Document:

textech_sb2-ex1007.htm

    EXHIBIT
      10.7

     

    THIS
      WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGIS­TERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  EXCEPT
      AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS
      OF
      SEPTEMBER 28, 2006, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRA­TION
      STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN
      FORM,
      SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
      TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
      PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

     

    Right
      to
      Purchase 900,000 Shares of Common Stock, par value $.00001 per
      share

     

    STOCK
      PURCHASE WARRANT

     

    THIS
      CERTIFIES THAT, for value
      received, AJW Partners, LLC or its registered assigns, is entitled to purchase
      from Textechnologies
      Inc., a Delaware corporation (the “Company”), at any time or from time to
      time during the period specified in Paragraph 2 hereof, 1,800,000 fully
      paid and nonassessable shares of the Company’s Common Stock, par value $.00001
      per share (the “Common Stock”), at an exercise price per share equal to $1.00
      (the “Exercise Price”).  The term “Warrant Shares,” as used herein,
      refers to the shares of Common Stock purchasable hereunder.  The
      Warrant Shares and the Exercise Price are subject to adjustment as provided
      in
      Paragraph 4 hereof.  The term “Warrants” means this Warrant and the
      other warrants issued pursuant to that certain Securities Purchase Agreement,
      dated September 28, 2006, by and among the Company and the Buyers listed on
      the
      execution page thereof (the “Securities Purchase Agreement”).

     

    This
      Warrant is subject to the following terms, provisions, and
      conditions:

     

    1.           
      Manner of Exercise;
      Issuance of Certificates; Payment for Shares.

     

    Subject
      to the provisions hereof, this Warrant may be exercised by the holder hereof,
      in
      whole or in part, by the surrender of this Warrant, together with a completed
      exercise agreement in the form attached hereto (the “Exercise Agreement”), to
      the Company during normal business hours on any business day at the Company’s
      principal executive offices (or such other office or agency of the Company
      as it
      may designate by notice to the holder hereof), and upon (i) payment to the
      Company in cash, by certified or offi­cial bank check or by wire transfer
      for the account of the Company of the Exercise Price for the Warrant Shares
      specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
      by the holder is not then registered pursuant to an effective registration
      statement under the Securities Act of 1933, as amended (the “Securities Act”),
      delivery to the Company of a written notice of an election to effect a “Cashless
      Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
      in the Exercise Agreement.  The Warrant Shares so purchased shall be
      deemed to be issued to the holder hereof or such holder’s designee, as the
      record owner of such shares, as of the close of business on the date on which
      this Warrant shall have been surrendered, the completed Exercise Agreement
      shall
      have been delivered, and payment shall have been made for such shares as set
      forth above.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              Certificates
                for the Warrant Shares so purchased, representing the aggregate number
                of
                shares specified in the Exercise Agreement, shall be delivered to
                the
                holder hereof within a reasonable time, not exceeding five (5) business
                days, after this Warrant shall have been so exercised. The certificates
                so
                delivered shall be in such denominations as may be requested by the
                holder
                hereof and shall be registered in the name of such holder or such
                other
                name as shall be designated by such holder. If this Warrant shall
                have
                been exercised only in part, then, unless this Warrant has expired,
                the
                Company shall, at its expense, at the time of delivery of such
                certificates, deliver to the holder a new Warrant representing the
                number
                of shares with respect to which this Warrant shall not then have
                been
                exercised. In addition to all other available remedies at law or
                in
                equity, if the Company fails to deliver certificates for the Warrant
                Shares within five (5) business days after this Warrant is exercised,
                then
                the Company shall pay to the holder in cash a penalty (the “Penalty”)
                equal to 2% of the number of Warrant Shares that the holder is entitled
                to
                multiplied by the Market Price (as hereinafter defined) for each
                day that
                the Company fails to deliver certificates for the Warrant
                Shares.  For example, if the holder is entitled to 100,000
                Warrant Shares and the Market Price is $2.00, then the Company shall
                pay
                to the holder $4,000 for each day that the Company fails to deliver
                certificates for the Warrant Shares.  The Penalty shall be paid
                to the holder by the fifth day of the month following the month in
                which
                it has accrued. 

            

    

     

    Notwithstanding
      anything in this Warrant to the contrary, in no event shall the holder of this
      Warrant be entitled to exercise a number of Warrants (or portions thereof)
      in
      excess of the number of Warrants (or portions thereof) upon exercise of which
      the sum of (i) the number of shares of Common Stock beneficially owned by the
      holder and its affiliates (other than shares of Common Stock which may be deemed
      beneficially owned through the ownership of the unexercised Warrants and the
      unexercised or unconverted portion of any other securities of the Company
      (including the Notes (as defined in the Securities Purchase Agreement)) subject
      to a limitation on conversion or exercise analogous to the limitation contained
      herein) and (ii) the number of shares of Common Stock issuable upon exercise
      of
      the Warrants (or portions thereof) with respect to which the determination
      described herein is being made, would result in beneficial ownership by the
      holder and its affiliates of more than 4.9% of the outstanding shares of Common
      Stock.  For purposes of the immediately preceding sentence, beneficial
      ownership shall be determined in accordance with Section 13(d) of the Securities
      Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
      otherwise provided in clause (i) of the preceding
      sentence.  Notwithstanding anything to the contrary contained herein,
      the limitation on exercise of this Warrant set forth herein may not be amended
      without (i) the written consent of the holder hereof and the Company and (ii)
      the approval of a majority of shareholders of the Company.

     

    2.           
      Period of
      Exercise.

     

    
      	
              This
                Warrant is exercisable at any time or from time to time on or after
                the
                date on which this Warrant is issued and delivered pursuant to the
                terms
                of the Securities Purchase Agreement and before 6:00 p.m., New York,
                New
                York time on the seventh (7th)
                anniversary of the date of issuance (the “Exercise Period”).
                

            

    

     

    
      
        
        

      

      
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    3.           
      Certain Agreements
      of
      the Company.

     

    
      	
              The
                Company hereby covenants and agrees as follows:

            

    

     

    (a)           
      Shares
      to
      be Fully Paid.  All Warrant
      Shares will, upon issuance in accordance with the terms of this Warrant, be
      validly issued, fully paid, and nonassessable and free from all taxes, liens,
      and charges with respect to the issue thereof.

     

    (b)           
      Reservation
      of Shares.  During the
      Exercise Period, the Company shall at all times have authorized, and reserved
      for the purpose of issuance upon exercise of this Warrant, a suf­ficient
      number of shares of Common Stock to provide for the exercise of this
      Warrant.

     

    (c)           
      Listing.  The
      Company shall
      promptly secure the listing of the shares of Common Stock issuable upon exercise
      of the Warrant upon each national securities exchange or automated quotation
      system, if any, upon which shares of Common Stock are then listed (subject
      to
      official notice of issuance upon exercise of this Warrant) and shall maintain,
      so long as any other shares of Common Stock shall be so listed, such listing
      of
      all shares of Common Stock from time to time issuable upon the exercise of
      this
      Warrant; and the Company shall so list on each national securities exchange
      or
      automated quotation system, as the case may be, and shall maintain such listing
      of, any other shares of capital stock of the Company issuable upon the exercise
      of this Warrant if and so long as any shares of the same class shall be listed
      on such national securities exchange or automated quotation system.

     

    (d)           
      Certain
      Actions Prohibited.  The Company
      will
      not, by amendment of its charter or through any re­organi­zation,
      transfer of assets, consolidation, mer­ger, dissolution, issue or sale of
      securities, or any other voluntary action, avoid or seek to avoid the observance
      or performance of any of the terms to be observed or performed by it hereunder,
      but will at all times in good faith assist in the carrying out of all the
      provisions of this Warrant and in the taking of all such action as may
      reasonably be requested by the holder of this Warrant in order to protect the
      exercise privilege of the holder of this Warrant against dilu­tion or other
      impairment, consistent with the tenor and purpose of this
      Warrant.  Without limiting the general­ity of the foregoing, the
      Company (i) will not increase the par value of any shares of Common Stock
      receivable upon the exercise of this Warrant above the Exercise Price then
      in
      effect, and (ii) will take all such actions as may be necessary or appropriate
      in order that the Company may validly and legally issue fully paid and
      nonassessable shares of Common Stock upon the exercise of this
      Warrant.

     

    (e)           
      Successors
      and Assigns.  This Warrant
      will
      be binding upon any entity succeeding to the Company by merger, consolidation,
      or acquisition of all or sub­stantially all the Company’s
      assets.

     

    4.           
      Antidilution
      Provisions.

     

    During
      the Exercise Period, the Exercise Price and the number of Warrant Shares shall
      be subject to adjustment from time to time as provided in this Paragraph
      4.

     

    In
      the
      event that any adjustment of the Exercise Price as required herein results
      in a
      fraction of a cent, such Exercise Price shall be rounded up to the nearest
      cent.

    
      
        
        

      

      
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    (a)           
      Adjustment
      of Exercise Price and Number of Shares upon Issuance of Common Stock.  Except as
      otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or
      after the date of issuance of this Warrant, the Company issues or sells, or
      in
      accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
      shares of Common Stock for no consideration or for a consideration per share
      (before deduction of reasonable expenses or commissions or underwriting
      discounts or allowances in connection therewith) less than the Market Price
      on
      the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
      Issuance, the Exercise Price will be reduced to a price determined by
      multiplying the Exercise Price in effect immediately prior to the Dilutive
      Issuance by a fraction, (i) the numerator of which is an amount equal to the
      sum
      of (x) the number of shares of Common Stock actually outstanding immediately
      prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
      consideration, calculated as set forth in Paragraph 4(b) hereof, received by
      the
      Company upon such Dilutive Issuance divided by the Market Price in effect
      immediately prior to the Dilutive Issuance, and (ii) the denominator of which
      is
      the total number of shares of Common Stock Deemed Outstanding (as defined below)
      immediately after the Dilutive Issuance.

     

    (b)           
      Effect
      on
      Exercise Price of Certain Events.  For purposes
      of
      determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
      following will be applicable:

     

    (i)           
      Issuance
      of Rights or Options.  If the Company
      in
      any manner issues or grants any warrants, rights or options, whether or not
      immediately exercisable, to subscribe for or to purchase Common Stock or other
      securities convertible into or exchangeable for Common Stock (“Convertible
      Securities”) (such warrants, rights and options to purchase Common Stock or
      Convertible Securities are hereinafter referred to as “Options”) and the price
      per share for which Common Stock is issuable upon the exercise of such Options
      is less than the Market Price on the date of issuance or grant of such Options,
      then the maximum total number of shares of Common Stock issuable upon the
      exercise of all such Options will, as of the date of the issuance or grant
      of
      such Options, be deemed to be outstanding and to have been issued and sold
      by
      the Company for such price per share.  For purposes of the preceding
      sentence, the “price per share for which Common Stock is issuable upon the
      exercise of such Options” is determined by dividing (i) the total amount, if
      any, received or receivable by the Company as consideration for the issuance
      or
      granting of all such Options, plus the minimum aggregate amount of additional
      consideration, if any, payable to the Company upon the exercise of all such
      Options, plus, in the case of Convertible Securities issuable upon the exercise
      of such Options, the minimum aggregate amount of additional consideration
      payable upon the conversion or exchange thereof at the time such Convertible
      Securities first become convertible or exchangeable, by (ii) the maximum total
      number of shares of Common Stock issuable upon the exercise of all such Options
      (assuming full conversion of Convertible Securities, if
      applicable).  No further adjustment to the Exercise Price will be made
      upon the actual issuance of such Common Stock upon the exercise of such Options
      or upon the conversion or exchange of Convertible Securities issuable upon
      exercise of such Options.

    
      
        
        

      

      
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    (ii)           
      Issuance
      of Convertible Securities.  If the Company
      in
      any manner issues or sells any Convertible Securities, whether or not
      immediately convertible (other than where the same are issuable upon the
      exercise of Options) and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Market Price on the date
      of
      issuance, then the maximum total number of shares of Common Stock issuable
      upon
      the conversion or exchange of all such Convertible Securities will, as of the
      date of the issuance of such Convertible Securities, be deemed to be outstanding
      and to have been issued and sold by the Company for such price per
      share.  For the purposes of the preceding sentence, the “price per
      share for which Common Stock is issuable upon such conversion or exchange” is
      determined by dividing (i) the total amount, if any, received or receivable
      by
      the Company as consideration for the issuance or sale of all such Convertible
      Securities, plus the minimum aggregate amount of additional consideration,
      if
      any, payable to the Company upon the conversion or exchange thereof at the
      time
      such Convertible Securities first become convertible or exchangeable, by (ii)
      the maximum total number of shares of Common Stock issuable upon the conversion
      or exchange of all such Convertible Securities.  No further adjustment
      to the Exercise Price will be made upon the actual issuance of such Common
      Stock
      upon conversion or exchange of such Convertible Securities.

     

    (iii)           
      Change
      in
      Option Price or Conversion Rate.  If there is
      a
      change at any time in (i) the amount of additional consideration payable to
      the
      Company upon the exercise of any Options; (ii) the amount of additional
      consideration, if any, payable to the Company upon the conversion or exchange
      of
      any Convertible Securities; or (iii) the rate at which any Convertible
      Securities are convertible into or exchangeable for Common Stock (other than
      under or by reason of provisions designed to protect against dilution), the
      Exercise Price in effect at the time of such change will be readjusted to the
      Exercise Price which would have been in effect at such time had such Options
      or
      Convertible Securities still outstanding provided for such changed additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold.

     

    (iv)           
      Treatment
      of Expired Options and Unexercised Convertible Securities.  If, in any
      case,
      the total number of shares of Common Stock issuable upon exercise of any Option
      or upon conversion or exchange of any Convertible Securities is not, in fact,
      issued and the rights to exercise such Option or to convert or exchange such
      Convertible Securities shall have expired or terminated, the Exercise Price
      then
      in effect will be readjusted to the Exercise Price which would have been in
      effect at the time of such expiration or termination had such Option or
      Convertible Securities, to the extent outstanding immediately prior to such
      expiration or termination (other than in respect of the actual number of shares
      of Common Stock issued upon exercise or conversion thereof), never been
      issued.

     

    (v)           
      Calculation
      of Consideration Received.  If any Common
      Stock, Options or Convertible Securities are issued, granted or sold for cash,
      the consideration received therefor for purposes of this Warrant will be the
      amount received by the Company therefor, before deduction of reasonable
      commissions, underwriting discounts or allowances or other reasonable expenses
      paid or incurred by the Company in connection with such issuance, grant or
      sale.  In case any Common Stock, Options or Convertible Securities are
      issued or sold for a consideration part or all of which shall be other than
      cash, the amount of the consideration other than cash received by the Company
      will be the fair value of such consideration, except where such consideration
      consists of securities, in which case the amount of consideration received
      by
      the Company will be the Market Price thereof as of the date of
      receipt.  In case any Common Stock, Options or Convertible Securities
      are issued in connection with any acquisition, merger or consolidation in which
      the Company is the surviving corporation, the amount of consideration therefor
      will be deemed to be the fair value of such portion of the net assets and
      business of the non-surviving corporation as is attributable to such Common
      Stock, Options or Convertible Securities, as the case may be.  The
      fair value of any consideration other than cash or securities will be determined
      in good faith by the Board of Directors of the Company.

    
      
        
        

      

      
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    (vi)           
      Exceptions
      to Adjustment of Exercise Price.  No adjustment
      to
      the Exercise Price will be made (i) upon the exercise of any warrants, options
      or convertible securities granted, issued and outstanding on the date of
      issuance of this Warrant; (ii) upon the grant or exercise of any stock or
      options which may hereafter be granted or exercised under any employee benefit
      plan, stock option plan or restricted stock plan of the Company now existing
      or
      to be implemented in the future, so long as the issuance of such stock or
      options is approved by a majority of the independent members of the Board of
      Directors of the Company or a majority of the members of a committee of
      independent directors established for such purpose; or (iii) upon the exercise
      of the Warrants.

     

    (c)           
      Subdivision
      or Combination of Common Stock.  If the Company
      at
      any time subdivides (by any stock split, stock dividend, recapitalization,
      reorganization, reclassification or otherwise) the shares of Common Stock
      acquirable hereunder into a greater number of shares, then, after the date
      of
      record for effecting such subdivision, the Exercise Price in effect immediately
      prior to such subdivision will be proportionately reduced.  If the
      Company at any time combines (by reverse stock split, recapitalization,
      reorganization, reclassification or otherwise) the shares of Common Stock
      acquirable hereunder into a smaller number of shares, then, after the date
      of
      record for effecting such combination, the Exercise Price in effect immediately
      prior to such combination will be proportionately increased.

     

    (d)           
      Adjustment
      in Number of Shares.  Upon each
      adjustment of the Exercise Price pursuant to the provisions of this Paragraph
      4,
      the number of shares of Common Stock issuable upon exercise of this Warrant
      shall be adjusted by multiplying a number equal to the Exercise Price in effect
      immediately prior to such adjustment by the number of shares of Common Stock
      issuable upon exercise of this Warrant immediately prior to such adjustment
      and
      dividing the product so obtained by the adjusted Exercise Price.

     

    (e)           
      Consolidation,
      Merger or Sale.  In case of
      any
      consolidation of the Company with, or merger of the Company into any other
      corporation, or in case of any sale or conveyance of all or substantially all
      of
      the assets of the Company other than in connection with a plan of complete
      liquidation of the Company, then as a condition of such consolidation, merger
      or
      sale or conveyance, adequate provision will be made whereby the holder of this
      Warrant will have the right to acquire and receive upon exercise of this Warrant
      in lieu of the shares of Common Stock immediately theretofore acquirable upon
      the exercise of this Warrant, such shares of stock, securities or assets as
      may
      be issued or payable with respect to or in exchange for the number of shares
      of
      Common Stock immediately theretofore acquirable and receivable upon exercise
      of
      this Warrant had such consolidation, merger or sale or conveyance not taken
      place.  In any such case, the Company will make appropriate provision
      to insure that the provisions of this Paragraph 4 hereof will thereafter be
      applicable as nearly as may be in relation to any shares of stock or securities
      thereafter deliverable upon the exercise of this Warrant.  The Company
      will not effect any consolidation, merger or sale or conveyance unless prior
      to
      the consummation thereof, the successor corporation (if other than the Company)
      assumes by written instrument the obligations under this Paragraph 4 and the
      obligations to deliver to the holder of this Warrant such shares of stock,
      securities or assets as, in accordance with the foregoing provisions, the holder
      may be entitled to acquire.

    
      
        
        

      

      
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    (f)           
      Distribution
      of Assets.  In case the
      Company shall declare or make any distribution of its assets (including cash)
      to
      holders of Common Stock as a partial liquidating dividend, by way of return
      of
      capital or otherwise, then, after the date of record for determining
      shareholders entitled to such distribution, but prior to the date of
      distribution, the holder of this Warrant shall be entitled upon exercise of
      this
      Warrant for the purchase of any or all of the shares of Common Stock subject
      hereto, to receive the amount of such assets which would have been payable
      to
      the holder had such holder been the holder of such shares of Common Stock on
      the
      record date for the determination of shareholders entitled to such
      distribution.

     

    (g)           
      Notice
      of
      Adjustment.  Upon the
      occurrence of any event which requires any adjustment of the Exercise Price,
      then, and in each such case, the Company shall give notice thereof to the holder
      of this Warrant, which notice shall state the Exercise Price resulting from
      such
      adjustment and the increase or decrease in the number of Warrant Shares
      purchasable at such price upon exercise, setting forth in reasonable detail
      the
      method of calculation and the facts upon which such calculation is
      based.  Such calculation shall be certified by the Chief Financial
      Officer of the Company.

     

    (h)           
      Minimum
      Adjustment of Exercise Price.  No adjustment
      of
      the Exercise Price shall be made in an amount of less than 1% of the Exercise
      Price in effect at the time such adjustment is otherwise required to be made,
      but any such lesser adjustment shall be carried forward and shall be made at
      the
      time and together with the next subsequent adjustment which, together with
      any
      adjustments so carried forward, shall amount to not less than 1% of such
      Exercise Price.

     

    (i)           
      No
      Fractional Shares.  No fractional
      shares of Common Stock are to be issued upon the exercise of this Warrant,
      but
      the Company shall pay a cash adjustment in respect of any fractional share
      which
      would otherwise be issuable in an amount equal to the same fraction of the
      Market Price of a share of Common Stock on the date of such
      exercise.

     

    (j)           
      Other
      Notices.  In case at
      any
      time:

     

    (i)           
      the Company shall declare any dividend upon the Common Stock payable in shares
      of stock of any class or make any other distribution (including dividends or
      distributions payable in cash out of retained earnings) to the holders of the
      Common Stock;

     

    (ii)           
      the Company shall offer for subscription pro rata to the holders of the Common
      Stock any additional shares of stock of any class or other rights;

     

    (iii)           there
      shall be any capital reorganiza­tion of the Company, or reclassification of
      the Common Stock, or consolidation or merger of the Company with or into, or
      sale of all or substan­tially all its assets to, another corporation or
      entity; or

     

    (iv)           
      there shall be a voluntary or involun­tary dissolution, liquidation or
      winding up of the Company;

    
      
        
        

      

      
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    then,
      in
      each such case, the Company shall give to the holder of this Warrant (a) notice
      of the date on which the books of the Company shall close or a record shall
      be
      taken for determining the holders of Common Stock entitled to receive any such
      divi­dend, distribution, or subscription rights or for determining the
      holders of Common Stock entitled to vote in respect of any such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up and (b) in the case of any such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding-up, notice
      of
      the date (or, if not then known, a reasonable approximation thereof by the
      Company) when the same shall take place.  Such notice shall also
      specify the date on which the holders of Common Stock shall be entitled to
      receive such dividend, distribution, or subscription rights or to exchange
      their
      Common Stock for stock or other securities or property deliverable upon such
      reorganization, re­classification, consolidation, merger, sale, dissolution,
      liquidation, or winding-up, as the case may be.  Such notice shall be
      given at least 30 days prior to the record date or the date on which the
      Company’s books are closed in respect thereto.  Failure to give any
      such notice or any defect therein shall not affect the validity of the
      proceedings referred to in clauses (i), (ii), (iii) and (iv) above.

     

    (k)           
      Certain
      Events.  If any event
      occurs of the type contemplated by the adjustment provisions of this Paragraph
      4
      but not expressly provided for by such provisions, the Company will give notice
      of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
      Directors will make an appropriate adjustment in the Exercise Price and the
      number of shares of Common Stock acquirable upon exercise of this Warrant so
      that the rights of the holder shall be neither enhanced nor diminished by such
      event.

     

    (l)           
      Other
      Events.  In the event
      the closing price for the Common Stock closed below $1.25 after such time as
      the
      Registration Statement is declared effective, the warrant exercise price shall
      be ratcheted down in the following manner:  fifteen (15) business days
      after the Registration Statement is declared effective the exercise price shall
      become 115% of the trailing 5 day volume weighted average price of the Common
      Stock (“VWAP”); thirty
      (30) business days after the Registration Statement is declared effective the
      exercise price shall become 115% of the trailing 5 day VWAP; forty-five (45)
      business days after the Registration Statement is declared effective the
      exercise price shall become 115% of the trailing 5 day VWAP; and sixty (60)
      business days after the Registration Statement is declared effective the
      exercise price shall become 125% of the trailing 5 day
      VWAP.  Notwithstanding anything in this subsection to the contrary, in
      the event the Common Stock is trading above $.75 at any time during these
      periods, the exercise price shall remain $1.00 and not be subject to any change
      whatsoever.

     

    (m)           
      Certain
      Definitions.

     

    (i)           
      “Common
      Stock Deemed Outstanding” shall mean
      the number of
      shares of Common Stock actually outstanding (not including shares of Common
      Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
      4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
      upon
      the exercise of Options, as of the date of such issuance or grant of such
      Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
      total number of shares of Common Stock issuable upon conversion or exchange
      of
      Convertible Securities, as of the date of issuance of such Convertible
      Securities, if any.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (ii)           
      “Market
      Price,” as of any
      date, (i) means the average of the last reported sale prices for the shares
      of
      Common Stock on the OTCBB for the five (5) Trading Days immediately preceding
      such date as reported by Bloomberg, or (ii) if the OTCBB is not the principal
      trading market for the shares of Common Stock, the average of the last reported
      sale prices on the principal trading market for the Common Stock during the
      same
      period as reported by Bloomberg, or (iii) if market value cannot be calculated
      as of such date on any of the foregoing bases, the Market Price shall be the
      fair market value as reasonably determined in good faith by (a) the Board of
      Directors of the Company or, at the option of a majority-in-interest of the
      holders of the outstanding Warrants by (b) an independent investment bank of
      nationally recognized standing in the valuation of businesses similar to the
      business of the corporation. The manner of determining the Market Price of
      the
      Common Stock set forth in the foregoing definition shall apply with respect
      to
      any other security in respect of which a determination as to market value must
      be made hereunder.

     

    (iii)           
      “Common
      Stock,” for
      purposes of this Paragraph 4, includes the Common Stock, par value $.00001
      per
      share, and any additional class of stock of the Company having no preference
      as
      to dividends or distributions on liquidation, provided that the shares
      purchasable pursuant to this Warrant shall include only shares of Common Stock,
      par value $.00001 per share, in respect of which this Warrant is exercisable,
      or
      shares resulting from any subdivision or combination of such Common Stock,
      or in
      the case of any reorganization, reclassification, consolidation, merger, or
      sale
      of the character referred to in Paragraph 4(e) hereof, the stock or other
      securities or property provided for in such Paragraph.

     

    5.           
      Issue
      Tax.

     

    
      	
              The
                issuance of certificates for Warrant Shares upon the exercise of
                this
                Warrant shall be made without charge to the holder of this Warrant
                or such
                shares for any issuance tax or other costs in respect thereof, provided
                that the Company shall not be required to pay any tax which may be
                payable
                in respect of any transfer involved in the issuance and delivery
                of any
                certificate in a name other than the holder of this Warrant.
                

            

    

     

    6.           
      No Rights or
      Liabilities as a Shareholder.

     

    
      	
              This
                Warrant shall not entitle the holder hereof to any voting rights
                or other
                rights as a shareholder of the Company. No provision of this Warrant,
                in
                the absence of affirmative action by the holder hereof to purchase
                Warrant
                Shares, and no mere enumeration herein of the rights or privileges
                of the
                holder hereof, shall give rise to any liability of such holder for
                the
                Exercise Price or as a shareholder of the Company, whether such liability
                is asserted by the Company or by creditors of the Company.
                

            

    

     

    7.           
      Transfer, Exchange,
      and Replacement of Warrant.

     

    (a)           
      Restriction
      on Transfer.  This Warrant
      and
      the rights granted to the holder hereof are transferable, in whole or in part,
      upon surrender of this Warrant, together with a properly executed assignment
      in
      the form attached hereto, at the office or agency of the Company referred to
      in
      Paragraph 7(e) below, pro­vided, however, that any transfer or
      assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
      and to the applicable provisions of the Securities Purchase
      Agreement.  Until due presentment for registration of transfer on the
      books of the Company, the Company may treat the registered holder hereof as
      the
      owner and holder hereof for all purposes, and the Company shall not be affected
      by any notice to the con­trary.  Notwithstanding anything to the
      contrary contained herein, the registration rights described in Paragraph 8
      are
      assignable only in accordance with the provisions of that certain Registration
      Rights Agreement, dated September 28, 2006, by and among the Company and the
      other signatories thereto (the “Registration Rights
      Agreement”).

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b)           
      Warrant
      Exchangeable for Different Denomina­tions.  This Warrant
      is
      exchangeable, upon the surrender hereof by the holder hereof at the office
      or
      agency of the Company referred to in Paragraph 7(e) below, for new Warrants
      of
      like tenor representing in the aggregate the right to purchase the number of
      shares of Common Stock which may be purchased hereunder, each of such new
      Warrants to represent the right to purchase such number of shares as shall
      be
      designated by the holder hereof at the time of such surrender.

     

    (c)           
      Replacement
      of Warrant.  Upon receipt
      of
      evidence reasonably satisfactory to the Company of the loss, theft, destruction,
      or mutilation of this Warrant and, in the case of any such loss, theft, or
      destruc­tion, upon delivery of an indemnity agreement reasonably
      satisfactory in form and amount to the Company, or, in the case of any such
      mutilation, upon surrender and cancellation of this Warrant, the Company, at
      its
      expense, will execute and deliver, in lieu thereof, a new Warrant of like
      tenor.

     

    (d)           
      Cancellation;
      Payment of Expenses.  Upon the
      surrender of this Warrant in connection with any trans­fer, exchange, or
      replacement as provided in this Paragraph 7, this Warrant shall be promptly
      canceled by the Company.  The Company shall pay all taxes (other than
      securities transfer taxes) and all other expenses (other than legal expenses,
      if
      any, incurred by the holder or transferees) and charges payable in connection
      with the preparation, execution, and delivery of Warrants pursuant to this
      Paragraph 7.

     

    (e)           
      Register.  The
      Company shall
      maintain, at its principal executive offices (or such other office or agency
      of
      the Company as it may designate by notice to the holder hereof), a register
      for
      this Warrant, in which the Company shall record the name and address of the
      person in whose name this Warrant has been issued, as well as the name and
      address of each transferee and each prior owner of this Warrant.

     

    (f)           
      Exercise
      or Transfer Without Registration.  If, at the
      time
      of the surrender of this Warrant in connection with any exercise, transfer,
      or
      exchange of this Warrant, this Warrant (or, in the case of any exercise, the
      Warrant Shares issuable hereunder), shall not be registered under the Securities
      Act of 1933, as amended (the “Securities Act”) and under applicable state
      securities or blue sky laws, the Company may require, as a condition of allowing
      such exercise, transfer, or exchange, (i) that the holder or transferee of
      this
      Warrant, as the case may be, furnish to the Company a written opinion of
      counsel, which opinion and counsel are acceptable to the Company, to the effect
      that such exercise, transfer, or exchange may be made without registration
      under
      said Act and under applicable state securities or blue sky laws, (ii) that
      the
      holder or transferee execute and deliver to the Company an investment letter
      in
      form and substance acceptable to the Company and (iii) that the transferee
      be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
      Act; provided that no such opinion, letter or status as an “accredited investor”
shall be required in connection with a transfer pursuant to Rule 144 under
      the
      Securities Act.  The first holder of this Warrant, by taking and
      holding the same, represents to the Company that such holder is acquiring this
      Warrant for investment and not with a view to the distribution
      thereof.

     

    8.           
      Registration
      Rights.

     

    
      	
              The
                initial holder of this Warrant (and certain assignees thereof) is
                entitled
                to the benefit of such registration rights in respect of the Warrant
                Shares as are set forth in Section 2 of the Registration Rights
                Agreement. 

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    9.           
      Notices.

     

    
      	
              All
                notices, requests, and other communications required or permitted
                to be
                given or delivered hereunder to the holder of this Warrant shall
                be in
                writing, and shall be personally delivered, or shall be sent by certified
                or registered mail or by recognized overnight mail courier, postage
                prepaid and addressed, to such holder at the address shown for such
                holder
                on the books of the Company, or at such other address as shall have
                been
                furnished to the Company by notice from such holder. All notices,
                requests, and other communications required or permitted to be given
                or
                delivered hereunder to the Company shall be in writing, and shall
                be
                personally delivered, or shall be sent by certified or registered
                mail or
                by recognized overnight mail courier, postage prepaid and addressed,
                to
                the office of David E. Price, Esq, General Counsel, at 13520 Oriental
                St,
                Rockville, Md 20853, or at such other address as shall have been
                furnished
                to the holder of this Warrant by notice from the Company. Any such
                notice,
                request, or other communication may be sent by facsimile, but shall
                in
                such case be subsequently confirmed by a writing personally delivered
                or
                sent by certified or registered mail or by recognized overnight mail
                courier as provided above. All notices, requests, and other communications
                shall be deemed to have been given either at the time of the receipt
                thereof by the person entitled to re­ceive such notice at the address
                of such person for purposes of this Paragraph 9, or, if mailed by
                registered or certified mail or with a recognized overnight mail
                courier
                upon deposit with the United States Post Office or such overnight
                mail
                courier, if postage is prepaid and the mailing is properly addressed,
                as
                the case may be. 

            

    

     

    10.           
      Governing
      Law.

     

    
      	
              THIS
                WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE
                WITH
                THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
                TO BE
                PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
                OF
                CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
                JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
                NEW
                YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE
                AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
                CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
                DEFENSE
                OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
                BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED
                BY
                FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
                OF
                PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
                SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
                PERMITTED BY LAW.  BOTH PARTIES AGREE THAT A FINAL
                NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
                AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
                OR IN
                ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
                ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL
                FEES
                AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
                IN CONNECTION WITH SUCH DISPUTE. HOWEVER, ALL PARTIES
                HERETO AGREE
                THAT PRIOR TO THE FILING OF ANY SUIT IN THE COURTS OF NEW YORK THAT
                THEY
                SHALL FIRST AGREE TO ARBITRATION BY CHOOSING AN ARTIBRATOR IN NEW
                YORK WHO
                SHALL HAVE FULL AUTHORITY TO HEAR, ADJUDGE AND ISSUE ANY FINDINGS
                HE FINDS
                REASONABLE

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    11.           
      Miscellaneous.

     

    (a)           
      Amendments.  This
      Warrant and
      any provision hereof may only be amended by an instrument in writing signed
      by
      the Company and the holder hereof.

     

    (b)           
      Descriptive
      Headings.  The descriptive
      headings of the several paragraphs of this Warrant are in­serted for
      purposes of reference only, and shall not affect the meaning or construction
      of
      any of the provisions hereof.

     

    (c)           
      Cashless
      Exercise.  Notwithstanding
      anything to the contrary contained in this Warrant, if the resale of the Warrant
      Shares by the holder is not then registered pursuant to an effective
      registration statement under the Securities Act, this Warrant may be exercised
      by presentation and surrender of this Warrant to the Company at its principal
      executive offices with a written notice of the holder’s intention to effect a
      cashless exercise, including a calculation of the number of shares of Common
      Stock to be issued upon such exercise in accordance with the terms hereof (a
      “Cashless Exercise”).  In the event of a Cashless Exercise, in lieu of
      paying the Exercise Price in cash, the holder shall surrender this Warrant
      for
      that number of shares of Common Stock determined by multiplying the number
      of
      Warrant Shares to which it would otherwise be entitled by a fraction, the
      numerator of which shall be the difference between the then current Market
      Price
      per share of the Common Stock and the Exercise Price,  and the
      denominator of which shall be the then current Market Price per share of Common
      Stock.  For example, if the holder is exercising 100,000 Warrants with
      a per Warrant exercise price of $0.75 per share through a cashless exercise
      when
      the Common Stock’s current Market Price per share is $2.00 per share, then upon
      such Cashless Exercise the holder will receive 62,500 shares of Common
      Stock.

     

    (d)           
      Remedies.  The
      Company acknowledges that a
      breach by it of its obligations hereunder will cause irreparable harm to the
      holder, by vitiating the intent and purpose of the transaction contemplated
      hereby.  Accordingly, the Company acknowledges that the remedy at law
      for a breach of its obligations under this Warrant will be inadequate and
      agrees, in the event of a breach or threatened breach by the Company of the
      provisions of this Warrant, that the holder shall be entitled, in addition
      to
      all other available remedies at law or in equity, and in addition to the
      penalties assessable herein, to an injunction or injunctions restraining,
      preventing or curing any breach of this Warrant and to enforce specifically
      the
      terms and provisions thereof, without the necessity of showing economic loss
      and
      without any bond or other security being required.

    

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the
      Company has caused this Warrant to be signed by its duly authorized
      officer.

     

    TEXTECHNOLOGIES
      INC.

    

    

    

    By:
/s/
      Peter
      Maddocks                                            
 

    Peter
      Maddocks

    Chief
      Executive Officer

    

     

    Dated
      as
      of September 28, 2006

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    FORM
      OF EXERCISE AGREEMENT

     

    

     

    Dated:  ________
      __, 200_

     

    

     

    To:           
      ______________________

     

    

     

    The
      undersigned, pursuant to the provisions set forth in the within Warrant, hereby
      agrees to purchase ________ shares of Common Stock covered by such Warrant,
      and
      makes pay­ment herewith in full therefor at the price per share provided by
      such Warrant in cash or by certified or official bank check in the amount of,
      or, if the resale of such Common Stock by the undersigned is not currently
      registered pursuant to an effective registration statement under the Securities
      Act of 1933, as amended, by surrender of securities issued by the Company
      (including a portion of the Warrant) having a market value (in the case of
      a
      portion of this Warrant, determined in accordance with Section 11(c) of the
      Warrant) equal to $_________.  Please issue a certificate or
      certifi­cates for such shares of Common Stock in the name of and pay any
      cash for any fractional share to:

     

    

    
    

    
      	 	
              Name: ______________________________

              

              

              Signature:

              Address:____________________________

                             
                ____________________________  

            

    

     

    

    
      	
               

            	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if applicable. 

            

    

    

     

    and,
      if
      said number of shares of Common Stock shall not be all the shares purchasable
      under the within Warrant, a new Warrant is to be issued in the name of said
      undersigned covering the balance of the shares purchasable thereunder less
      any
      frac­tion of a share paid in cash.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    FORM
      OF ASSIGNMENT

    

     

    

     

    FOR
      VALUE RECEIVED, the
      undersigned hereby sells, assigns, and transfers all the rights of the
      undersigned under the within Warrant, with respect to the number of shares
      of
      Common Stock covered thereby set forth hereinbelow, to:

    

     

    Name
      of
      Assignee                                                                          
     Address                                                                  
                          
No of
      Shares

     

    

     

    

     

    

     

    ,
      and
      hereby irrevocably constitutes and appoints ___________________________________
      as agent and attorney-in-fact to trans­fer said Warrant on the books of the
      within-named corporation, with full power of substitution in the
      premises.

     

    

     

    Dated:                      
      ________ __, 200_

     

    
      

      
      

      
        	 In
                the
                presence of:	
                ______________________________________

                 

                Name: _________________________________

                

                

                Signature:
                  ______________________________

                
                  Title
                    of Signing Officer or Agent (if any):

                                    
                    ______________________________

                  Address:  ______________________________

                                   
                    ______________________________

                

                 

              

      

      
         

        
          	
                   

                	
                  Note:

                	
                  The
                    above signature should correspond exactly with the name on the
                    face of the
                    within Warrant, if applicable. 

                

        

         

         

        15textech_sb2-ex1008.htm

    EXHIBIT
      10.8

     

    REGISTRATION
      RIGHTS
      AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT (this “Agreement”), dated as of
      September 28, 2006, by and among Textechnologies Inc., a
      [              ]
      corporation with its headquarters located at
      [                            ]
      (the “Company”), and
      each of the undersigned (together with their respective affiliates and any
      assignee or transferee of all of their respective rights hereunder, the “Initial
      Investors”).

    

    WHEREAS:

     

    A.           In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the “Securities Purchase Agreement”), the Company
      has agreed, upon the terms and subject to the conditions contained therein,
      to
      issue and sell to the Initial Investors (i) secured convertible notes in
      the aggregate principal amount of up to One Million Five Hundred Thousand
      Dollars ($1,500,000) (the “Notes”) that are convertible into shares of the
      Company’s common stock (the “Common Stock”), upon the terms and subject to the
      limitations and conditions set forth in such Notes and (ii) warrants (the
“Warrants”) to acquire an aggregate of 10,000,000 shares of Common Stock, upon
      the terms and conditions and subject to the limitations and conditions set
      forth
      in the Warrants; and

     

    B.           To
      induce the Initial Investors to execute and deliver the Securities Purchase
      Agreement, the Company has agreed to provide certain registration rights under
      the Securities Act of 1933, as amended, and the rules and regulations
      thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable
      state securities laws;

     

    NOW,
      THEREFORE, in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Initial Investors hereby agree
      as follows:

     

    1.           DEFINITIONS.

     

    a.           As
      used in this Agreement, the following terms shall have the following
      meanings:

     

    (i)           “Investors”
means
      the Initial
      Investors and any transferee or assignee who agrees to become bound by the
      provisions of this Agreement in accordance with Section 9 hereof.

     

    (ii)           “register,”
“registered,”
and
“registration”
refer
      to a
      registration effected by preparing and filing a Registration Statement or
      Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
      1933 Act or any successor rule providing for offering securities on a continuous
      basis (“Rule 415”), and
      the declaration or ordering of effectiveness of such Registration Statement
      by
      the United States Securities and Exchange Commission (the “SEC”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii)           “Registrable
      Securities” means
      the Conversion Shares issued or issuable upon conversion or otherwise pursuant
      to the Notes and Additional Notes (as defined in the Securities Purchase
      Agreement) including, without limitation, Damages Shares (as defined in the
      Notes) issued or issuable pursuant to the Notes, shares of Common Stock issued
      or issuable in payment of the Standard Liquidated Damages Amount (as defined
      in
      the Securities Purchase Agreement), shares issued or issuable in respect of
      interest or in redemption of the Notes in accordance with the terms thereof)
      and
      any shares of capital stock issued or issuable as a dividend on or in exchange
      for or otherwise with respect to any of the foregoing.

     

    (iv)           “Registration
      Statement” means
      a registration statement of the Company under the 1933 Act.

     

    b.           Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement or the Convertible
      Note.

     

    2.           REGISTRATION.

     

    a.           Mandatory
      Registration.  The Company shall prepare, and, on or
      prior to thirty (30) days from the date of Closing (as defined in the Securities
      Purchase Agreement) (the “Filing Date”), file with the
      SEC a Registration Statement on Form SB-2 (or, if Form SB-2 is not then
      available, on such form of Registration Statement as is then available to effect
      a registration of the Registrable Securities, subject to the consent of the
      Initial Investors, which consent will not be unreasonably withheld) covering
      the
      resale of the Registrable Securities underlying the Notes issued or issuable
      pursuant to the Securities Purchase Agreement, which Registration Statement,
      to
      the extent allowable under the 1933 Act and the rules and regulations
      promulgated thereunder (including Rule 416), shall state that such Registration
      Statement also covers such indeterminate number of additional shares of Common
      Stock as may become issuable upon conversion of or otherwise pursuant to the
      Notes to prevent dilution resulting from stock splits, stock dividends or
      similar transactions.  The number of shares of Common Stock initially
      included in such Registration Statement shall be no less than an amount equal
      to
      the sum of the number of Conversion Shares that are then issuable upon
      conversion of the Notes and Additional Notes (based on the Variable Conversion
      Price as would then be in effect and assuming the Variable Conversion Price
      is
      the Conversion Price at such time), without regard to any limitation on the
      Investor’s ability to convert the Notes.  The Company acknowledges
      that the number of shares initially included in the Registration Statement
      represents a good faith estimate of the maximum number of shares issuable upon
      conversion of the Notes.

     

    b.           Underwritten
      Offering.  If any offering pursuant to a Registration
      Statement pursuant to Section 2(a) hereof involves an underwritten offering,
      the
      Investors who hold a majority in interest of the Registrable Securities subject
      to such underwritten offering, with the consent of a majority-in-interest of
      the
      Initial Investors, shall have the right to select one legal counsel and an
      investment banker or bankers and manager or managers to administer the offering,
      which investment banker or bankers or manager or managers shall be reasonably
      satisfactory to the Company.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    c.           Payments
      by the
      Company.  The Company shall use its best efforts to
      obtain effectiveness of the Registration Statement as soon as
      practicable.  If (i) the Registration Statement(s) covering the
      Registrable Securities required to be filed by the Company pursuant to Section
      2(a) hereof is not filed by the Filing Date or declared effective by the SEC
      on
      or prior to one hundred and five (105) days from the date of Closing (as defined
      in the Securities Purchase Agreement), or (ii) after the Registration
      Statement has been declared effective by the SEC, sales of all of the
      Registrable Securities cannot be made pursuant to the Registration Statement,
      or
      (iii) the Common Stock is not listed or included for quotation on the
      Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap
      Market (“Nasdaq
      SmallCap”), the New York Stock Exchange (the “NYSE”) or the American
      Stock
      Exchange (the “AMEX”)
      after being so listed or included for quotation, or (iv) the Common Stock
      ceases to be traded on the Over-the-Counter Bulletin Board (the “OTCBB”) or on the Pinksheets
      (“Pinksheets”) or any equivalent replacement exchange prior to being listed or
      included for quotation on one of the aforementioned markets, then the Company
      will make payments to the Investors in such amounts and at such times as shall
      be determined pursuant to this Section 2(c) as partial relief for the damages
      to
      the Investors by reason of any such delay in or reduction of their ability
      to
      sell the Registrable Securities (which remedy shall not be exclusive of any
      other remedies available at law or in equity).  The Company shall pay
      to each holder of the Notes or Registrable Securities an amount equal to the
      then outstanding principal amount of the Notes (and, in the case of holders
      of
      Registrable Securities, the principal amount of Notes from which such
      Registrable Securities were converted) (“Outstanding Principal
      Amount”), multiplied by the Applicable Percentage (as defined below)
      times the sum of:  (i) the number of months (prorated for partial
      months) after the Filing Date or the end of the aforementioned one hundred
      and
      five (105) day period and prior to the date the Registration Statement is
      declared effective by the SEC, provided, however, that there shall be excluded
      from such period any delays which are solely attributable to changes required
      by
      the Investors in the Registration Statement with respect to information relating
      to the Investors, including, without limitation, changes to the plan of
      distribution, or to the failure of the Investors to conduct their review of
      the
      Registration Statement pursuant to Section 3(h) below in a reasonably prompt
      manner; (ii) the number of months (prorated for partial months) that sales
      of
      all of the Registrable Securities cannot be made pursuant to the Registration
      Statement after the Registration Statement has been declared effective
      (including, without limitation, when sales cannot be made by reason of the
      Company’s failure to properly supplement or amend the prospectus included
      therein in accordance with the terms of this Agreement, but excluding any days
      during an Allowed Delay (as defined in Section 3(f)); and (iii) the number
      of
      months (prorated for partial months) that the Common Stock is not listed or
      included for quotation on the OTCBB, Pinksheets, Nasdaq, Nasdaq SmallCap, NYSE
      or AMEX or that trading thereon is halted after the Registration Statement
      has
      been declared effective.  The term “Applicable Percentage” means
      two hundredths (.015).  (For example, if the Registration Statement
      becomes effective one (1) month after the end of such one hundred and five
      (105)
      day period, the Company would pay $5,000 for each $250,000 of Outstanding
      Principal Amount.  If thereafter, sales could not be made pursuant to
      the Registration Statement for an additional period of one (1) month, the
      Company would pay an additional $5,000 for each $250,000 of Outstanding
      Principal Amount.)  Such amounts shall be paid in cash or, at the
      Company’s option, in shares of Common Stock priced at the Conversion Price (as
      defined in the Notes) on such payment date.

     

    
      
        
        

      

      
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    d.           Piggy-Back
      Registrations.  Subject to the last sentence of this
      Section 2(d), if at any time prior to the expiration of the Registration Period
      (as hereinafter defined) the Company shall determine to file with the SEC a
      Registration Statement relating to an offering for its own account or the
      account of others under the 1933 Act of any of its equity securities (other
      than
      on Form S-4 or Form S-8 or their then equivalents relating to equity securities
      to be issued solely in connection with any acquisition of any entity or business
      or equity securities issuable in connection with stock option or other bonafide,
      employee
      benefit plans), the Company shall send to each Investor who is entitled to
      registration rights under this Section 2(d) written notice of such determination
      and, if within fifteen (15) days after the effective date of such notice, such
      Investor shall so request in writing, the Company shall include in such
      Registration Statement all or any part of the Registrable Securities such
      Investor requests to be registered, except that if, in connection with any
      underwritten public offering for the account of the Company the managing
      underwriter(s) thereof shall impose a limitation on the number of shares of
      Common Stock which may be included in the Registration Statement because, in
      such underwriter(s)’ judgment, marketing or other factors dictate such
      limitation is necessary to facilitate public distribution, then the Company
      shall be obligated to include in such Registration Statement only such limited
      portion of the Registrable Securities with respect to which such Investor has
      requested inclusion hereunder as the underwriter shall permit. Any exclusion
      of
      Registrable Securities shall be made pro rata among the Investors seeking to
      include Registrable Securities in proportion to the number of Registrable
      Securities sought to be included by such Investors; provided, however,
      that the
      Company shall not exclude any Registrable Securities unless the Company has
      first excluded all outstanding securities, the holders of which are not entitled
      to inclusion of such securities in such Registration Statement or are not
      entitled to pro rata inclusion with the Registrable Securities; and provided, further,
however,
      that, after
      giving effect to the immediately preceding proviso, any exclusion of Registrable
      Securities shall be made pro rata with holders of other securities having the
      right to include such securities in the Registration Statement other than
      holders of securities entitled to inclusion of their securities in such
      Registration Statement by reason of demand registration rights.  No
      right to registration of Registrable Securities under this Section 2(d) shall
      be
      construed to limit any registration required under Section 2(a)
      hereof.  If an offering in connection with which an Investor is
      entitled to registration under this Section 2(d) is an underwritten offering,
      then each Investor whose Registrable Securities are included in such
      Registration Statement shall, unless otherwise agreed by the Company, offer
      and
      sell such Registrable Securities in an underwritten offering using the same
      underwriter or underwriters and, subject to the provisions of this Agreement,
      on
      the same terms and conditions as other shares of Common Stock included in such
      underwritten offering.  Notwithstanding anything to the contrary set
      forth herein, the registration rights of the Investors pursuant to this Section
      2(d) shall only be available in the event the Company fails to timely file,
      obtain effectiveness or maintain effectiveness of any Registration Statement
      to
      be filed pursuant to Section 2(a) in accordance with the terms of this
      Agreement.

     

    
      
        
        

      

      
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    e.           Eligibility
      for Form S-3,
      SB-2 or S-1; Conversion to Form S-3.  The Company
      represents and warrants that it meets the requirements for the use of Form
      S-3,
      SB-2 or S-1 for registration of the sale by the Initial Investors and any other
      Investors of the Registrable Securities.   The Company agrees to
      file all reports required to be filed by the Company with the SEC in a timely
      manner so as to remain eligible or become eligible, as the case may be, and
      thereafter to maintain its eligibility, for the use of Form S-3.  If
      the Company is not currently eligible to use Form S-3, not later than fifteen
      (15) business days after the Company first meets the registration eligibility
      and transaction requirements for the use of Form S-3 (or any successor form)
      for
      registration of the offer and sale by the Initial Investors and any other
      Investors of Registrable Securities, the Company shall file a Registration
      Statement on Form S-3 (or such successor form) with respect to the Registrable
      Securities covered by the Registration Statement on Form SB-2 or Form S-1,
      whichever is applicable, filed pursuant to Section 2(a) (and include in such
      Registration Statement on Form S-3 the information required by Rule 429 under
      the 1933 Act) or convert the Registration Statement on Form SB-2 or Form S-1,
      whichever is applicable, filed pursuant to Section 2(a) to a Form S-3 pursuant
      to Rule 429 under the 1933 Act and cause such Registration Statement (or such
      amendment) to be declared effective no later than thirty (30) days after
      filing.  In the event of a breach by the Company of the provisions of
      this Section 2(e), the Company will be required to make payments pursuant to
      Section 2(c) hereof.

     

    3.           OBLIGATIONS
      OF THE
      COMPANY.

     

    In
      connection with the registration of the Registrable Securities, the Company
      shall have the following obligations:

     

    a.           The
      Company shall prepare promptly, and file with the SEC not later than the Filing
      Date, a Registration Statement with respect to the number of Registrable
      Securities provided in Section 2(a), and thereafter use its best efforts to
      cause such Registration Statement relating to Registrable Securities to become
      effective as soon as possible after such filing but in no event later than
      one
      hundred and five (105) days from the date of Closing), and keep the Registration
      Statement effective pursuant to Rule 415 at all times until such date as is
      the
      earlier of (i) the date on which all of the Registrable Securities have been
      sold and (ii) the date on which the Registrable Securities (in the opinion
      of
      counsel to the Initial Investors) may be immediately sold to the public without
      registration or restriction (including, without limitation, as to volume by
      each
      holder thereof) under the 1933 Act (the “Registration Period”), which
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall not contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein,
      or
      necessary to make the statements therein not misleading.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    b.           The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to the Registration Statements and
      the prospectus used in connection with the Registration Statements as may be
      necessary to keep the Registration Statements effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by the Registration Statements until such time as all of such
      Registrable Securities have been disposed of in accordance with the intended
      methods of disposition by the seller or sellers thereof as set forth in the
      Registration Statements.  In the event the number of shares available
      under a Registration Statement filed pursuant to this Agreement is insufficient
      to cover all of the Registrable Securities issued or issuable upon conversion
      of
      the Notes, the Company shall amend the Registration Statement, or file a new
      Registration Statement (on the short form available therefor, if applicable),
      or
      both, so as to cover all of the Registrable Securities, in each case, as soon
      as
      practicable, but in any event within fifteen (15) days after the necessity
      therefor arises (based on the market price of the Common Stock and other
      relevant factors on which the Company reasonably elects to rely).  The
      Company shall use its best efforts to cause such amendment and/or new
      Registration Statement to become effective as soon as practicable following
      the
      filing thereof, but in any event within thirty (30) days after the date on
      which
      the Company reasonably first determines (or reasonably should have determined)
      the need therefor.  The provisions of Section 2(c) above shall be
      applicable with respect to such obligation, with the one hundred and five (105)
      days running from the day the Company reasonably first determines (or reasonably
      should have determined) the need therefor.

     

    c.           The
      Company shall furnish to each Investor whose Registrable Securities are included
      in a Registration Statement and its legal counsel (i) promptly (but in no
      event more than two (2) business days) after the same is prepared and publicly
      distributed, filed with the SEC, or received by the Company, one copy of each
      Registration Statement and any amendment thereto, each preliminary prospectus
      and prospectus and each amendment or supplement thereto, and, in the case of
      the
      Registration Statement referred to in Section 2(a), each letter written by
      or on
      behalf of the Company to the SEC or the staff of the SEC, and each item of
      correspondence from the SEC or the staff of the SEC, in each case relating
      to
      such Registration Statement (other than any portion of any thereof which
      contains information for which the Company has sought confidential treatment),
      and (ii) promptly (but in no event more than two (2) business days) after
      the Registration Statement is declared effective by the SEC, such number of
      copies of a prospectus, including a preliminary prospectus, and all amendments
      and supplements thereto and such other documents as such Investor may reasonably
      request in order to facilitate the disposition of the Registrable Securities
      owned by such Investor.  The Company will immediately notify each
      Investor by facsimile of the effectiveness of each Registration Statement or
      any
      post-effective amendment.  The Company will promptly respond to any
      and all comments received from the SEC (which comments shall promptly be made
      available to the Investors upon request), with a view towards causing each
      Registration Statement or any amendment thereto to be declared effective by
      the
      SEC as soon as practicable, shall promptly file an acceleration request as
      soon
      as practicable (but in no event more than two (2) business days) following
      the
      resolution or clearance of all SEC comments or, if applicable, following
      notification by the SEC that any such Registration Statement or any amendment
      thereto will not be subject to review and shall, if required by SEC Rules,
      promptly file with the SEC a final prospectus as soon as practicable (but in
      no
      event more than two (2) business days) following receipt by the Company from
      the
      SEC of an order declaring the Registration Statement effective.  In
      the event of a breach by the Company of the provisions of this Section 3(c),
      the
      Company will be required to make payments pursuant to Section 2(c)
      hereof.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    d.           The
      Company shall use reasonable efforts to (i) register and qualify the
      Registrable Securities covered by the Registration Statements under such other
      securities or “blue sky” laws of such jurisdictions in the United States as the
      Investors who hold a majority in interest of the Registrable Securities being
      offered reasonably request, (ii) prepare and file in those jurisdictions
      such amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) take all other
      actions reasonably necessary or advisable to qualify the Registrable Securities
      for sale in such jurisdictions; provided, however,
      that the
      Company shall not be required in connection therewith or as a condition thereto
      to (a) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 3(d), (b) subject
      itself to general taxation in any such jurisdiction, (c) file a general
      consent to service of process in any such jurisdiction, (d) provide any
      undertakings that cause the Company undue expense or burden, or (e) make
      any change in its charter or bylaws, which in each case the Board of Directors
      of the Company determines to be contrary to the best interests of the Company
      and its shareholders.

     

    e.           In
      the event Investors who hold a majority-in-interest of the Registrable
      Securities being offered in the offering (with the approval of a
      majority-in-interest of the Initial Investors) select underwriters for the
      offering, the Company shall enter into and perform its obligations under an
      underwriting agreement, in usual and customary form, including, without
      limitation, customary indemnification and contribution obligations, with the
      underwriters of such offering.

     

    f.           As
      promptly as practicable after becoming aware of such event, the Company shall
      notify each Investor of the happening of any event, of which the Company has
      knowledge, as a result of which the prospectus included in any Registration
      Statement, as then in effect, includes an untrue statement of a material fact
      or
      omission to state a material fact required to be stated therein or necessary
      to
      make the statements therein not misleading, and use its best efforts promptly
      to
      prepare a supplement or amendment to any Registration Statement to correct
      such
      untrue statement or omission, and deliver such number of copies of such
      supplement or amendment to each Investor as such Investor may reasonably
      request; provided that, for not more than ten (10) consecutive trading days
      (or
      a total of not more than twenty (20) trading days in any twelve (12) month
      period), the Company may delay the disclosure of material non-public information
      concerning the Company (as well as prospectus or Registration Statement
      updating) the disclosure of which at the time is not, in the good faith opinion
      of the Company, in the best interests of the Company (an “Allowed Delay”); provided,
      further, that the Company shall promptly (i) notify the Investors in
      writing of the existence of (but in no event, without the prior written consent
      of an Investor, shall the Company disclose to such investor any of the facts
      or
      circumstances regarding) material non-public information giving rise to an
      Allowed Delay and (ii) advise the Investors in writing to cease all sales
      under such Registration Statement until the end of the Allowed Delay. Upon
      expiration of the Allowed Delay, the Company shall again be bound by the first
      sentence of this Section 3(f) with respect to the information giving rise
      thereto.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      g.           The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of any Registration Statement, and, if
        such an
        order is issued, to obtain the withdrawal of such order at the earliest possible
        moment and to notify each Investor who holds Registrable Securities being
        sold
        (or, in the event of an underwritten offering, the managing underwriters)
        of the
        issuance of such order and the resolution thereof.

       

    

    h.           The
      Company shall permit a single firm of counsel designated by the Initial
      Investors to review such Registration Statement and all amendments and
      supplements thereto (as well as all requests for acceleration or effectiveness
      thereof) a reasonable period of time prior to their filing with the SEC, and
      not
      file any document in a form to which such counsel reasonably objects and will
      not request acceleration of such Registration Statement without prior notice
      to
      such counsel.  The sections of such Registration Statement covering
      information with respect to the Investors, the Investor’s beneficial ownership
      of securities of the Company or the Investors intended method of disposition
      of
      Registrable Securities shall conform to the information provided to the Company
      by each of the Investors.

     

    i.           The
      Company shall make generally available to its security holders as soon as
      practicable, but not later than one hundred and five (105) days after the close
      of the period covered thereby, an earnings statement (in form complying with
      the
      provisions of Rule 158 under the 1933 Act) covering a twelve-month period
      beginning not later than the first day of the Company’s fiscal quarter next
      following the effective date of the Registration Statement.

     

    j.           At
      the request of any Investor, the Company shall furnish, on the date that
      Registrable Securities are delivered to an underwriter, if any, for sale in
      connection with any Registration Statement or, if such securities are not being
      sold by an underwriter, on the date of effectiveness thereof (i) an
      opinion, dated as of such date, from counsel representing the Company for
      purposes of such Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to the
      underwriters, if any, and the Investors and (ii) a letter, dated such date,
      from the Company’s independent certified public accountants in form and
      substance as is customarily given by independent certified public accountants
      to
      underwriters in an underwritten public offering, addressed to the underwriters,
      if any, and the Investors.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
       

      k.           The
        Company shall make available for inspection by (i) any Investor,
        (ii) any underwriter participating in any disposition pursuant to a
        Registration Statement, (iii) one firm of attorneys and one firm of
        accountants or other agents retained by the Initial Investors, (iv) one
        firm of attorneys and one firm of accountants or other agents retained by
        all
        other Investors, and (v) one firm of attorneys retained by all such
        underwriters (collectively, the “Inspectors”) all pertinent
        financial and other records, and pertinent corporate documents and properties
        of
        the Company, including without limitation, records of conversions by other
        holders of convertible securities issued by the Company and the issuance
        of
        stock to such holders pursuant to the conversions (collectively, the “Records”), as shall be
        reasonably deemed necessary by each Inspector to enable each Inspector to
        exercise its due diligence responsibility, and cause the Company’s officers,
        directors and employees to supply all information which any Inspector may
        reasonably request for purposes of such due diligence; provided, however,
        that each
        Inspector shall hold in confidence and shall not make any disclosure (except
        to
        an Investor) of any Record or other information which the Company determines
        in
        good faith to be confidential, and of which determination the Inspectors
        are so
        notified, unless (a) the disclosure of such Records is necessary to avoid
        or correct a misstatement or omission in any Registration Statement,
        (b) the release of such Records is ordered pursuant to a subpoena or other
        order from a court or government body of competent jurisdiction, or (c) the
        information in such Records has been made generally available to the public
        other than by disclosure in violation of this or any other
        agreement.  The Company shall not be required to disclose any
        confidential information in such Records to any Inspector until and unless
        such
        Inspector shall have entered into confidentiality agreements (in form and
        substance satisfactory to the Company) with the Company with respect thereto,
        substantially in the form of this Section 3(k).  Each Investor agrees
        that it shall, upon learning that disclosure of such Records is sought in
        or by
        a court or governmental body of competent jurisdiction or through other means,
        give prompt notice to the Company and allow the Company, at its expense,
        to
        undertake appropriate action to prevent disclosure of, or to obtain a protective
        order for, the Records deemed confidential.  Nothing herein (or in any
        other confidentiality agreement between the Company and any Investor) shall
        be
        deemed to limit the Investor’s ability to sell Registrable Securities in a
        manner which is otherwise consistent with applicable laws and
        regulations.

       

    

    l.           The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of
      such information is necessary to comply with federal or state securities laws,
      (ii) the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release
      of such information is ordered pursuant to a subpoena or other order from a
      court or governmental body of competent jurisdiction, or (iv) such
      information has been made generally available to the public other than by
      disclosure in violation of this or any other agreement.  The Company
      agrees that it shall, upon learning that disclosure of such information
      concerning an Investor is sought in or by a court or governmental body of
      competent jurisdiction or through other means, give prompt notice to such
      Investor prior to making such disclosure, and allow the Investor, at its
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.

     

    
      
        
        

      

      
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      m.           The
        Company shall (i) cause all the Registrable Securities covered by the
        Registration Statement to be listed on each national securities exchange
        on
        which securities of the same class or series issued by the Company are then
        listed, if any, if the listing of such Registrable Securities is then permitted
        under the rules of such exchange, or (ii) to the extent the securities of
        the same class or series are not then listed on a national securities exchange,
        secure the designation and quotation, of all the Registrable Securities covered
        by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
        Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the
        OTCBB
        and, without limiting the generality of the foregoing, to arrange for at
        least
        two market makers to register with the National Association of Securities
        Dealers, Inc. (“NASD”)
        as such with respect to such Registrable Securities.

       

      n.           The
        Company shall provide a transfer agent and registrar, which may be a single
        entity, for the Registrable Securities not later than the effective date
        of the
        Registration Statement.

       

      o.           The
        Company shall cooperate with the Investors who hold Registrable Securities
        being
        offered and the managing underwriter or underwriters, if any, to facilitate
        the
        timely preparation and delivery of certificates (not bearing any restrictive
        legends) representing Registrable Securities to be offered pursuant to a
        Registration Statement and enable such certificates to be in such denominations
        or amounts, as the case may be, as the managing underwriter or underwriters,
        if
        any, or the Investors may reasonably request and registered in such names
        as the
        managing underwriter or underwriters, if any, or the Investors may request,
        and,
        within three (3) business days after a Registration Statement which includes
        Registrable Securities is ordered effective by the SEC, the Company shall
        deliver, and shall cause legal counsel selected by the Company to deliver,
        to
        the transfer agent for the Registrable Securities (with copies to the Investors
        whose Registrable Securities are included in such Registration Statement)
        an
        instruction in the form attached hereto as Exhibit 1 and an opinion
        of
        such counsel in the form attached hereto as Exhibit 2.

       

    

    p.           At
      the request of the holders of a majority-in-interest of the Registrable
      Securities, the Company shall prepare and file with the SEC such amendments
      (including post-effective amendments) and supplements to a Registration
      Statement and any prospectus used in connection with the Registration Statement
      as may be necessary in order to change the plan of distribution set forth in
      such Registration Statement.

     

    q.           From
      and after the date of this Agreement, the Company shall not, and shall not
      agree
      to, allow the holders of any securities of the Company to include any of their
      securities, in excess of 1,000,000 shares of Common Stock, in any Registration
      Statement under Section 2(a) hereof or any amendment or supplement thereto
      under
      Section 3(b) hereof without the consent of the holders of a majority-in-interest
      of the Registrable Securities.

     

    r.           The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by the Investors of Registrable Securities pursuant
      to a
      Registration Statement.

     

    
      
         

      

      
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    4.           OBLIGATIONS
      OF THE
      INVESTORS.

     

    In
      connection with the registration of the Registrable Securities, the Investors
      shall have the following obligations:

     

    a.           It
      shall be a condition precedent to the obligations of the Company to complete
      the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Investor that such Investor shall furnish to the
      Company such information regarding itself, the Registrable Securities held
      by it
      and the intended method of disposition of the Registrable Securities held by
      it
      as shall be reasonably required to effect the registration of such Registrable
      Securities and shall execute such documents in connection with such registration
      as the Company may reasonably request.  At least three (3) business
      days prior to the first anticipated filing date of the Registration Statement,
      the Company shall notify each Investor of the information the Company requires
      from each such Investor.

     

    b.           Each
      Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of the Registration Statements hereunder, unless
      such Investor has notified the Company in writing of such Investor’s election to
      exclude all of such Investor’s Registrable Securities from the Registration
      Statements.

     

    c.           In
      the event Investors holding a majority-in-interest of the Registrable Securities
      being registered (with the approval of the Initial Investors) determine to
      engage the services of an underwriter, each Investor agrees to enter into and
      perform such Investor’s obligations under an underwriting agreement, in usual
      and customary form, including, without limitation, customary indemnification
      and
      contribution obligations, with the managing underwriter of such offering and
      take such other actions as are reasonably required in order to expedite or
      facilitate the disposition of the Registrable Securities, unless such Investor
      has notified the Company in writing of such Investor’s election to exclude all
      of such Investor’s Registrable Securities from such Registration
      Statement.

     

    d.           Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(f) or 3(g), such
      Investor will immediately discontinue disposition of Registrable Securities
      pursuant to the Registration Statement covering such Registrable Securities
      until such Investor’s receipt of the copies of the supplemented or amended
      prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
      Company, such Investor shall deliver to the Company (at the expense of the
      Company) or destroy (and deliver to the Company a certificate of destruction)
      all copies in such Investor’s possession, of the prospectus covering such
      Registrable Securities current at the time of receipt of such
      notice.

     

    e.           No
      Investor may participate in any underwritten registration hereunder unless
      such
      Investor (i) agrees to sell such Investor’s Registrable Securities on the
      basis provided in any underwriting arrangements in usual and customary form
      entered into by the Company, (ii) completes and executes all
      questionnaires, powers of attorney, indemnities, underwriting agreements and
      other documents reasonably required under the terms of such underwriting
      arrangements, and (iii) agrees to pay its pro rata share of all
      underwriting discounts and commissions and any expenses in excess of those
      payable by the Company pursuant to Section 5 below.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    5.           EXPENSES
      OF
      REGISTRATION.

     

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualification fees, printers and accounting fees, the fees and disbursements
      of
      counsel for the Company, and the reasonable fees and disbursements of one
      counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
      hereof shall be borne by the Company.

     

    6.           INDEMNIFICATION.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    a.           To
      the extent permitted by law, the Company will indemnify, hold harmless and
      defend (i) each Investor who holds such Registrable Securities,
      (ii) the directors, officers, partners, employees, agents and each person
      who controls any Investor within the meaning of the 1933 Act or the Securities
      Exchange Act of 1934, as amended (the “1934 Act”), if any,
      (iii) any underwriter (as defined in the 1933 Act) for the Investors, and
      (iv) the directors, officers, partners, employees and each person who
      controls any such underwriter within the meaning of the 1933 Act or the 1934
      Act, if any (each, an “Indemnified Person”), against
      any joint or several losses, claims, damages, liabilities or expenses
      (collectively, together with actions, proceedings or inquiries by any regulatory
      or self-regulatory organization, whether commenced or threatened, in respect
      thereof, “Claims”) to
      which any of them may become subject insofar as such Claims arise out of or
      are
      based upon: (i) any untrue statement or alleged untrue statement of a material
      fact in a Registration Statement or the omission or alleged omission to state
      therein a material fact required to be stated or necessary to make the
      statements therein not misleading;
      (ii) any untrue statement or alleged untrue statement of a material fact
      contained in any preliminary prospectus if used prior to the effective date
      of
      such Registration Statement, or contained in the final prospectus (as amended
      or
      supplemented, if the Company files any amendment thereof or supplement thereto
      with the SEC) or the omission or alleged omission to state therein any material
      fact necessary to make the statements made therein, in light of the
      circumstances under which the statements therein were made, not misleading;
      or
      (iii) any violation or alleged violation by the Company of the 1933 Act, the
      1934 Act, any other law, including, without limitation, any state securities
      law, or any rule or regulation thereunder relating to the offer or sale of
      the
      Registrable Securities (the matters in the foregoing clauses (i) through (iii)
      being, collectively, “Violations”).  Subject
      to the restrictions set forth in Section 6(c) with respect to the number of
      legal counsel, the Company shall reimburse the Indemnified Person, promptly
      as
      such expenses are incurred and are due and payable, for any reasonable legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim.  Notwithstanding anything
      to the contrary contained herein, the indemnification agreement contained in
      this Section 6(a): (i) shall not apply to a Claim arising out of or based upon
      a
      Violation which occurs in reliance upon and in conformity with information
      furnished in writing to the Company by any Indemnified Person or underwriter
      for
      such Indemnified Person expressly for use in connection with the preparation
      of
      such Registration Statement or any such amendment thereof or supplement thereto,
      if such prospectus was timely made available by the Company pursuant to Section
      3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim
      if
      such settlement is effected without the prior written consent of the Company,
      which consent shall not be unreasonably withheld; and (iii) with respect to
      any
      preliminary prospectus, shall not inure to the benefit of any Indemnified Person
      if the untrue statement or omission of material fact contained in the
      preliminary prospectus was corrected on a timely basis in the prospectus, as
      then amended or supplemented, such corrected prospectus was timely made
      available by the Company pursuant to Section 3(c) hereof, and the Indemnified
      Person was promptly advised in writing not to use the incorrect prospectus
      prior
      to the use giving rise to a Violation and such Indemnified Person,
      notwithstanding such advice, used it.  Such indemnity shall remain in
      full force and effect regardless of any investigation made by or on behalf
      of
      the Indemnified Person and shall survive the transfer of the Registrable
      Securities by the Investors pursuant to Section 9.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    b.           In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees severally and not jointly to indemnify,
      hold harmless and defend, to the same extent and in the same manner set forth
      in
      Section 6(a), the Company, each of its directors, each of its officers who
      signs
      the Registration Statement, each person, if any, who controls the Company within
      the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
      shareholder selling securities pursuant to the Registration Statement or any
      of
      its directors or officers or any person who controls such shareholder or
      underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
      and
      together with an Indemnified Person, an “Indemnified Party”), against
      any Claim to which any of them may become subject, under the 1933 Act, the
      1934
      Act or otherwise, insofar as such Claim arises out of or is based upon any
      Violation by such Investor, in each case to the extent (and only to the extent)
      that such Violation occurs in reliance upon and in conformity with written
      information furnished to the Company by such Investor expressly for use in
      connection with such Registration Statement; and subject to Section 6(c) such
      Investor will reimburse any legal or other expenses (promptly as such expenses
      are incurred and are due and payable) reasonably incurred by them in connection
      with investigating or defending any such Claim; provided, however,
      that the
      indemnity agreement contained
      in this Section 6(b) shall not apply to amounts paid in settlement of any Claim
      if such settlement is effected  without the prior written consent of
      such Investor, which consent shall not be unreasonably withheld; provided, further,
however,
      that the
      Investor shall be liable under this Agreement (including this Section 6(b)
      and
      Section 7) for only that amount as does not exceed the net proceeds to such
      Investor as a result of the sale of Registrable Securities pursuant to such
      Registration Statement.  Such indemnity shall remain in full force and
      effect regardless of any investigation made by or on behalf of such Indemnified
      Party and shall survive the transfer of the Registrable Securities by the
      Investors pursuant to Section 9. Notwithstanding anything to the contrary
      contained herein, the indemnification agreement contained in this Section 6(b)
      with respect to any preliminary prospectus shall not inure to the benefit of
      any
      Indemnified Party if the untrue statement or omission of material fact contained
      in the preliminary prospectus was corrected on a timely basis in the prospectus,
      as then amended or supplemented.

     

    c.           Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action (including any governmental action),
      such Indemnified Person or Indemnified Party shall, if a Claim in respect
      thereof is to be made against any indemnifying party under this Section 6,
      deliver to the indemnifying party a written notice of the commencement thereof,
      and the indemnifying party shall have the right to participate in, and, to
      the
      extent the indemnifying party so desires, jointly with any other indemnifying
      party similarly noticed, to assume control of the defense thereof with counsel
      mutually satisfactory to the indemnifying party and the Indemnified Person
      or
      the Indemnified Party, as the case may be; provided, however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses to be paid by the indemnifying party, if,
      in
      the reasonable opinion of counsel retained by the indemnifying party, the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding.  The
      indemnifying party shall pay for only one separate legal counsel
      for  the Indemnified Persons or the Indemnified Parties, as
      applicable, and such legal counsel shall be selected by Investors holding a
      majority-in-interest of the  Registrable Securities included in the
      Registration Statement to which the Claim relates (with the approval of a
      majority-in-interest of the Initial Investors), if the Investors are entitled
      to
      indemnification hereunder, or the Company, if the Company is entitled to
      indemnification hereunder, as applicable.  The failure to deliver
      written notice to the indemnifying party within a reasonable time of the
      commencement of any such action shall not relieve such indemnifying party of
      any
      liability to the Indemnified Person or Indemnified Party under this Section
      6,
      except to the extent that the indemnifying party is actually prejudiced in
      its
      ability to defend such action.  The indemnification required by this
      Section 6 shall be made by periodic payments of the amount thereof during the
      course of the investigation or defense, as such expense, loss, damage or
      liability is incurred and is due and payable.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    7.           CONTRIBUTION.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however,
      that
      (i) no contribution shall be made under circumstances where the maker would
      not have been liable for indemnification under the fault standards set forth
      in
      Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
      be
      entitled to contribution from any seller of Registrable Securities who was
      not
      guilty of such fraudulent misrepresentation, and (iii)contribution (together
      with any indemnification or other obligations under this Agreement) by any
      seller of Registrable Securities shall be limited in amount to the net amount
      of
      proceeds received by such seller from the sale of such Registrable
      Securities.

     

    8.           REPORTS
      UNDER THE 1934
      ACT.

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the investors to sell securities of the Company to the public
      without registration (“Rule
      144”), the Company agrees to:

     

    a.           make
      and keep public information available, as those terms are understood and defined
      in Rule 144;

     

    b.           file
      with the SEC in a timely manner all reports and other documents required of
      the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements (it being understood that nothing herein shall
      limit the Company’s obligations under Section 4(c) of the Securities Purchase
      Agreement) and the filing of such reports and other documents is required for
      the applicable provisions of Rule 144; and

     

    c.           furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company that it has complied
      with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
      (ii) a copy of the most recent annual or quarterly report of the Company
      and such other reports and documents so filed by the Company, and
      (iii) such other information as may be reasonably requested to permit the
      Investors to sell such securities pursuant to Rule 144 without
      registration.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    9.           ASSIGNMENT
      OF REGISTRATION
      RIGHTS.

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of Registrable Securities if:
      (i) the Investor agrees in writing with the transferee or assignee to
      assign such rights, and a copy of such agreement is furnished to the Company
      within a reasonable time after such assignment, (ii) the Company is, within
      a reasonable time after such transfer or assignment, furnished with written
      notice of (a) the name and address of such transferee or assignee, and
      (b) the securities with respect to which such registration rights are being
      transferred or assigned, (iii) following such transfer or assignment, the
      further disposition of such securities by the transferee or assignee is
      restricted under the 1933 Act and applicable state securities laws, (iv) at
      or
      before the time the Company receives the written notice contemplated by clause
      (ii) of this sentence, the transferee or assignee agrees in writing with the
      Company to be bound by all of the provisions contained herein, (v) such transfer
      shall have been made in accordance with the applicable requirements of the
      Securities Purchase Agreement, and (vi) such transferee shall be an “accredited investor” as that
      term defined in Rule 501 of Regulation D promulgated under the 1933
      Act.

     

    10.           AMENDMENT
      OF REGISTRATION
      RIGHTS.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with written consent of the Company, each of the Initial
      Investors (to the extent such Initial Investor still owns Registrable
      Securities) and Investors who hold a majority interest of the Registrable
      Securities.  Any amendment or waiver effected in accordance with this
      Section 10 shall be binding upon each Investor and the Company.

     

    11.           MISCELLANEOUS.

     

    a.           A
      person or entity is deemed to be a holder of Registrable Securities whenever
      such person or entity owns of record such Registrable Securities.  If
      the Company receives conflicting instructions, notices or elections from two
      or
      more persons or entities with respect to the same Registrable Securities, the
      Company shall act upon the basis of instructions, notice or election received
      from the registered owner of such Registrable Securities.

     

    b.           Any
      notices required or permitted to be given under the terms hereof shall be sent
      by certified or registered mail (return receipt requested) or delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile and shall be effective five days after being placed in the mail,
      if
      mailed by regular United States mail, or upon receipt, if delivered personally
      or by courier (including a recognized overnight delivery service) or by
      facsimile, in each case addressed to a party.  The addresses for such
      communications shall be:

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    If
      to the
      Company:

     

    Textechnologies
      Inc.

     

     

    Attention:
      Chief Executive Officer

                    Telephone:

                    Facsimile: 

     

     

                    With
      a copy
      to:

     

     

    Attention:

    Telephone:

    Facsimile:

     

    If
      to an
      Investor: to the address set forth immediately below such Investor’s name on the
      signature pages to the Securities Purchase Agreement.

     

    With
      a
      copy to:

     

    Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

    51st
      Floor

    Philadelphia,
      Pennsylvania  19103

    Attention:  Gerald
      J. Guarcini, Esq.

    Telephone:  215-865-8625

    Facsimile:  215-864-8999

     

    c.           Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    d.           
      THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
      THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
      PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
      CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
      JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK
      WITH
      RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED
      INTO
      IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      BOTH
      PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
      MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
      THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
      IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
      OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
      AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    e.           In
      the event that any provision of this Agreement 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 provision
      hereof which may prove invalid or unenforceable under any law shall not affect
      the validity or enforceability of any other provision hereof.

     

    f.           This
      Agreement, the Notes and the Securities Purchase Agreement (including all
      schedules and exhibits thereto) constitute the entire agreement among the
      parties hereto with respect to the subject matter hereof and
      thereof.  There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and
      therein.  This Agreement and the Securities Purchase Agreement
      supersede all prior agreements and understandings among the parties hereto
      with
      respect to the subject matter hereof and thereof.

     

    g.           Subject
      to the requirements of Section 9 hereof, this Agreement shall be binding upon
      and inure to the benefit of the parties and their successors and
      assigns.

     

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

     

    i.           This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which shall constitute one and the same agreement
      and shall become effective when counterparts have been signed by each party
      and
      delivered to the other party.  This Agreement, once executed by a
      party, may be delivered to the other party hereto by facsimile transmission
      of a
      copy of this Agreement bearing the signature of the party so delivering this
      Agreement.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    j.           Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    k.           Except
      as otherwise provided herein, all consents and other determinations to be made
      by the Investors pursuant to this Agreement shall be made by Investors holding
      a
      majority of the Registrable Securities, determined as if the all of the Notes
      then outstanding have been converted into for Registrable
      Securities.

     

    l.           The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to each Investor by vitiating the intent and purpose of the
      transactions contemplated hereby.  Accordingly, the Company
      acknowledges that the remedy at law for breach of its obligations under this
      Agreement will be inadequate and agrees, in the event of a breach or threatened
      breach by the Company of any of the provisions under this Agreement, that each
      Investor shall be entitled, in addition to all other available remedies in
      law
      or in equity, and in addition to the penalties assessable herein,  to
      an injunction or injunctions restraining, preventing or curing any breach of
      this Agreement and to enforce specifically the terms and provisions hereof,
      without the necessity of showing economic loss and without any bond or other
      security being required.

     

    m.           The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    

     

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      Company and the undersigned Initial Investors have caused this Agreement to
      be
      duly executed as of the date first above written.

     

    TEXTECHNOLOGIES
      INC.

     

    

    By:
/s/
      Peter
      Maddocks                                            

    
      Peter
        Maddocks

      Chief
        Executive Officer

    

    

    

    AJW
      PARTNERS, LLC

     

    By:  SMS
      Group, LLC

     

    /s/
      Corey S.
      Ribotsky                                                

    Corey
      S.
      Ribotsky

     

    Manager

     

    AJW
      OFFSHORE,
      LTD.

    By:  First
      Street Manager II, LLC

    

    /s/
      Corey S.
      Ribotsky                                                

    Corey
      S.
      Ribotsky

    Manager

    

    

    AJW
      QUALIFIED PARTNERS,
      LLC

     

    By:  AJW
      Manager, LLC

     

    /s/
      Corey S.
      Ribotsky                                                

    Corey
      S.
      Ribotsky

    Manager

    

    

    NEW
      MILLENNIUM CAPITAL PARTNERS II,
      LLC

     

    By:  First
      Street Manager II, LLC

     

    /s/
      Corey S.
      Ribotsky                                                

    Corey
      S.
      Ribotsky

    Manager

     

    19

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