
Warrant
  issued to John Brugmann dated December 22, 2006.

Schedule 4.6

Agreement; Action

1. The Company
is obligated to provide the letter of credit indicated below in connection with
the construction that may be done with respect to the premises indicated and is
also the beneficiary of a Tenant Allowance from the landlord in connection
therewith as indicated below.

Chevy
Chase

Tenant Allowance - $572,000

Letter of Credit - $645,000

2. As described in
Securities Filings, the Company provided a loan to its product
manufacturer, Atlantis Laboratories, Inc, to purchase land for the construction
of a new factory designed to manufacture company products for approximately
$465,000 in an agreement dated April 4, 2006. Additionally, the Company has
made advances to Atlantis for construction of the new factory of approximately
$50,000.

3. The Company
has negotiated a separation and severance agreement with several previous
owners/employees. On August 26, 2006 Cosmo Dischino was terminated with a
year’s salary ($260,000) severance payable over 12 months. Janice Worth and Ana
Blau have severance agreements not yet executed that combined total $100,000.

4. The Company
has loaned $300,000 to Nouvisage Corp. as part of its agreement to evaluate the
purchase of Solana Medspas dated September 8, 2006. The amount of the loan can
be decreased by up to $75,000 of transaction expenses.

5. See also
Schedule 4.7, 4..9 and 4.12.

6. On April 2,
2007 the Company and Home Shopping Network (HSN) executed exclusive agreements
to sell Cosmedicine product on HSN. Sephora, which has an exclusive right to
sell Cosmedicine in certain channels, waived any defaults under its agreement
as they apply to the Company’s agreement with HSN.

7. The Company
has reached an agreement to sell the subsidiaries comprising the stores and
related assets (stores’ inventory and equipment.).

8. The Company
has reached a settlement dated May 3, 2007 to settle and compromise an
outstanding unpaid invoice with its outside counsel Troutman Sanders. The
agreement provides for a payment of $400,000 for past due invoices and a
payment

of between
$150,000 - $200,000 for work associated with the Laurus refinancing transaction
and the transaction related to selling of the facilities.

9. The Company
has negotiated but not yet executed a settlement to discontinue its Consulting
Agreement and License and Management Agreement with Johns Hopkins. The
negotiated agreement provides that the Company will pay $362,500 to Johns
Hopkins for previous services under the Consulting Agreement. The Company will
also pay approximately $200,000 for monies owed to Johns Hopkins under the
License and Management Agreement (the final amount is being calculated but all
the costs have not yet been ascertained.

10. The
Company negotiated a termination of its Norwalk office lease dated April 11, 2007.
The agreement provided for the payment of $130,000 for back owed rent and
future rent through June 30. The Termination agreement also provided for a
payment of $340,000 for Landlord’s cost associated with releasing the Premises.

11. The
Company entered into a new lease (not yet dated) for office space in Old
Greenwich, CT at a first year’s rent of $160,258 plus electric charges.

Schedule
4.7

Obligations
to Related Parties

None

Schedule
4.9

	
 

	
 

	
1.

	
Borg
  Construction v. Klinger Advanced Aesthetics, LLC, case number 0706039055,
  Plaintiff filed a contractor’s lien for work completed at the Water Tower
  location.

	
 

	
 

	
2.

	
Default
  Notice dated April 12, 2007 from for the Chevy Chase Landlord, to Klinger
  Advanced Aesthetics, LLC (f/k/a Advanced K, LLC), as tenant, and Klinger
  Advanced Aesthetics, Inc., as guarantor, in connection with tenant and
  guarantor’s failure to post a $645,000 letter of credit and failure to pay
  rent in the amount of $80,452.12 (as of April 9, 2007). 

	
 

	
 

	
3.

	
See Schedule
  4.12.

	
 

	
 

	
4.

	
Liens from
  the following entities that were issued for a loan that is being converted in
  common stock as of this transaction and, will therefore, be terminated at
  closing: Klinger Investments LLC, Andrew Lipman, Laurus Funds, Vicis Capiral
  Master Fund LLC, Richard Rakowski, Gerard De Biasi, James Benedict, Dan Richardson,
  Amal Devani, CSFN I LLC and John Brugman

	
 

	
 

	
5.

	
Liens from
  the four parties that as of March 27, 2007 entered into an intercreditor
  agreement with Laurus Funds: North Sound Legacy International Ltd., North
  Sound Legacy Institutional Fund LLC, Andrew Lipman, and Seapine Investments
  LLC. 

Schedule
4.12

	
 

	
 

	
1.

	
Three Day
  Notice to Pay or to Quit given by South Coast Plaza for unpaid rent in the
  amount of $115,782.69.

	
 

	
 

	
2.

	
Biosea II
  International, Inc. v Klinger Advanced Aesthetics, LLC Palm Beach County
  Circuit Court, FL case number 2007 CA003669XXXXMB. This case is to prohibit
  Defendant’s use of the Anushka trade name and to allow Plaintiffs to void
  certain restrictive covenants.

	
 

	
 

	
3.

	
Complainant
  John Curcio filed a retaliatory discharge claim with the EEOC, charge number
  510-2006-02737, against Anushka PBG Acquisition, LLC.

	
 

	
 

	
4.

	
Complainant
  Gisele Dinardo filed a retaliatory discharge claim with the EEOC, charge
  number 510-2007-02001, against the Wild Hare Acquisition LLC. She also filed
  a worker’s compensation claim.

	
 

	
 

	
5.

	
G & I IV
  Wharfside, LLC v. Wild Hare Acquisition Sub, LLC, Palm Beach County, FL case
  no 502007CC003037XXXXSB. A complaint for possession has been settled through
  agreement by Defendant Tenant to make certain payments, but if Defendant
  fails to make such payments, Plaintiff Landlord shall be entitled to
  immediately enter a final judgment for eviction and writ of possession.

	
 

	
 

	
6.

	
Main
  Electric Supply Company v. Klinger Advanced Aesthetics, LLC, Los Angeles
  County Superior Court, CA case number 06C02137. Action to foreclose
  mechanic’s lien related to the Beverly Hills construction.

	
 

	
 

	
7.

	
Watson
  Construction v. Klinger Advanced Aesthetics, LLC, Los Angeles County Superior
  Court, CA case number SC091490. Action to foreclose a mechanic’s lien related
  to the Beverly Hills construction.

	
 

	
 

	
8.

	
Borg
  Construction v. Klinger Advanced Aesthetics, LLC, case number 0706039055,
  Plaintiff filed a contractor’s lien for work completed at the Water Tower
  location.

	
 

	
 

	
9.

	
TREA
  Wilshire Rodeo LLC has a claim against Klinger Advanced Aesthetics, LLC
  (formerly Advanced K, LLC) for unpaid and back and future rent related to
  Tenant’s closing of the store in Beverly Hills. 

	
 

	
 

	
10.

	
Klinger
  Advanced Aesthetics, Inc. has entered into a settlement agreement with
  Tri-North Builders to delay Tri-North’s lien rights in exchange for certain
  payments to be made to Tri-North.

	
 

	
 

	
11.

	
The Landlord
  of the West Palm facility, Chritstal, Inc., filed an action on March 7, 2007
  in Palm Beach County Court (Case number 502007CC003069XXXXMB) against,
  Dischino Corporation, claiming that there had been a rental shortfall due to
  the fact that the leased premises are larger than what is indicated in the
  lease agreement. Landlord further claimed that Tenant owed amounts due for an
  increase in real estate taxes due to the increase in the assesed value of the
  property due to tenants improvements. Landlord failed to provide any proof
  for either claim and at a hearing in the case, the judge dismissed the
  action. An order for dismissal is being drafted and will be entered with the
  court. Although, Landlord failed to provide any proof, there may be some
  merit to Landlord’s claim. Landlord and Tenant are currently in discussions
  to resolve the matter, although no agreement has been reached.

	
 

	
 

	
12.

	
UBS Securities,
  LLC v. Klinger Advanced Aesthetics, Inc., filed in Supreme Court of the State
  of New York, County of New York filed September 15, 2006. UBS filed against
  KAAI for breach of contract related to services in obtaining financing. UBS
  is seeking damages of $1,750,000 plus interest and costs.

	
 

	
 

	
13.

	
See schedule
  4.6 and 4.9.

Schedule
4.13

Tax
Returns and Payments

	
 

	
 

	
1.

	
The Company
  has filed returns for all federal and state tax returns, based upon its 2006
  year end. All returns are considered current.

	
 

	
 

	
2.

	
The Company
  has the following sales tax audits open:

	
 

	
 

	
 

	
 

	
 

	
1) New York

	
 

	
 

	
 

	
 

	
 

	
2) Illinois

	
 

	
 

	
 

	
 

	
 

	
3)
  California

	
 

	
 

	
3.

	
The Company
  has received a notice from Florida that the Company did not file a 6/30/05
  Corporate Income / Franchise and Emergency Excise Tax return. As the Share
  Exchange Agreement did not occur until December 2005, the Company does not
  agree with the notice and intends to challenge the requirement.

	
 

	
 

	
4.

	
The Company
  has determined that Texas franchise tax reports submitted under the name
  Advanced Aesthetics Sub, Inc., should have been filed under Klinger Advanced
  Aesthetics, LLC. The Company has prepared and filed revised returns for all
  affected years on April 23, 2007. It is estimated that it will take the state
  several weeks to complete its review and issue a good standing certificate.

	
 

	
 

	
5.

	
The Company
  has received a notice of delinquent property taxes for Dallas Texas. The
  Company had already issued a check, cashed on April 16, 2007 but not
  reflected on the notice that covers most of the liability. The remaining
  liability is $2,826.07.

	
 

	
 

	
6.

	
The Company
  is currently preparing a delinquent Norwalk, Connecticut property tax return.
  The liability can not be determined until the return is filed and the tax is
  calculated by the town. Due to the limited assets maintained in Norwalk, the
  liability is not expected to be significant. The liability will not be over
  $75,000.

Schedule 4.14

Employees

	 
	 

	1.
	Under the sale of the stores’ disclosed
          in schedule 4.6, employees in the stores and certain supervisory and
          administrative personnel will begin working for the new stores’ owner
          as of the transaction date.

	 
	 

	 
	 
	 

2. The company is in negotiations for an agreement with Richard
    Rakowski to compensate him for his work on the company’s behalf.

3. 401(k) Plans

Georgette Klinger 401(k) Savings Plan 6-11216

  Principal Financial Group – Plan Sponsor

The plan is
under a Voluntary Correction Program (VCP) due to late contributions made to
the plan during the past year and lack of open enrollment since KAA took over
the plan. The VCP should take approximately 8 months to complete. We started
the process on March 20, 2007. 

Once the VCP
is completed the plan will then be opened up to all employees. Currently, there
is approximately $500,000.00 in assets. 

All tax
filings are current for this plan. 

Dischino Corp
401(k)

CITISTREET – Plan Sponsor

Plan is being
closed out. This 401(k) was available only to Dischino employees. All
participants have received their funds.

Schedule
4.15

Registration
and Voting Rights

None.

Schedule
4.17

The medical
operations in the NorthPark, Chevy Chase, Palm Beach Gardens, and West Palm
facilities as part of their operations dispose of bio hazard waste through
licensed third party contractors.

Schedule
4.21

SEC
Reports

1. On May 2,
2006, the Company received comments from the Securities and Exchange Commission
relating to its registration statement on Form S-1 (File No. 333-131254) and
Preliminary Information Statement on Schedule 14 C (File No. 000-51158). We
reviewed the Commission’s comments and submitted a revised Preliminary
Information Statement in response to such comments on October 4, 2006. On
November 1, 2006, we received additional comments from the Commission (File No.
0-51158) with respect to the Revised Information Statement. 

2. The Company
has not filed its Quarterly Report on Form 10-Q for its fiscal quarter ended
December 30, 2006.

3. The Company
does not anticipate it will be able to timely file its Quarterly Report on Form
10-Q for its fiscal quarter ended March 31, 2007.

Schedule
6.13(e)

Debt

	
 

	
 

	
1.

	
$2,000,000
  Secured Demand Note dated March 16, 2007 issued by TrueYou.Com, Inc. to North
  Sound Legacy Institutional Fund LLC, North Sound Legacy International Ltd.,
  Andrew Lipman, and Seapine Investments, LLC. 

	
 

	
 

	
2.

	
$2,000,000
  Secured Demand Note dated March 27, 2007 issued by TrueYou.Com, Inc. to North
  Sound Legacy Institutional Fund LLC, North Sound Legacy International Ltd.,
  Andrew Lipman, and Seapine Investments, LLC. 

	
 

	
 

	
3.

	
$5,000,000
  performance deposit owed to Sephora USA, payable upon attainment of specified
  levels of net revenues and capital expenditures of Cosmedicine. 

	
 

	
 

	
4.

	
$2,586,203
  accrued interest owed to LCapital prior to Share Exchange Agreement that was
  not converted.

Schedule
11.12

Broker’s
Fees

As disclosed
in schedule 4.12, UBS Securities, LLC v. Klinger Advanced Aesthetics, Inc.,
filed in Supreme Court of the State of New York, County of New York filed
September 15, 2006. UBS filed against KAAI for breach of contract related to
services in obtaining financing. UBS is seeking damages of $1,750,000 plus
interest and costs. The parties are seeking to negotiate an out of court
settlement. Other than the UBS claim, the company represents and warrants that
no other party is entitled to any broker’s or finder’s fee or any other
commission directly or indirectly in connection with the transaction.

TrueYou.Com, Inc 

State & Date of Incorporation: 

Delaware, 9/9/1998 

EIN: 13-4024017 

DE ID: 2942493

Klinger Advanced Aesthetics, Inc. 

State & Date of Incorporation: DE 10/28/03 

Qualified to do Business in New York 

EIN: 20-0368801 

DE ID: 3721040

Advanced Aesthetics Sub, Inc. 

State & Date of Incorporation: DE 7/12/02 

Qualified to do Business in Florida 

EIN: 65-1174518 

DE ID: 3547037

Advanced Aesthetics, LLC 

State & Date of Formation: DE 10/23/02 

Qualified to do Business in Florida & NY 

EIN: 65-1174522 

DE ID: 3583246 

Klinger Advanced Aesthetics, LLC 

State & Date of Formation: DE 3/16/04 

Qualified to do Business in 

CA, DC, FL, IL, MD, NJ, NY, TX 

EIN: 20-0368801 & DE ID: 3777451

Anushka PBG, LLC 

State & Date of Formation: DE 11/3/03 

EIN: 20-0370333 

DE ID: 3722749

Anushka Boca, LLC 

State & Date of Formation: DE 11/3/03 

EIN: 20-0370390 

DE ID: 3722740

Wild Hare, LLC 

State & Date of Formation: DE 11/3/03 

EIN: 56-2415656 

DE ID: 3722746

Dischino Corporation 

State & Date of Incorporation: FL 3/29/1988 

EIN: 65-0077670 

FL ID: 651174522

Anushka PBG Acquisition Sub, LLC 

State & Date of Formation: DE 11/3/03 

Qualified to do Business in Florida 

EIN: 20-0368428 

DE ID: 3722762

Anushka Boca Acquisition Sub, LLC 

State & Date of Formation: DE 11/3/03 

Qualified to do Business in Florida 

EIN: 20-0368736 

DE ID: 3722765

Wild Hare Acquisition Sub, LLC 

State & Date of Formation: DE 11/3/03 

Qualified to do Business in Florida 

EIN: 20-0368178 

DE ID: 3722764

Potter Agreement 

K 360 Patents 

Johns Hopkins Consulting Agreement 

Cosmedicine Related Trademarks, (eg Skinstate, Place of Possibilities) 

Cosmedicine Product Trademarks

West Palm Beach

Beverly Hills, CA 

Costa Mesa, CA 

Dallas, TX 

Chicago, IL 

Manhasset, NY 

Short Hills, NJ 

Chevy Chase, MD 

Palm Beach Island, FL

Palm Beach Gardens, FL

    Spa in Boca

Georgette Klinger Trademarks 

Cosmedicine Trademarks

Sephora Agreement

New York, NY Store

Hair Salon in BocaExhibit 10.2

AMENDED
AND RESTATED SECURED TERM NOTE 

                    FOR
VALUE RECEIVED, TRUEYOU.COM INC., a Delaware (the “Company”), promises to pay to LAURUS MASTER
FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland
House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (the “Holder”) or its registered assigns or
successors in interest, the sum of Fifty Four Million One Hundred Eighty-Five
Thousand ($54,650,000), together with any accrued and unpaid interest hereon,
on May 4, 2010 (the “Maturity Date”) if not sooner indefeasibly
paid in full. The original principal amount of this Amended and Restated
Secured Term Note (this “Note”) held in a restricted bank account
is hereinafter referred to as the “Restricted
Principal Amount” and the remaining original principal amount of
this Secured Term Note is hereinafter referred to as the “Unrestricted Principal Amount.” The
Restricted Principal Amount and the Unrestricted Principal Amount are
collectively referred to herein as the “Principal
Amount”.

                    This
Note amends, restates and completely replaces that certain Secured Term Note
issued in the original principal amount of $25,000,000 by the Company to the
Holder dated as of June 30, 2006 (the “Original Note”, in its entirety.

                    Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Amended and Restated Securities Purchase Agreement dated
as of the date hereof between the Company and the Holder (as amended, modified
and/or supplemented from time to time, the “Purchase Agreement”).

                    The
Principal Amount of this Note includes (i) the $25,000,000 previously advanced
and outstanding under the Original Note, and (ii) $3,750,000 resulting from a
Default Payment on the date of the issuance of this Note.

                    The
following terms shall apply to this Note:

ARTICLE
I

CONTRACT RATE AND AMORTIZATION

                    1.1
Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the
outstanding Principal Amount of this Note shall accrue at a rate per annum
equal to the “prime rate” published in The Wall Street Journal from time
to time (the “Prime Rate”), plus two percent (2%) (the “Contract Rate”). The Contract
Rate shall be increased or decreased as the case may be for each increase or
decrease in the Prime Rate in an amount equal to such increase or decrease in
the Prime Rate; each change to be effective as of the day of the change in the
Prime Rate. Interest shall be calculated on the basis of a 360 day year. Interest on the Unrestricted Principal Amount
shall be payable monthly, in arrears, commencing on May 1, 2007, on the
first business day of each consecutive calendar month thereafter through and
including the Maturity Date, and on the Maturity Date, whether by acceleration
or otherwise. Accrued interest on the
Restricted Principal Amount shall be payable on the Maturity Date or, in the
event of the redemption of all or any portion of the Restricted Principal
Amount, accrued

interest on the amount so
redeemed shall be paid on the date of redemption. Additionally, at the time of
release of any amounts from the Restricted Account, interest that has accrued
on such amounts during the time it was held in the Restricted Account shall be
paid.

                    1.2
Contract Rate Payments. The Contract Rate shall be calculated on the
last business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date and shall be
subject to adjustment as set forth herein.

                    1.3
Principal Payments. Any outstanding Principal Amount together with any
accrued and unpaid interest and any and all other unpaid amounts which are then
owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity
Date.

ARTICLE
II

REDEMPTION

                    2.1
Optional Redemption of the Principal Amount. The Company may prepay outstanding
Principal Amount, in whole or in part, (the “Optional Amortizing Redemption”)
by paying to the Holder a sum of money equal to one hundred percent (100%) of
the Principal Amount to be redeemed together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder
arising under this Note, the Purchase Agreement or any other Related Agreement
(the “Redemption
Amount”) outstanding on the Redemption Payment Date (as defined
below). The Company shall deliver to the Holder a written notice of redemption
(the “Notice
of Redemption”) specifying the date for such Optional Redemption
(the “Redemption
Payment Date”).

ARTICLE
III

EVENTS OF DEFAULT

                    3.1
Events of Default. The occurrence of any of the following events set
forth in this Section 3.1 shall constitute an event of default (“Event of
Default”) hereunder:

                         (a)
Failure to Pay. The Company fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Company
fails to pay any of the other Obligations (under and as defined in the Master
Security Agreement) when due, and, in any such case, such failure shall
continue for a period of three (3) days following the date upon which any such
payment was due.

                         (b)
Breach of Covenant. The Company or any of its Subsidiaries breaches any
covenant or any other term or condition of this Note in any material respect
and such breach, if subject to cure, continues for a period of fifteen (15)
days after the occurrence thereof.

                         (c)
Breach of Representations and Warranties. Any representation, warranty
or statement made or furnished by the Company or any of its Subsidiaries in
this Note, the Purchase Agreement or any other Related Agreement shall at any
time be false or misleading in any material respect on the date as of which
made or deemed made.

2

                         (d)
Default Under Other Agreements. The occurrence of any default (or
similar term) in the observance or performance of any other agreement or
condition relating to any indebtedness or contingent obligation of the Company
or any of its Subsidiaries (including, without limitation, the Pari Passu
Indebtedness beyond the period of grace (if any), the effect of which default
is to cause, or permit the holder or holders of such indebtedness or
beneficiary or beneficiaries of such contingent obligation to cause, such
indebtedness to become due prior to its stated maturity or such contingent
obligation to become payable; 

                         (e)
Material Adverse Effect. Any change or the occurrence of any event which
could reasonably be expected to have a Material Adverse Effect;

                         (f)
Bankruptcy. The Company or any of its Subsidiaries shall (i) apply
for, consent to or suffer to exist the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, without challenge
within ten (10) days of the filing thereof, or failure to have dismissed, within
thirty (30) days, any petition filed against it in any involuntary case under
such bankruptcy laws, or (vii) take any action for the purpose of effecting any
of the foregoing;

                         (g)
Judgments. Attachments or levies in excess of $50,000 in the aggregate
are made upon the Company or any of its Subsidiary’s assets or a judgment is
rendered against the Company’s property involving a liability of more than
$50,000 which shall not have been vacated, discharged, stayed or bonded within thirty
(30) days from the entry thereof;

                         (h)
Insolvency. The Company or any of its Subsidiaries shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;

                         (i)
Change of Control. A Change of Control (as defined below) shall occur
with respect to the Company, unless Holder shall have expressly consented to
such Change of Control in writing. A “Change of Control” shall mean any event
or circumstance as a result of which (i) any “Person” or “group” (as such terms
are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on
the date hereof), other than the Holder, is or becomes the “beneficial owner”
(as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of 35% or more on a fully diluted basis of the then outstanding
voting equity interest of the any Company (other than a “Person” or “group”
that beneficially owns 35% or more of such outstanding voting equity interests
of the Company on the date hereof), (ii) the Board of Directors of the Company
shall cease to consist of a majority of the Company’s board of directors on the
date hereof (or directors appointed by a majority of the board of directors in
effect immediately prior to such appointment) or (iii) the Company or any of
its Subsidiaries merges or consolidates with, or sells all or substantially all
of its assets to, any other person or entity;

3

                         (j)
Indictment; Proceedings. The indictment or threatened indictment of the
Company or any of its Subsidiaries or any executive officer of the Company or
any of its Subsidiaries under any criminal statute, or commencement or
threatened commencement of criminal or civil proceeding against the Company or
any of its Subsidiaries or any executive officer of the Company or any of its
Subsidiaries pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of the Company or
any of its Subsidiaries;

                         (k)
The Purchase Agreement and Related Agreements. (i) An Event of Default
shall occur under and as defined in the Purchase Agreement or any other Related
Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or
provision of the Purchase Agreement or any other Related Agreement in any
material respect and such breach, if capable of cure, continues unremedied for
a period of fifteen (15) days after the occurrence thereof, (iii) the Company
or any of its Subsidiaries attempts to terminate, challenges the validity of,
or its liability under, the Purchase Agreement or any Related Agreement, (iv)
any proceeding shall be brought to challenge the validity, binding effect of the
Purchase Agreement or any Related Agreement or (v) the Purchase Agreement or
any Related Agreement ceases to be a valid, binding and enforceable obligation
of the Company or any of its Subsidiaries (to the extent such persons or
entities are a party thereto);

                    3.2
Default Interest. Following the occurrence and during the continuance of
an Event of Default, the Company shall pay additional interest on the
outstanding principal balance of this Note in an amount equal to two percent
(2%) per month, and all outstanding obligations under this Note, the Purchase
Agreement and each other Related Agreement, including unpaid interest, shall
continue to accrue interest at such additional interest rate from the date of
such Event of Default until the date such Event of Default is cured or waived.

                    3.3
Default Payment. Following the occurrence and during the continuance of
an Event of Default, the Holder, at its option, may demand repayment in full of
all obligations and liabilities owing by the Company to the Holder under this
Note, the Purchase Agreement and/or any other Related Agreement and/or may
elect, in addition to all rights and remedies of the Holder under the Purchase
Agreement and the other Related Agreements and all obligations and liabilities
of the Company under the Purchase Agreement and the other Related Agreements,
to require the Company to make a Default Payment (“Default Payment”). The
Default Payment shall be one hundred twenty percent (120%) of the outstanding
principal amount of the Note, plus accrued but unpaid interest, all other fees
then remaining unpaid, and all other amounts payable hereunder. The Default
Payment shall be applied first to any fees due and payable to the Holder
pursuant to this Note, the Purchase Agreement, and/or the other Related
Agreements, then to accrued and unpaid interest due on this Note and then to
the outstanding principal balance of this Note. The Default Payment shall be
due and payable immediately on the date that the Holder has demanded payment of
the Default Payment pursuant to this Section 3.3.

ARTICLE
IV

MISCELLANEOUS

                    4.1
Issuance of New Note. Upon any partial redemption of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be

4

issued by the Company to the Holder for the principal
balance of this Note and interest which shall not have been paid as of such
date. Subject to the provisions of Article III of this Note, the Company shall
not pay any costs, fees or any other consideration to the Holder for the
production and issuance of a new Note.

                    4.2
Cumulative Remedies. The remedies under this Note shall be cumulative.

                    4.3
Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

                    4.4
Notices. Any notice herein required or permitted to be given shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for the Holder, with a copy to Laurus Capital Management, LLC, Attn:
Portfolio Services, 335 Madison Avenue, 10th Floor, New York, New
York 10017, facsimile number (212) 581-5037, or at such other address as the
Company or the Holder may designate by ten days advance written notice to the
other parties hereto. 

                    4.5
Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented, and
any successor instrument as such successor instrument may be amended or
supplemented.

                    4.6
Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with
the requirements of the Purchase Agreement. The Company may not assign any of
its obligations under this Note without the prior written consent of the
Holder, any such purported assignment without such consent being null and void.

                    4.7
Cost of Collection. In case of any Event of Default under this Note, the
Company shall pay the Holder the Holder’s reasonable costs of collection,
including reasonable attorneys’ fees.

                    4.8
Governing Law, Jurisdiction and Waiver of Jury Trial.

                         (a)
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF.

5

                         (b)
THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE
HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE
OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED,
THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER
FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.

                         (c)
THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER
AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER
RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

                    4.9
Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.

                    4.10
Maximum Payments. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the
maximum

6

permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Company to the Holder and thus refunded to
the Company.

                    4.11
Security Interest and Guarantee. The Holder has been granted a security
interest (i) in certain assets of the Company and its Subsidiaries as more
fully described in the Master Security Agreement dated as of June 30, 2006, as
modified, supplemented or amended as of the date hereof and (ii) in the equity
interests of the Company’s Subsidiaries pursuant to the Stock Pledge Agreement
dated as of June 30, 2006, as modified, supplemented or amended as of the date
hereof and (iii) in certain intellectual property of the Company and its
Subsidiaries as more fully described in the Intellectual Property Security
Agreement dated as of June 30, 2006, as modified, supplemented or amended as of
the date hereof. The obligations of the Company under this Note are guaranteed
by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty
dated as of June 30, 2006, as modified, supplemented or amended as of the date
hereof.

                    4.12
Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.

                    4.13
Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Company (or its agent) shall register this Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder or
the issuance by the Company of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

[Balance of page
intentionally left blank; signature page follows]

7

4.14. Restatement and Continuation of Existing Indebtedness. This Note amends,
restates and completely replaces the Original Note in its entirety. The
indebtedness outstanding under the Original Note has been continued in and is
now exclusively evidenced and governed by this Note, but such outstanding
indebtedness has not been paid, satisfied, discharged or novated by the
issuance or delivery of this Note. 

                                   IN
WITNESS WHEREOF, the Company has caused this Secured Term
Note to be signed in its name effective as of this 4th day of May, 2007.

	
 

	
 

	
 

	
 

	
TRUEYOU.COM INC.

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
 

	
 

	
Title:

	
WITNESS:

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

8

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