Document:

Unassociated Document

     

    SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of June 30, 2006, by and among Gilder Enterprises, Inc., a Nevada corporation
      (the “Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

    WHEREAS,
      the
      Company and the Subscribers are executing and delivering this Agreement in
      reliance upon an exemption from securities registration afforded by the
      provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“Commission”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase not less than $3,500,000
      and up to $8,000,000 of stated value of 10% Series A Preferred Stock of the
      Company (“Preferred
      Stock”)
      at a
      purchase price (the "Purchase
      Price")
      equal
      to the stated value thereof which Preferred Stock shall be convertible into
      shares of the Company's common stock, $.001 par value (the "Common
      Stock")
      hereof
      subject to the rights and preferences described in the form of Certificate
      of
      Designation annexed hereto as Exhibit
      A
      (“Certificate
      of Designation”),
      and
      common stock purchase warrants (the “Warrants”)
      in the
      form attached hereto as Exhibit
      B,
      to
      purchase shares of Common Stock (the “Warrant
      Shares”).
      The
      Preferred Stock, shares of Common Stock issuable upon conversion of the
      Preferred Stock (the “Shares”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      "Securities";
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Preferred Stock and the Warrants
      contemplated hereby shall be held in escrow pursuant to the terms of a Funds
      Escrow Agreement to be executed by the parties substantially in the form
      attached hereto as Exhibit
      C
      (the
      "Escrow
      Agreement").

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Subscribers hereby agree as follows:

     

    1. Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the “Closing
      Date”
(as
      defined in Section 2 hereof), each Subscriber shall purchase and the Company
      shall sell to each Subscriber the Preferred Stock having the Stated Value set
      forth on the signature page hereto and the amount of Warrants determined
      pursuant to Section 3 below. The aggregate stated value of the Preferred Stock
      to be purchased by the Subscribers on the Closing Date shall, in the aggregate,
      be not less than $3,500,000 nor more than $8,000,000. The Closing Date shall
      be
      the date that subscriber funds representing the net amount due the Company
      from
      the Purchase Price of the Offering is transmitted by wire transfer or otherwise
      to or for the benefit of the Company. 

     

    2. Closing
      Date.
      The
      consummation of the transactions contemplated herein shall take place at the
      offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
      New York 10176, upon the satisfaction of all conditions to Closing set forth
      in
      this Agreement (“Closing
      Date”).
      

    

    3. Warrants.
      On the
      Closing Date, the Company will issue and deliver Warrants to the Subscribers.
      One Class A Warrant will be issued for each two Shares which would be issued
      on
      the Closing Date assuming the complete conversion of the Preferred Stock issued
      on the Closing Date at the Conversion Price in effect on the Closing Date.
      The
      per Warrant Share exercise price to acquire a Warrant Share upon exercise of
      a
      Class A Warrant shall be $2.00. The Class A Warrants shall be exercisable until
      five (5) years after the Issue Date of the Warrants.

    
      
        
        

      

      
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    4. Subscriber's
      Representations and Warranties.
      Each
      Subscriber hereby represents and warrants to and agrees with the Company only
      as
      to such Subscriber that:

     

    (a) Organization
      and Standing of the Subscribers.
      If the
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or
      organization.

    

    (b) Authorization
      and Power.
      Each
      Subscriber has the requisite power and authority to enter into and perform
      this
      Agreement and to purchase the Preferred Stock and Warrants being sold to it
      hereunder. The execution, delivery and performance of this Agreement by such
      Subscriber and the consummation by it of the transactions contemplated hereby
      and thereby have been duly authorized by all necessary corporate or partnership
      action, and no further consent or authorization of such Subscriber or its Board
      of Directors, stockholders, partners, members, as the case may be, is required.
      This Agreement has been duly authorized, executed and delivered by such
      Subscriber and constitutes, or shall constitute when executed and delivered,
      a
      valid and binding obligation of the Subscriber enforceable against the
      Subscriber in accordance with the terms thereof.

     

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the consummation
      by
      such Subscriber of the transactions contemplated hereby or relating hereto
      do
      not and will not (i) result in a violation of such Subscriber’s charter
      documents or bylaws or other organizational documents or (ii) conflict with,
      or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of any agreement, indenture or
      instrument or obligation to which such Subscriber is a party or by which its
      properties or assets are bound, or result in a violation of any law, rule,
      or
      regulation, or any order, judgment or decree of any court or governmental agency
      applicable to such Subscriber or its properties (except for such conflicts,
      defaults and violations as would not, individually or in the aggregate, have
      a
      material adverse effect on such Subscriber). Such Subscriber is not required
      to
      obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency in order for it to execute,
      deliver or perform any of its obligations under this Agreement or to purchase
      the Preferred Stock or acquire the Warrants in accordance with the terms hereof,
      provided that for purposes of the representation made in this sentence, such
      Subscriber is assuming and relying upon the accuracy of the relevant
      representations and agreements of the Company herein.

    

    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to (i) the Company's Form 10-KSB for the year ended May 31, 2005
      and
      all periodic reports as filed with the Commission, and (ii) the draft 8-K in
      the
      form of Exhibit
      E
      hereto,
      to be filed by the Company with the Commission following the Closing
      (hereinafter collectively referred to as the "Reports").
      In
      addition, the Subscriber has received in writing from the Company and its
      subsidiary such other information concerning their operations, financial
      condition and other matters as the Subscriber has requested in writing (such
      other information is collectively, the "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. 

     

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Preferred Stock
      and exercise of the Warrants, an "accredited investor", as such term is defined
      in Regulation D promulgated by the Commission under the 1933 Act, is experienced
      in investments and business matters, has made investments of a speculative
      nature and has purchased securities of United States publicly-owned companies
      in
      private placements in the past and, with its representatives, has such knowledge
      and experience in financial, tax and other business matters as to enable the
      Subscriber to utilize the information made available by the Company to evaluate
      the merits and risks of and to make an informed investment decision with respect
      to the proposed purchase, which represents a speculative investment. The
      Subscriber has the authority and is duly and legally qualified to purchase
      and
      own the Securities. The Subscriber is able to bear the risk of such investment
      for an indefinite period and to afford a complete loss thereof. The information
      set forth on the signature page hereto regarding the Subscriber is
      accurate.

    
      
        
        

      

      
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    (f) Purchase
      of Preferred Stock and Warrants.
      On the
      Closing Date, the Subscriber will purchase the Preferred Stock and Warrants
      as
      principal for its own account for investment only and not with a view toward,
      or
      for resale in connection with, the public sale or any distribution
      thereof.

    (g) Compliance
      with Securities Act.
      The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration.
      Notwithstanding anything to the contrary contained in this Agreement, such
      Subscriber may transfer (without restriction and without the need for an opinion
      of counsel) the Securities to its Affiliates (as defined below) provided that
      each such Affiliate is an “accredited investor” under Regulation D and such
      Affiliate agrees to be bound by the terms and conditions of this Agreement.
      For
      the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate when employed in connection with the Company
      includes each Subsidiary [as defined in Section 5(a)] of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

     

     (h) Shares
      Legend.
      The
      Shares and the Warrant Shares shall bear the following or similar
      legend:

     

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

     

    (i) Warrants
      Legend.
      The
      Warrants shall bear the following 

     

    or
      similar legend:

     

    "THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
      AND
      THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE
      STATE
      SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GILDER
      ENTERPRISES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

    
      
        
        

      

      
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    (j) Preferred
      Stock Legend.
      The
      Preferred Stock shall bear the following legend:

     

    "THIS
      PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS PREFERRED
      STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
      THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THESE
      PREFERRED STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE PREFERRED STOCK
      UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GILDER
      ENTERPRISES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

     

    (k) Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to the Subscriber by
      the
      Company. At no time was the Subscriber presented with or solicited by any
      leaflet, newspaper or magazine article, radio or television advertisement,
      or
      any other form of general advertising or solicited or invited to attend a
      promotional meeting otherwise than in connection and concurrently with such
      communicated offer.

     

    (l) Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by the
      Subscriber and are valid and binding agreements enforceable in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity;
      and Subscriber has full corporate power and authority necessary to enter into
      this Agreement and such other agreements and to perform its obligations
      hereunder and under all other agreements entered into by the Subscriber relating
      hereto.

    

    (m) No
      Governmental Review.
      Each
      Subscriber understands that no United States federal or state agency or any
      other governmental or state agency has passed on or made recommendations or
      endorsement of the Securities or the suitability of the investment in the
      Securities nor have such authorities passed upon or endorsed the merits of
      the
      offering of the Securities.

    

    (n) Correctness
      of Representations.
      Each
      Subscriber represents as to such Subscriber that the foregoing representations
      and warranties are true and correct as of the date hereof and, unless a
      Subscriber otherwise notifies the Company prior to the Closing Date shall be
      true and correct as of the Closing Date.

    

    (o) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date.

     

    5. Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber that except
      as set forth in the Reports and as otherwise qualified in the Transaction
      Documents:

    
      
        
        

      

      
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    (a) Due
      Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has the requisite
      corporate power to own its properties and to carry on its business is disclosed
      in the Reports.
      The
      Company is duly qualified as a foreign corporation to do business and is in
      good
      standing in each jurisdiction where the nature of the business conducted or
      property owned by it makes such qualification necessary, other than those
      jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purpose of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company taken as a whole. For purposes
      of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity) of which more than 50% of (i) the
      outstanding capital stock having (in the absence of contingencies) ordinary
      voting power to elect a majority of the board of directors or other managing
      body of such entity, (ii) in the case of a partnership or limited liability
      company, the interest in the capital or profits of such partnership or limited
      liability company or (iii) in the case of a trust, estate, association,
      joint venture or other entity, the beneficial interest in such trust, estate,
      association or other entity business is, at the time of determination, owned
      or
      controlled directly or indirectly through one or more intermediaries, by such
      entity. All the Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a)
      hereto.

     

    (b) Outstanding
      Stock.
      All
      issued and outstanding shares of capital stock of the Company have been duly
      authorized and validly issued and are fully paid and nonassessable.

     

    (c) Authority;
      Enforceability.
      This
      Agreement, the Preferred Stock, Certificate of Designation, the Warrants, the
      Escrow Agreement, and any other agreements delivered together with this
      Agreement or in connection herewith (collectively “Transaction
      Documents”)
      have
      been duly authorized, executed and delivered by the Company and are valid and
      binding agreements enforceable in accordance with their terms, subject to
      bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
      similar laws of general applicability relating to or affecting creditors' rights
      generally and to general principles of equity. The Company has full corporate
      power and authority necessary to enter into and deliver the Transaction
      Documents and to perform its obligations thereunder.

     

    (d) Additional
      Issuances.
      There
      are no outstanding agreements or preemptive or similar rights affecting the
      Company's common stock or equity and no outstanding rights, warrants or options
      to acquire, or instruments convertible into or exchangeable for, or agreements
      or understandings with respect to the sale or issuance of any shares of common
      stock or equity of the Company or other equity interest in any of the
      Subsidiaries of the Company except as described on Schedule
      5(d).
      The
      Common stock of the Company on a fully diluted basis outstanding as of the
      last
      trading day preceding the Closing Date is set forth on Schedule
      5(d).

     

    (e) Consents.
      No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, any Principal Market (as defined in Section 9(b) of this Agreement),
      nor the Company's shareholders is required for the execution by the Company
      of
      the Transaction Documents and compliance and performance by the Company of
      its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities. The Offering and Transaction Documents
      have
      been unanimously approved by the Company’s board of directors.

     

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 4
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      agreements entered into by the Company relating thereto by the Company
      will:

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default in any material respect) of a material nature
      under (A) the articles or certificate of incorporation, charter or bylaws of
      the
      Company, (B) to the Company's knowledge, any decree, judgment, order, law,
      treaty, rule, regulation or determination applicable to the Company of any
      court, governmental agency or body, or arbitrator having jurisdiction over
      the
      Company or over the properties or assets of the Company or any of its
      Affiliates, (C) the terms of any bond, debenture, note or any other evidence
      of
      indebtedness, or any agreement, stock option or other similar plan, indenture,
      lease, mortgage, deed of trust or other instrument to which the Company or
      any
      of its Affiliates is a party, by which the Company or any of its Affiliates
      is
      bound, or to which any of the properties of the Company or any of its Affiliates
      is subject, or (D) the terms of any "lock-up" or similar provision of any
      underwriting or similar agreement to which the Company, or any of its Affiliates
      is a party except the violation, conflict, breach, or default of which would
      not
      have a Material Adverse Effect;
      or

    
      
        
        

      

      
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    (ii) result
      in
      the creation or imposition of any lien, charge or encumbrance upon the
      Securities or any of the assets of the Company or any of its Affiliates;
      or

     

    (iii) except
      as
      disclosed in Schedule
      5(f),
      result
      in the activation of any anti-dilution rights or a reset or repricing of any
      debt or security instrument of any other creditor or equity holder of the
      Company, nor result in the acceleration of the due date of any obligation of
      the
      Company; or

     

    (iv) result
      in
      the activation of any piggy-back registration rights of any person or entity
      holding securities or debt of the Company or having the right to receive
      securities of the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

    (i) are,
      or
      will be, free and clear of any security interests, liens, claims or other
      encumbrances, subject to restrictions upon transfer under the 1933 Act and
      any
      applicable state securities laws;

    

    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares upon conversion of the Preferred Stock and issuance of the Warrant Shares
      upon exercise of the Warrants will be duly and validly issued, fully paid and
      nonassessable or if registered pursuant to the 1933 Act, and resold pursuant
      to
      an effective Registration Statement (as defined in Section 11.1(iv) hereof)
      will
      be free trading and unrestricted;

     

    (iii) will
      not
      have been issued or sold in violation of any preemptive or other similar rights
      of the holders of any securities of the Company;

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders provided Subscriber’s representations herein are true and accurate and
      Subscribers take no actions or fail to take any actions required for their
      purchase of the Securities to be in compliance with all applicable laws and
      regulations; and

     

    (v) will
      not
      result in a violation of Section 5 under the 1933 Act.

     

    (h) Litigation.
      There
      is no pending or, to the best knowledge of the Company, threatened action,
      suit,
      proceeding or investigation before any court, governmental agency or body,
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates that
      would affect the execution by the Company or the performance by the Company
      of
      its obligations under the Transaction Documents. Except as disclosed in the
      Reports [or as set forth in Schedule
      5(h)],
      there
      is no pending or, to the best knowledge of the Company, basis for or threatened
      action, suit, proceeding or investigation before any court, governmental agency
      or body, or arbitrator having jurisdiction over the Company, or any of its
      Affiliates which litigation if adversely determined would have a Material
      Adverse Effect.

     

    (i) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13(a) and 15(d) of the Securities Exchange Act of 1934 (the
“1934
      Act”)
      and
      has a class of common shares registered pursuant to Section 12(g) of the 1934
      Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
      all reports and other materials required to be filed thereunder with the
      Commission during the preceding twenty-four months.

    
      
        
        

      

      
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    (j) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold, provided, however, that this provision
      shall
      not prevent the Company from engaging in investor relations/public relations
      activities consistent with past practices.

     

    (k) Information
      Concerning Company and Subsidiary.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition as of their respective dates and all the
      information required to be disclosed therein. Since the last day of the fiscal
      year of the most recent annual audited financial statements included in the
      Reports (“Latest
      Financial Date”),
      and
      except as modified in the Other Written Information or in the Schedules hereto,
      there has been no Material Adverse Event relating to the Company's business,
      financial condition or affairs not disclosed in the Reports. The Reports do
      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 in light of the circumstances when made. The financial statements
      included in the Reports have been prepared in accordance with United States
      GAAP
      and do not require any restatement to comply with United States GAAP as of
      the
      Closing Date. The
      audited financial statements of Medasorb Corporation, a Subsidiary of the
      Company for the last two fiscal years ended December 31, 2004 and 2005 and
      unaudited statements for the fiscal quarter ended March 31, 2006 are attached
      hereto as Exhibit
      E.
      Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

    (l) Stop
      Transfer.
      The
      Company will not issue any stop transfer order or other order impeding the
      sale,
      resale or delivery of any of the Securities, except as may be required by any
      applicable federal or state securities laws and unless contemporaneous notice
      of
      such instruction is given to the Subscriber.

     

    (m) Defaults.
      The
      Company is not in violation of its certificate or articles of incorporation
      or
      bylaws. The Company is (i) not in default under or in violation of any material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect,
      (ii)
      not in default with respect to any order of any court, arbitrator or
      governmental body or subject to or party to any order of any court or
      governmental authority arising out of any action, suit or proceeding under
      any
      statute or other law respecting antitrust, monopoly, restraint of trade, unfair
      competition or similar matters, or (iii) to the Company’s knowledge not in
      violation of any statute, rule or regulation of any governmental authority
      which
      violation would have a Material Adverse Effect.

    
      
        
        

      

      
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    (n) Not
      an
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the OTC Bulletin Board (“Bulletin
      Board”)
      any
      Principal Market [as defined in Section 9(b)] which would impair the exemptions
      relied upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder. Nor will the Company or any of its Affiliates take any
      action or steps that would cause the offer or issuance of the Securities to
      be
      integrated with other offerings which would impair the exemptions relied upon
      in
      this Offering or the Company’s ability to timely comply with its obligations
      hereunder. The Company will not conduct any offering other than the transactions
      contemplated hereby that will be integrated with the offer or issuance of the
      Securities, which would impair the exemptions relied upon in this Offering
      or
      the Company’s ability to timely comply with its obligations
      hereunder.

     

    (o) No
      General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor to its knowledge, any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the 1933 Act)
      in
      connection with the offer or sale of the Securities.

     

    (p) Listing.
      The
      Company's common stock is listed on the Bulletin Board under the symbol GDRE.
      The Company has not received any oral or written notice that the Common Stock
      is
      not eligible nor will become ineligible for listing on the Bulletin Board nor
      that the Common Stock does not meet all requirements for the continuation of
      such listing. The Company satisfies all the requirements for the continued
      quotation of the Common Stock on the Bulletin Board.

     

    (q) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company’s
      businesses since the Latest Financial Date and which in the aggregate, would
      reasonably be expected to have a Material Adverse Effect,
      except
      as disclosed on Schedule
      5(q).
      As of
      the Closing Date, the net liabilities of the Company, not including the
      Subsidiaries, will not exceed $100,000.

     

    (r) No
      Undisclosed Events or Circumstances.
      Since
      the Latest Financial Date, no event or circumstance has occurred or exists
      with
      respect to the Company or its businesses, properties, operations or financial
      condition, that, under applicable law, rule or regulation, requires public
      disclosure or announcement prior to the date hereof by the Company but which
      has
      not been so publicly announced or disclosed in the Reports.

     

    (s) Capitalization.
      The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries. All of the outstanding shares of Common Stock of the Company
      have
      been duly and validly authorized and issued and are fully paid and
      nonassessable.

     

    (t) Dilution.
      The
      Company's executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Preferred Stock, and the Warrant Shares upon exercise of
      the
      Warrants is binding upon the Company and enforceable regardless of the dilution
      such issuance may have on the ownership interests of other shareholders of
      the
      Company or parties entitled to receive equity of the Company.

     

    (u) No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind during the two fiscal years preceding the
      date
      of this Agreement, presently existing, or reasonably anticipated by the Company
      to arise, between the Company and the accountants and lawyers formerly or
      presently employed by the Company, including but not limited to disputes or
      conflicts over payment owed to such accountants and lawyers.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    

    

    (v) Transfer
      Agent.
      The
      name, address, telephone number, fax number, contact person and email address
      of
      the Company transfer agent is set forth on Schedule
      5(v)
      hereto.

    

    (w) Investment
      Company.
      Neither
      the Company nor any Affiliate is an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended.

    

    (x) Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 5(a), (b),
      (d),
      (e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as same
      relate to each Subsidiary of the Company, including but not limited to Medasorb
      Corporation.

    

    (y) Company
      Predecessor.
      All
      representations made by or relating to the Company of a historical or
      prospective nature and all undertakings described in Sections 9(g) through
      9(l)
      shall relate, apply and refer to the Company, its predecessors, and
      Subsidiaries, including but not limited to Medasorb Corporation.

    

    (z) Correctness
      of Representations.
      The
      Company represents that the foregoing representations and warranties are true
      and correct as of the date hereof in all material respects, and, unless the
      Company otherwise notifies the Subscribers prior to the Closing Date, shall
      be
      true and correct in all material respects as of the Closing Date.

     

    (AA) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date.

     

    6. Regulation
      D Offering.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company's legal counsel opining
      on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. A form of the legal opinion is annexed hereto as
      Exhibit
      D.
      The
      Company will provide, at the Company's expense, such other legal opinions in
      the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon conversion of the Preferred Stock and exercise of the
      Warrants pursuant to an effective registration statement or Rule 144 under
      the
      1933 Act.

    

    7.1. Conversion
      of Preferred Stock.

    

    (a) Upon
      the
      conversion of any Preferred Stock, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its nominee) or such other persons
      as
      designated by Subscriber and in such denominations to be specified at conversion
      representing the number of shares of Common Stock issuable upon such conversion.
      The Company warrants that no instructions other than these instructions have
      been or will be given to the transfer agent of the Company's Common Stock and
      that, unless waived by the Subscriber, the Shares will be freely transferable,
      and will not contain a legend other
      than the usual 1933 Act restriction from transfer legend. If and when the
      Subscriber sells the Shares and Warrant Shares, assuming (i) the Registration
      Statement (as defined below) is effective and the prospectus, as supplemented
      or
      amended, contained therein is current and (ii) the Subscriber confirms in
      writing to the transfer agent that the Subscriber has or will comply with the
      prospectus delivery requirements, upon delivery to the purchaser, the
      restrictive legend will be immediately removed and the Shares and Warrant Shares
      upon such sale will be free-trading, and freely transferable. In the event
      that
      the Shares and Warrant Shares are sold in a manner that complies with an
      exemption from registration, the Company will promptly instruct its counsel
      to
      issue to the transfer agent an opinion permitting removal of the legend
      (indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or for 90 days if
      pursuant to the other provisions of Rule 144 of the 1933 Act). 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    

    (b) Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Subscriber and thus refunded to the Company.

    

    7.2. Adjustments.
      The
      Conversion Price, Warrant exercise price and amount of Shares issuable upon
      conversion of the Preferred Stock and exercise of the Warrants shall be
      equitably adjusted and as described in this Agreement, the Certificate of
      Designation and Warrants.

     

    7.3. Redemption.
      The
      Preferred Stock and Warrants shall not be redeemable or callable except as
      described in the Certificate of Designation or Warrants.

    

    8. Broker/Legal
      Fees.

     

    (a) Broker’s
      Fee.
      The
      Company on the one hand, and each Subscriber (for itself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby and arising out of such party’s actions. The Company
      represents that to its knowledge there are no parties entitled to receive fees,
      commissions, or similar payments from the Company in connection with the
      transaction described in this Agreement (“Offering”),
      except the party described on Schedule
      8
      hereto
      (“Guarantor”),
      who
      will receive a yield enhancement fee, described thereon.

    

    (b)  Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a cash fee of $25,000
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Preferred Stock and Warrants (the
      “Offering”).
      An
      additional cash Legal Fee of $45,000 will be paid to Greenberg & Kahr on the
      Closing Date out of funds held pursuant to the Escrow Agreement. The Legal
      Fees
      and reimbursement for UCC search fees, if any, to be paid by the Company will
      be
      payable on the Closing Date out of funds held pursuant to the Escrow Agreement.
      In the event the aggregate Purchase price of the Offering is less than
      $6,000,000, then the Company will pay one-half of the Legal Fees and the
      Guarantor will pay the other half of the Legal Fees.

     

    (c) Due
      Diligence Fee.
      On the
      Closing Date, a cash due diligence fee of $50,000 (“Due
      Diligence Fee”)
      will
      be paid to the party identified on Schedule
      8
      hereto
      (“Due
      Diligence Fee Recipient”).
      The
      Company will pay $25,000 of the Due Diligence Fee out of funds held pursuant
      to
      the Escrow Agreement. The Guarantor will pay $25,000 of the Due Diligence
      Fee.

     

    9. Covenants
      of the Company.
      The
      Company covenants and agrees with the Subscribers as follows:

     

    (a) Stop
      Orders.
      The
      Company will advise the Subscribers, within four hours after the Company
      receives notice of issuance by the Commission, any state securities commission
      or any other regulatory authority of any stop order or of any order preventing
      or suspending any offering of any securities of the Company, or of the
      suspension of the qualification of the Common Stock of the Company for offering
      or sale in any jurisdiction, or the initiation of any proceeding for any such
      purpose.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    

     

    (b) Listing.
      The
      Company shall promptly secure the listing of the Shares and the Warrant Shares
      upon each national securities exchange, or electronic or automated quotation
      system upon which they are or become eligible for listing and shall maintain
      such listing so long as any Preferred Stock or Warrants are outstanding. The
      Company will maintain the listing of its Common Stock on the American Stock
      Exchange, Nasdaq SmallCap Market, Nasdaq National Market System, Bulletin Board,
      or New York Stock Exchange (whichever of the foregoing is at the time the
      principal trading exchange or market for the Common Stock (the “Principal
      Market”)),
      and
      will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement, the Bulletin Board
      is the Principal Market.

     

    (c) Market
      Regulations.
      The
      Company shall notify the Commission, the Principal Market and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the
      Subscribers and promptly provide copies thereof to Subscriber.

     

    (d) Filing
      Requirements.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      (A)
      comply in all respects with its reporting and filing obligations under the
      1934
      Act, (B) cause its Common Stock to continue to be registered under Section
      12(b)
      or 12(g) of the 1934 Act, and (C) comply with all requirements related to any
      registration statement filed pursuant to this Agreement. The Company will use
      its best efforts not to take any action or file any document (whether or not
      permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
      or suspend such registration under the 1934 Act or to terminate or suspend
      its
      reporting and filing obligations under said acts until two (2) years after
      the
      Closing Date. Until the earlier of the resale of the Common Stock and the
      Warrant Shares by each Subscriber or two (2) years after the Warrants have
      been
      exercised, the Company will use its best efforts to continue the listing or
      quotation of the Common Stock on a Principal Market and will comply in all
      respects with the Company's reporting, filing and other obligations under the
      bylaws or rules of the Principal Market. The Company agrees to timely file
      a
      Form D with respect to the Securities if required under Regulation D, if
      required, and to provide a copy thereof to each Subscriber promptly after such
      filing. 

     

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.

     

    (f) Reservation.
      Prior
      to the Closing Date, the Company undertakes to reserve, pro rata,
      on
      behalf of the Subscribers from its authorized but unissued common stock, a
      number of common shares equal to 175%
      of
      the amount of Common Stock necessary to allow each Subscriber to be able to
      convert all Preferred Stock issuable pursuant to this Agreement and dividends
      thereon and reserve 100% of the amount of Warrant Shares issuable upon exercise
      of the Warrants. Failure to have sufficient shares reserved pursuant to this
      Section 9(f) for five (5) consecutive business days or fifteen (15) days in
      the
      aggregate shall be a material default of the Company’s obligations under this
      Agreement and an Event of Default pursuant to the Certificate of
      Designation.

     

    (g) Taxes.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      promptly pay and discharge, or cause to be paid and discharged, when due and
      payable, all lawful taxes, assessments and governmental charges or levies
      imposed upon the income, profits, property or business of the Company; provided,
      however, that any such tax, assessment, charge or levy need not be paid if
      the
      validity thereof shall currently be contested in good faith by appropriate
      proceedings and if the Company shall have set aside on its books adequate
      reserves with respect thereto, and provided, further, that the Company will
      pay
      all such taxes, assessments, charges or levies forthwith upon the commencement
      of proceedings to foreclose any lien which may have attached as security
      therefore.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    

     

    (h) Insurance.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      keep its material assets which are of an insurable character insured by
      financially sound and reputable insurers against loss or damage by fire,
      explosion and other risks customarily insured against by companies in the
      Company’s line of business, in amounts sufficient to prevent the Company from
      becoming a co-insurer and not in any event less than one hundred percent (100%)
      of the insurable value of the property insured; and the Company will maintain,
      with financially sound and reputable insurers, insurance against other hazards
      and risks and liability to persons and property to the extent and in the manner
      customary for companies in similar businesses similarly situated and to the
      extent available on commercially reasonable terms.

     

    (i) Books
      and Records.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      keep true records and books of account in which full, true and correct entries
      will be made of all dealings or transactions in relation to its business and
      affairs in accordance with generally accepted accounting principles applied
      on a
      consistent basis.

     

    (j) Governmental
      Authorities.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company shall
      duly observe and conform in all material respects to all valid requirements
      of
      governmental authorities relating to the conduct of its business or to its
      properties or assets.

     

    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company shall
      maintain in full force and effect its corporate existence, rights and franchises
      and all licenses and other rights to use intellectual property owned or
      possessed by it and reasonably deemed to be necessary to the conduct of its
      business, unless it is sold for value.

     

    (l) Properties.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      keep its material properties in good repair, working order and condition,
      reasonable wear and tear excepted, and from time to time make all necessary
      and
      proper repairs, renewals, replacements, additions and improvements thereto;
      and
      the Company will at all times comply with each provision of all leases to which
      it is a party or under which it occupies property if the breach of such
      provision could reasonably be expected to have a Material Adverse
      Effect.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    

     

    (m) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company agrees
      that except in connection with a Form 8-K or the Registration Statement or
      as
      otherwise required in any other Commission filing, it will not disclose publicly
      or privately the identity of the Subscribers unless expressly agreed to in
      writing by a Subscriber, only to the extent required by law and then only upon
      five days prior notice to Subscriber. In any event and subject to the foregoing,
      the Company shall file
      a
      Form 8-K or make a public announcement describing the Offering not later than
      the third business day after the Closing Date. In the Form 8-K or public
      announcement, the Company will specifically disclose the amount of common stock
      outstanding immediately after the Closing. A form of the proposed Form 8-K
      or
      public announcement to be employed in connection with the Closing is annexed
      hereto as Exhibit
      F.

     

    (n) Further
      Registration Statements.
      Except
      for a registration statement filed exclusively on behalf of the Subscribers
      pursuant to Section 11 of this Agreement, the Company will not file any
      registration statements nor amend any already filed registration statement,
      including but not limited to Forms S-8, with the Commission or with state
      regulatory authorities without the consent of the Subscriber nor allow any
      other
      registration statement to be declared effective by the Commission until the
      sooner of (i) the Registration Statement shall have been current and available
      for use in connection with the resale of the Registrable Securities (as defined
      in Section 11.1(i)) for a period of 180 days, or (ii) until all the Shares
      and
      Warrant Shares have been resold or transferred by the Subscribers pursuant
      to
      the Registration Statement or Rule 144, without regard to volume limitations
      (“Exclusion
      Period”).
      The
      Exclusion Period will be tolled during the pendency of an Event of Default
      as
      defined in the Certificate of Designation.

     

    (o) Blackout.
      The
      Company undertakes and covenants that until the end of the Exclusion Period,
      the
      Company will not enter into any acquisition, merger, exchange or sale or other
      transaction that could have the effect of delaying the effectiveness of any
      pending registration statement or causing an already effective registration
      statement to no longer be effective or current for a period ten (10) or more
      consecutive days
      nor
      more than twenty (20) days in the aggregate during any consecutive three hundred
      and sixty-five (365) day period.

     

    (p) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company.

    

    (q) Negative
      Covenants.
      So long
      as at least twenty-five percent (25%) of the principal amount of the Preferred
      Stock issued on the Closing Date is outstanding and during the pendency of
      an
      Event of Default (as defined in the Certificate of Designation), without the
      consent of the Subscribers, the Company will not directly or
      indirectly:

    

    (i) create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired except for (A)
      the
      Excepted Issuances (as defined in Section 12(a) hereof), (B) (a) Liens imposed
      by law for taxes that are not yet due or are being contested in good faith
      and
      for which adequate reserves have been established in accordance with generally
      accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
      material men’s, repairmen’s and other like Liens imposed by law, arising in the
      ordinary course of business and securing obligations that are not overdue by
      more than 30 days or that are being contested in good faith and by appropriate
      proceedings; (c) pledges and deposits made in the ordinary course of business
      in
      compliance with workers’ compensation, unemployment insurance and other social
      security laws or regulations; (d) deposits to secure the performance of bids,
      trade contracts, leases, statutory obligations, surety and appeal bonds,
      performance bonds and other obligations of a like nature, in each case in the
      ordinary course of business; (e) Liens created with respect to the financing
      of
      the purchase of new property in the ordinary course of the Company’s business up
      to the amount of the purchase price of such property, or (f) easements, zoning
      restrictions, rights-of-way and similar encumbrances on real property imposed
      by
      law or arising in the ordinary course of business that do not secure any
      monetary obligations and do not materially detract from the value of the
      affected property (each of (a) through (f), a “Permitted
      Lien”)
      and
      (C) indebtedness for borrowed money which is not senior or pari passu to the
      rights of the Subscribers to receive assets of the Company upon bankruptcy
      or
      dissolution;

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

     

        (ii) amend
      its
      certificate of incorporation, bylaws or its charter documents so as to adversely
      affect any rights of the Subscriber;

     

     

    (iii) repay,
      repurchase or offer to repay, repurchase or otherwise acquire or make any
      dividend or distribution in respect of any of its Common Stock, preferred stock,
      or other equity securities other than to the extent permitted or required under
      the Transaction Documents;

     

     

    (iv) prepay
      any financing related debt obligations; or

     

     

    (v) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $25,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company, or interest previously owned by officers, directors,
      or employees of the Company as described on Schedule
      9(q).

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a) The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
      persons, and principal shareholders, against any claim, cost, expense,
      liability, obligation, loss or damage (including reasonable legal fees) of
      any
      nature, incurred by or imposed upon the Subscriber or any such person which
      results, arises out of or is based upon (i) any material misrepresentation
      by
      Company or breach of any warranty by Company in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any breach
      or
      default in performance by the Company of any covenant or undertaking to be
      performed by the Company hereunder, or any other agreement entered into by
      the
      Company and Subscriber relating hereto.

     

    (b) Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons against any claim, cost, expense, liability, obligation, loss or damage
      (including reasonable legal fees) of any nature, incurred by or imposed upon
      the
      Company or any such person which results, arises out of or is based upon (i)
      any
      material misrepresentation by such Subscriber in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any breach
      or
      default in performance by such Subscriber of any covenant or undertaking to
      be
      performed by such Subscriber hereunder, or any other agreement entered into
      by
      the Company and Subscribers, relating hereto.

    
      
        
        

      

      
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    (c) In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of Registrable Securities
      (as
      defined herein).

     

    (d) The
      procedures set forth in Section 11.6 shall apply to the indemnification set
      forth in Sections 10(a) and 10(b) above.

     

    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities.

     

    (i) On
      one
      occasion, for a period commencing one hundred and twenty-one (121) days after
      the Closing Date, but not later than two (2) years after the Closing Date,
      upon
      a written request therefor from any record holder or holders of more than 50%
      of
      the Shares issued and issuable upon conversion of the outstanding Preferred
      Stock and outstanding Warrant Shares, the Company shall prepare and file with
      the Commission a registration statement under the 1933 Act registering the
      Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
      subject of such request for unrestricted public resale by the holder thereof.
      For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall
      not
      include Securities which are (A) registered for resale in an effective
      registration statement, (B) included for registration in a pending registration
      statement, (C) which have been issued without further transfer restrictions
      after a sale or transfer pursuant to Rule 144 under the 1933 Act, or (D) which
      may be sold under Rule 144(k). Upon the receipt of such request, the Company
      shall promptly give written notice to all other record holders of the
      Registrable Securities that such registration statement is to be filed and
      shall
      include in such registration statement Registrable Securities for which it
      has
      received written requests within ten (10) days after the Company gives such
      written notice. Such other requesting record holders shall be deemed to have
      exercised their demand registration right under this Section
      11.1(i).

     

    (ii) If
      the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Registrable
      Securities for sale to the public, provided the Registrable Securities are
      not
      otherwise registered for resale by the Subscribers or Holder pursuant to an
      effective registration statement, each such time it will give at least fifteen
      (15) days' prior written notice to the record holder of the Registrable
      Securities of its intention so to do. Upon the written request of the holder,
      received by the Company within ten (10) days after the giving of any such notice
      by the Company, to register any of the Registrable Securities not previously
      registered, the Company will cause such Registrable Securities as to which
      registration shall have been so requested to be included with the securities to
      be covered by the registration statement proposed to be filed by the Company,
      all to the extent required to permit the sale or other disposition of the
      Registrable Securities so registered by the holder of such Registrable
      Securities (the “Seller”
or
      “Sellers”).
      In
      the event that any registration pursuant to this Section 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(i), the Company has determined to proceed with the
      actual preparation and filing of a registration statement under the 1933 Act
      in
      connection with the proposed offer and sale for cash of any of its securities
      for the Company's own account and the Company actually does file such other
      registration statement, such written request shall be deemed to have been given
      pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

    
      
        
        

      

      
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    (iv) The
      Company shall file with the Commission a Form SB-2 registration statement (the
      “Registration
      Statement”)
      (or
      such other form that it is eligible to use) in order to register the Registrable
      Securities for resale and distribution under the 1933 Act not later than one
      hundred and twenty (120) days after the Closing Date (the
      “Filing
      Date”),
      and
      cause to be declared effective not
      later
      than two hundred and forty (240) calendar days after the Closing Date
(the
      “Effective
      Date”).
      The
      Company will register not less than a number of shares of common stock in the
      aforedescribed registration statement that is equal to 175%
      of
      the Shares issuable upon conversion of all of the Preferred Stock issuable
      to
      the Subscribers and the dividends thereon, and 100% of the Warrant Shares
      issuable pursuant to this Agreement upon exercise of the Warrants (collectively
      the “Registrable
      Securities”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber and Warrant holder, pro rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber and
      Warrant holder. The Registration Statement will immediately be amended or
      additional registration statements will be immediately filed by the Company
      as
      necessary to register additional shares of Common Stock to allow the public
      resale of all Common Stock included in and issuable by virtue of the Registrable
      Securities. Except with the written consent of the Subscriber, or as described
      on Schedule
      11.1
      hereto,
      no securities of the Company other than the Registrable Securities will be
      included in the Registration Statement. It shall be deemed a Non-Registration
      Event if at any time after the date the Registration Statement is declared
      effective by the Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Sellers fewer
      than 125%
      of
      the amount of Common Shares issuable upon full conversion of all sums due under
      the Preferred Stock and 100% of the Warrant Shares issuable upon exercise of
      the
      Warrants.

     

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii),
      or (iv) to effect the registration of any Registrable Securities under the
      1933
      Act, the Company will, as expeditiously as possible: 

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Registrable Securities copies of all filings and Commission letters of comment
      and notify Grushko & Mittman, P.C. (by telecopier or by email to
Counslers@aol.com)
      on or
      before 6:00 PM EST not later than the first business Day after the Company
      receives notice that (i) the Commission has no comments or no further comments
      on the Registration Statement, and (ii) the registration statement has been
      declared effective (failure to timely provide notice as required by this Section
      11.2(a) shall be a material breach of the Company’s obligation and an Event of
      Default as defined in the Preferred
      Stock and a Non-Registration Event as defined in Section 11.4 of this
      Agreement); 

     

    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years or the sale or
      transfer of all Registrable Securities pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period; 

     

    (c) furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available; 

     

     

    
      
        
        

      

      
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    (d) use
      its
commercially
      reasonable best efforts to register or qualify the Registrable Securities
      covered by such registration statement under the securities or “blue sky” laws
      of New York and such jurisdictions as the Sellers shall request in writing,
      provided, however, that the Company shall not for any such purpose be required
      to qualify generally to transact business as a foreign corporation in any
      jurisdiction where it is not so qualified or to consent to general service
      of
      process in any such jurisdiction; 

     

    (e) if
      applicable, list the Registrable Securities covered by such registration
      statement with any securities exchange on which the Common Stock of the Company
      is then listed; 

     

    (f) notify
      the Subscribers within four hours of the Company’s becoming aware that a
      prospectus relating thereto is required to be delivered under the 1933 Act,
      of
      the happening of any event of which the Company has knowledge as a result of
      which the prospectus contained in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing or which
      becomes subject to a Commission, state or other governmental order suspending
      the effectiveness of the registration statement covering any of the
      Shares;

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, reasonably make available for inspection by the Sellers, and any attorney,
      accountant or other agent retained by the Seller or underwriter, upon prior
      written request, all publicly available, non-confidential financial and other
      records, pertinent corporate documents and properties of the Company, and cause
      the Company's officers, directors and employees to supply all publicly
      available, non-confidential information reasonably requested by the seller,
      attorney, accountant or agent in connection with such registration statement;
      and

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      not
      later than three business days prior to the filing thereof with the
      Commission.

     

    11.3. Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws. 

    
      
        
        

      

      
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    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1(i) or 11.1(ii) is not filed within 60
      days
      after written request and declared effective by the Commission within 120 days
      after such request or, if later, within 240 calendar days after the Closing
      Date
      with respect to any Registration Statement required under Section 11.1(ii),
      and
      maintained in the manner and within the time periods contemplated by Section
      11
      hereof, and it would not be feasible to ascertain the extent of such damages
      with precision. Accordingly, if (A) the Registration Statement is not filed
      on
      or before the Filing Date, (B) is not declared effective on or before the
      Effective Date, (C) due to the action or inaction of the Company the
      Registration Statement is not declared effective within three (3) business
      days
      after receipt by the Company or its attorneys of a written or oral communication
      from the Commission that the Registration Statement will not be reviewed or
      that
      the Commission has no further comments which time will be reasonably extended
      if
      the Company is required to amend the Registration Statement to include
      additional financial statements, (D) if the registration statement described
      in
      Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such written
      request, or is not declared effective within 120 days after such written request
      or, if later, within 240 calendar days after the Closing Date with respect
      to
      any Registration Statement required under Section 11.1(ii), or (E) any
      registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv)
      is
      filed and declared effective but shall thereafter cease to be effective without
      being succeeded within twenty (20) business days by an effective replacement
      or
      amended registration statement or for a period of time which shall exceed 30
      days in the aggregate per year (defined as a period of 365 days commencing
      on
      the Actual Effective Date (each such event referred to in clauses (A) through
      (E) of this Section 11.4 is referred to herein as a "Non-Registration Event"),
      then the Company shall deliver to the holder of Registrable Securities, as
      Liquidated Damages, an amount equal to two percent (2%) for each thirty (30)
      days or part thereof of the Purchase Price of the Preferred Stock remaining
      unconverted and purchase price of Shares issued upon conversion of the
      Obligation Amount (as defined in the Certificate of Designation) owned of record
      by such holder which are subject to such Non-Registration Event until such
      time
      as the Non-Registration Event is cured. The Company must pay the Liquidated
      Damages in cash. The Liquidated Damages must be paid within ten (10) days after
      the end of each thirty (30) day period or shorter part thereof for which
      Liquidated Damages are payable. In the event a Registration Statement is filed
      by the Filing Date but is withdrawn prior to being declared effective by the
      Commission, then such Registration Statement will be deemed to have not been
      filed. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      fifteen (15) business days after receipt of comments from the Commission.
      Failure
      to
      timely respond to Commission comments is a Non-Registration Event for which
      Liquidated Damages shall accrue and be payable by the Company to the holders
      of
      Registrable Securities at the same rate set forth above. Notwithstanding the
      foregoing, the Company shall not be liable to the Subscriber under this Section
      11.4 for any events or delays occurring as a consequence of the acts or
      omissions of the Subscribers contrary to the material obligations undertaken
      by
      Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable
      pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to
      have occurred for times during which Registrable Securities are transferable
      by
      the holder of Registrable Securities pursuant to Rule 144(k) under the 1933
      Act.

     

    11.5. Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses (if
      required), fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the National Association of Securities Dealers, Inc., transfer taxes, and fees
      of transfer agents and registrars, are called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities are called "Selling
      Expenses."
      The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    11.6. Indemnification
      and Contribution.

     

    (a) In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to Section 11, the Company will, to the extent permitted by law,
      indemnify and hold harmless the Seller, each officer of the Seller, each
      director of the Seller, each underwriter of such Registrable Securities
      thereunder and each other person, if any, who controls such Seller or
      underwriter within the meaning of the 1933 Act, against any losses, claims,
      damages or liabilities, joint or several, to which the Seller, or such
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any registration statement
      under which such Registrable Securities was registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading
      in light of the circumstances when made, and will subject to the provisions
      of
      Section 11.6(c) reimburse the Seller, each such underwriter and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company shall not be liable
      to
      the Seller to the extent that any such damages arise out of or are based upon
      an
      untrue statement or omission made in any preliminary prospectus if (i) the
      Seller failed to send or deliver a copy of the final prospectus or supplement
      to
      the final prospectus delivered by the Company to the Seller with or prior to
      the
      delivery of written confirmation of the sale by the Seller to the person
      asserting the claim from which such damages arise, (ii) the final prospectus
      or
      supplement to the final prospectus would have corrected such untrue statement
      or
      alleged untrue statement or such omission or alleged omission, or (iii) to
      the
      extent that any such loss, claim, damage or liability arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or alleged
      omission so made in conformity with information furnished by any such Seller,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus. 

    
      
        
        

      

      
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    (b) In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading,
      and will reimburse the Company and each such officer, director, underwriter
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action, provided, however, that the Seller will be liable hereunder
      in any such case if and only to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission made in reliance upon and in
      conformity with information pertaining to such Seller, as such, furnished in
      writing to the Company by such Seller specifically for use in such registration
      statement or prospectus, and provided, further, however, that the liability
      of
      the Seller hereunder shall be limited to the net proceeds actually received
      by
      the Seller from the sale of Registrable Securities covered by such registration
      statement.

     

    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel reasonably
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      which are different from or additional to those available to the indemnifying
      party or if the interests of the indemnified party reasonably may be deemed
      to
      conflict with the interests of the indemnifying party, the indemnified parties,
      as a group, shall have the right to select one separate counsel and to assume
      such legal defenses and otherwise to participate in the defense of such action,
      with the reasonable expenses and fees of such separate counsel and other
      expenses related to such participation to be reimbursed by the indemnifying
      party as incurred.

    
      
        
        

      

      
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    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation.

     

    11.7. Delivery
      of Unlegended Shares.

     

    (a) Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Shares
      or
      Warrant Shares or any other Common Stock held by a Subscriber have been sold
      pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii)
      a
      representation that the prospectus delivery requirements, or the requirements
      of
      Rule 144, as applicable and if required, have been satisfied, and (iii) the
      original share certificates representing the shares of Common Stock that have
      been sold, and (iv) in the case of sales under Rule 144, customary
      representation letters of the Subscriber and/or Subscriber’s broker regarding
      compliance with the requirements of Rule 144, the Company at its expense, (y)
      shall deliver, and shall cause legal counsel selected by the Company to deliver
      to its transfer agent (with copies to Subscriber) an appropriate instruction
      and
      opinion of such counsel, directing the delivery of shares of Common Stock
      without any legends including the legend set forth in Section 4(h)
      above,
      reissuable pursuant to any effective and current Registration Statement
      described in Section 11 of this Agreement or pursuant to Rule 144 under the
      1933
      Act (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Shares certificate, if any, to the Subscriber at the address specified
      in the notice of sale, via express courier, by electronic transfer or otherwise
      on or before the Unlegended Shares Delivery Date. 

     

    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, upon request of a Subscriber, so long
      as
      the certificates therefor do not bear a legend and the Subscriber is not
      obligated to return such certificate for the placement of a legend thereon,
      the
      Company agrees to cause its transfer agent to electronically transmit the
      Unlegended Shares by crediting the account of Subscriber’s prime Broker with DTC
      through its Deposit Withdrawal Agent Commission system. Such delivery must
      be
      made on or before the Unlegended Shares Delivery Date.

    
      
        
        

      

      
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    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof later than two business days after the Unlegended
      Shares Delivery Date could result in economic loss to a Subscriber. As
      compensation to a Subscriber for such loss, the Company agrees to pay late
      payment fees (as liquidated damages and not as a penalty) to the Subscriber
      for
      late delivery of Unlegended Shares in the amount of $100 per business day after
      the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
      subject to the delivery default. If during any 360 day period, the Company
      fails
      to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
      of thirty (30) days, then each Subscriber or assignee holding Securities subject
      to such default may, at its option, require the Company to redeem all or any
      portion of the Shares and Warrant Shares subject to such default at a price
      per
      share equal to 120% of the purchase price of such Common Stock and Warrant
      Shares (“Unlegended
      Redemption Amount”).
      The
      amount of the aforedescribed liquidated damages that have accrued or been paid
      for the twenty day period prior to the receipt by the Subscriber of the
      Unlegended Redemption Amount shall be credited against the Unlegended Redemption
      Amount. The Company shall pay any payments incurred under this Section in
      immediately available funds upon demand.

     

    (d) In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber Unlegended Shares as required pursuant to this
      Agreement, within seven (7) business days after the Unlegended Shares Delivery
      Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
      open market transaction or otherwise) shares of common stock to deliver in
      satisfaction of a sale by such Subscriber of the shares of Common Stock which
      the Subscriber was entitled to receive from the Company (a "Buy-In"),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of common stock so purchased exceeds (B) the aggregate purchase
      price
      of the shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares together
      with interest thereon at a rate of 15% per annum, accruing until such amount
      and
      any accrued interest thereon is paid in full (which amount shall be paid as
      liquidated damages and not as a penalty). For
      example, if a Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
      price of shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares, the Company shall be required to pay the Subscriber
      $1,000,
      plus interest. The
      Subscriber shall provide the Company written notice indicating the amounts
      payable to the Subscriber in respect of the Buy-In.

     

    (e) In
      the
      event a Subscriber shall request delivery of Unlegended Shares as described
      in
      Section 11.7 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares or exercise of all or part of said Warrant shall have been sought and
      obtained by the Company or at the Company’s request or with the Company’s
      assistance,
      and the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the amount of the aggregate purchase price of the Common
      Stock
      and Warrant Shares which are subject to the injunction or temporary restraining
      order, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    12. (a) Right
      of First Refusal.
      Until
      one year after the Actual Effective Date, the Subscribers shall be given not
      less than seven (7) business days prior written notice of any proposed sale
      by
      the Company of its common stock or other securities or debt obligations, except
      in connection with (i) full or partial consideration in connection with a
      strategic merger, acquisition, consolidation or purchase of substantially all
      of
      the securities or assets of corporation or other entity which holders of such
      securities or debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital which
      holders of such securities or debt are not at any time granted registration
      rights,
      (iii)
      the Company’s issuance of Common Stock or the issuances or grants of options to
      purchase Common Stock to employees, directors or consultants of the Company
      pursuant to stock option plans and employee stock purchase plans described
      on
Schedule
      5(d)
      hereto,
      (iv) as a result of the exercise of Warrants or conversion of Preferred Stock
      which are granted or issued pursuant to this Agreement, (v) the payment of
      dividends on the Preferred Stock and liquidated and other damages hereunder,
      and
      (vi) as
      has
      been described in the Reports or Other Written Information filed with the
      Commission not later than three Business Days before the Closing Date and
      available on the EDGAR system, (vii) the issuance of securities in connection
      with a commercial bank lending arrangement, and (viii) as described on
Schedule
      12(a)
      hereto
      (collectively the foregoing are “Excepted
      Issuances”).
      The
      Subscribers who exercise their rights pursuant to this Section 12(a) shall
      have
      the right during the seven (7) business days following receipt of the notice
      to
      participate in such offering of common stock, debt or other securities in
      accordance with the terms and conditions set forth in the notice of sale in
      the
      same proportion to each other as their purchase of Preferred Stock in the
      Offering for up to the entire amount of such other offering. In the event such
      terms and conditions are modified during the notice period, the Subscribers
      shall be given prompt notice of such modification and shall have the right
      during the seven (7) business days following the notice of modification to
      exercise such right. 

     

    (b) Favored
      Nations Provision.
      Other
      than in connection with the Excepted Issuances, for so long as Preferred Stock
      or Warrants are outstanding, if the Company shall offer, issue or agree to
      issue
      any Common Stock or securities convertible into or exercisable for shares of
      Common Stock (or modify any of the foregoing which may be outstanding) to any
      person or entity at a price per share or conversion or exercise price per share
      which shall be less than the Conversion Price in respect of the Preferred Stock,
      or if less than the Warrant exercise price in respect of the Warrants, without
      the consent of each Subscriber holding Preferred Stock or Warrants, the
      Conversion Price of the Preferred Stock and the Warrant exercise price shall
      automatically be reduced to such lower price. For purposes of the adjustment
      described in this paragraph, the issuance of any security of the Company
      carrying the right to convert such security into shares of Common Stock or
      of
      any warrant, right or option to purchase Common Stock shall result in the
      reduction in the Conversion Price and Exercise Price, if applicable, upon the
      sooner of the agreement to or actual issuance of such convertible security,
      warrant, right or option and again at any time upon any subsequent issuances
      of
      shares of Common Stock upon exercise of such conversion or purchase rights
      if
      such issuance is at a price lower than the Conversion Price or Warrant exercise
      price in effect upon such issuance. The rights of the Subscriber set forth
      in
      this Section 12 are in addition to any other rights the Subscriber has pursuant
      to this Agreement, the Certificate of Designation, any Transaction Document,
      any
      other agreement referred to or entered into in connection herewith, and at
      law,
      equity or otherwise.

     

    (c) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Section 12(a) would
      result in the issuance of an amount of Common Stock of the Company that would
      exceed the maximum amount that may be issued to a Subscriber calculated in
      the
      manner described in Section 4(c) of the Certificate of Designation, then the
      issuance to Subscriber of such additional shares of Common Stock of the Company
      to such Subscriber will be deferred in whole or in part until such time as
      such
      Subscriber is able to beneficially own such Common Stock without exceeding
      the
      maximum amount set forth calculated in such manner. The determination of when
      such Common Stock may be issued shall be made by each Subscriber as to only
      such
      Subscriber.

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    

     

    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: Gilder
      Enterprises, Inc., 7 Deer Park Drive, Suite K, Monmouth Junction, NJ 08852,
      Attn: Al Kraus, CEO, telecopier:
      (732) 329-8650, with a copy by telecopier only to: Kronish Lieb Weiner &
Hellman, LLP, 1114 Avenue of the Americas, New York, NY 10036, Attn: Alison
      Newman, Esq., telecopier: (212) 479-6275, and (ii) if to the Subscriber, to:
      the
      one or more addresses and telecopier numbers indicated on the signature pages
      hereto, with an additional copy by telecopier only to: Grushko & Mittman,
      P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number:
      (212) 697-3575.

     

    (b) Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers. 

     

    (c) 
      Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts
      of laws principles
      that would result in the application of the substantive laws of another
      jurisdiction. Any action brought by either party against the other concerning
      the transactions contemplated by this Agreement shall be brought only in the
      civil or state courts of New York or in the federal courts located in New York
      County. The
      parties and the individuals executing this Agreement and other agreements
      referred to herein or delivered in connection herewith on behalf of the Company
      agree to submit to the jurisdiction of such courts and waive trial by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage may occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek one or more
      preliminary and final injunctions to prevent or cure breaches of the provisions
      of this Agreement and to enforce specifically the terms and provisions hereof,
      this being in addition to any other remedy to which any of them may be entitled
      by law or equity. Subject to Section 13(d) hereof, each of the Company,
      Subscriber and any signator hereto in his personal capacity hereby waives,
      and
      agrees not to assert in any such suit, action or proceeding, any claim that
      it
      is not personally subject to the jurisdiction in New York of such court, that
      the suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner permitted
      by law.

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    

     

    (f) Damages.
      In the
      event the Subscriber is entitled to receive any liquidated damages pursuant
      to
      the Transactions, the Subscriber may elect to receive the greater of actual
      damages or such liquidated damages. 

     

    (g) Independent
      Nature of Subscribers.  
        The
      Company acknowledges that the obligations of each Subscriber under the
      Transaction Documents are several and not joint with the obligations of any
      other Subscriber, and no Subscriber shall be responsible in any way for the
      performance of the obligations of any other Subscriber under the Transaction
      Documents. The
      Company acknowledges that each Subscriber has represented that the decision
      of
      each Subscriber to purchase Securities has been made by such Subscriber
      independently of any other Subscriber and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company which may have been made or given by
      any
      other Subscriber or by any agent or employee of any other Subscriber, and no
      Subscriber or any of its agents or employees shall have any liability to any
      Subscriber (or any other person) relating to or arising from any such
      information, materials, statements or opinions.  The
      Company acknowledges that nothing contained in any Transaction Document, and
      no
      action taken by any Subscriber pursuant hereto or thereto (including, but not
      limited to, the (i) inclusion of a Subscriber in the Registration Statement
      and
      (ii) review by, and consent to, such Registration Statement by a Subscriber)
      shall be deemed to constitute the Subscribers as a partnership, an association,
      a joint venture or any other kind of entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or the transactions contemplated by the Transaction Documents. 
The Company acknowledges that each Subscriber shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of the Transaction Documents, and it shall not be necessary for
      any other Subscriber to be joined as an additional party in any proceeding
      for
      such purpose.  The Company acknowledges that it has elected to provide all
      Subscribers with the same terms and Transaction Documents for the convenience
      of
      the Company and not because Company was required or requested to do so by the
      Subscribers.  The Company acknowledges that such procedure with respect to
      the Transaction Documents in no way creates a presumption that the Subscribers
      are in any way acting in concert or as a group with respect to the Transaction
      Documents or the transactions contemplated thereby.

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 80% of the total of the Shares issuable
      upon
      conversion of outstanding Preferred Stock owned by Subscribers on the date
      consent is requested.

     

    (i) Equal
      Treatment.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered to all the parties to the Transaction
      Documents.

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    

     

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    

    
      	 	
              GILDER
                ENTERPRISES, INC.

            
	 	
              a
                Nevada corporation

            
	 	 
	 	 
	 	 
	 	
              By:_____________________________

            
	 	
              Name:
                Al Kraus

            
	 	
              Title:
                CEO

            
	 	 
	 	 
	 	
              Dated:
                _____________, 2006

            

    

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE AND STATED VALUE OF PREFERRED STOCK

            	
              CLASS
                A WARRANTS

            
	
              ALPHA
                CAPITAL AKTIENGESELLSCHAFT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

              ______________________________________

              (Signature)

              By:
                

            	
              $1,000,000.00

            	
              400,000

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    

    GILDER
      ENTERPRISES, INC.

    a
      Nevada
      corporation

    

    

    

    By:_________________________________

    Name:
      Al
      Kraus

    Title:
      CEO

    

    

    Dated:
      _____________, 2006

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE AND STATED VALUE OF PREFERRED STOCK

            	
              CLASS
                A WARRANTS

            
	
              LONGVIEW
                FUND, LP

              600
                Montgomery Street, 44th Floor

              San
                Francisco, CA 94111

              Fax:
                (415) 981-5301

               

               

               

              ______________________________________

              (Signature)

              By:
                

            	
              $3,000,000.00

            	
              1,200,000

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (C)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    

    GILDER
      ENTERPRISES, INC.

    a
      Nevada
      corporation

    

    

    By:_________________________________

    Name:
      Al
      Kraus

    Title:
      CEO

    

    Dated:
      _____________, 2006

    

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE AND STATED VALUE OF PREFERRED STOCK

            	
              CLASS
                A WARRANTS

            
	
              PLATINUM
                PARTNERS LONG TERM GROWTH III LLC

              11
                Dr. Roy’s Road

              Grand
                Cayman, Cayman Islands

              Fax:

               

               

               

               

               

               

               

               

               

              ______________________________________

              (Signature)

              By:
                

            	
              $1,000,000.00

            	
              400,000

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (D)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

    

    GILDER
      ENTERPRISES, INC.

    a
      Nevada
      corporation

    

    

    By:_________________________________

    Name:
      Al
      Kraus

    Title:
      CEO

    

    Dated:
      _____________, 2006

    

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
                PRICE AND STATED VALUE OF PREFERRED STOCK

            	
              CLASS
                A WARRANTS

            
	
              ELLIS
                INTERNATIONAL LTD.

              53rd
                Street Urbanizacion Obarrio

              Swiss
                Tower, 16th
                Floor, Panama

              Republic
                of Panama

              Fax:
                (516) 887-8990

               

               

               

               

               

               

               

               

               

              ______________________________________

              (Signature)

              By:
                

            	
              $250,000.00

            	
              100,000

            

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

     

     

    
      	
              Exhibit
                A

            	
              Certificate
                of Designation

            
	
              Exhibit
                B

            	
              Form
                of Warrant

            
	
              Exhibit
                C

            	
              Escrow
                Agreement

            
	
              Exhibit
                D

            	
              Form
                of Legal Opinion

            
	
              Exhibit
                E

            	
              Medasorb
                Corporation Financial Statements

            
	
              Exhibit
                F

            	
              Form
                of Public Announcement or Form 8-K

            
	
              Schedule
                5(d)

            	
              Additional
                Issuances / Capitalization

            
	
              Schedule
                5(f)

            	
              Outstanding
                Reset Rights

            
	
              Schedule
                5(h)

            	
              Litigation

            
	
              Schedule
                5(q)

            	
              Undisclosed
                Liabilities

            
	
              Schedule
                5(v)

            	
              Transfer
                Agent

            
	
              Schedule
                8

            	
              Broker/Broker’s
                Fee/Due Diligence Fee

            
	
              Schedule
                9(e)

            	
              Use
                of Proceeds

            
	
              Schedule
                11.1

            	
              Other
                Registrable Securities

            
	
              Schedule
                12(a)

            	
              Other
                Excepted IssuancesEMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into this 18th
day of July, 2003, by and between Renal Tech International, LLC, (the
"Company"), and Al Kraus ("Employee").

      The Company wishes to employ Employee as Chief Financial Officer upon
the terms and conditions set forth in this Agreement and Employee is willing
to accept employment subject to the terms and conditions set forth below.
Accordingly, the parties, intending to be legally bound, agree as follows:

1.    Employment and Term

      1.1 Employment. Subject to the terms and conditions hereof, the Company
hereby employs Employee during the term of employment set forth in Section 1.2
to serve as President and Chief Executive Officer of the Company and perform
such services and duties as are normally and customarily associated with such
position as well as such other associated duties as the Board of Managers shall
determine. Employee hereby accepts such employment and agrees to devote
sufficient time, attention and energies during regular business hours to
effectively perform his duties and obligations hereunder, devoting three full
business days each week to the Company's business either at the Company's
offices or traveling on Company business and being available by telephone,
e-mail or other communication for the remainder of the normal work week, until
the BetaSorb device, or other significant product shall achieve FDA market
approval, at which time Employee shall devote his full business time solely to
the business of the Company; provided that the Company and Employee mutually
agree upon an increase in compensation and associated benefits. In the event the
Company and Employee do not agree on an increase in compensation and benefits,
the terms of this Agreement shall remain in effect including employee's
obligation to devote no more than three full business days each week.

      1.2 Term. The term of employment of Employee under this Agreement shall
begin on the date hereof and end on the fifth anniversary of such date, subject
to the provisions for early termination set forth herein.

2. Compensation. In consideration of the services to be rendered hereunder, the
Company hereby agrees to (a) pay Employee an annual base compensation of
$200,000 payable in equal semimonthly installments in accordance with the usual
practice of the Company which base compensation shall be subject to annual
review (but his compensation may not be reduced from then current level) by the
Compensation Committee, and (b) grant Options for that number of Membership
Units equal to 5% of the outstanding Membership Units of the equity of the
Company determined and granted on the date hereof at an exercise price of $1.00
per Unit (the "Options"), said number of units to vest as follows: 25% on the
first anniversary of this Agreement and 25% on each of the next three subsequent
anniversaries, subject to the terms hereof. Notwithstanding anything set forth
herein to the contrary, in the event of the issuance of additional Membership
Units, granting of options to third parties or the issuance of securities
convertible or exercisable into Membership Units of the Company, then the
Company agrees to immediately adjust in favor of the Employee the number of
Options granted hereunder to assure that Employee at all times retains a 5%
equity interest in the Company on a fully diluted basis until such time as the
Company obtains additional equity (including any form of financing that converts
to equity) capital of $20 million. It is also understood that the Employee's
Options will be adjusted on the same basis as all other Unit holders to account
for any stock split, stock dividend, combination or recapitalization.

<PAGE>

3.    Benefits.

      3.1 Participation in Plans. During the term hereof, Employee shall be
entitled to participate on the same terms as afforded other executive officers
in any group insurance, hospitalization, medical, dental, health and accident,
disability or similar plan or program of the Company now existing or established
hereafter to the extent that he is eligible under the general provisions
thereof; provided that in no case shall the benefits be reduced or less than
that granted, awarded or provided to Employee on the date hereof.

      3.2 Reasonable Business Expenses. Employee shall be allowed reimbursement
for reasonable business expenses in connection with the performance of his
duties hereunder upon presentation by Employee of the details of, vouchers for,
such expenses, including tourist class commercial air travel, and Employee shall
be furnished reasonable office space, assistance and facilities.

      3.3 Vacation. Employee shall be entitled to a vacation (without deduction
of salary or other compensation) for the period as is in conformity with the
Company's policy regarding vacations for management employees (but in no event
less than four weeks per year).

      3.4 Bonuses. (a) Employee may receive such discretionary bonuses as the
Board of Managers, in its sole discretion and from time to time, deem
appropriate; and (b) Employee shall be entitled to receive a bonus of up to
$100,000 upon achieving the milestones set forth in Appendix A.

      3.5 Automobile Allowance. The Company agrees to pay Employee each month an
automobile allowance of $500.00 per month throughout the term of this Agreement.

4.    Early Termination of Employment

      4.1   Termination for Justifiable Cause.  In addition to termination
pursuant to Section 1.2, the Company, by written notice to Employee
authorized by a majority of the Managers other than Employee, may terminate
Employee's employment for "justifiable cause", which shall mean any of the
following events: (a) adjudication by a court of competent jurisdiction that
Employee has committed an act of fraud or dishonesty resulting or intended to
result, directly or indirectly, in personal enrichment at the expense of the
Company; (b) an indictment of a felony (other than a motor vehicle related
matter) involving moral turpitude; (c) repeated failure or refusal by
Employee to follow written policies and directions reasonably established by
the Board of Managers that go uncorrected for a period of thirty (30)
consecutive days after written notice has been provided to Employee; or (d)
persistent willful failure by Employee to fulfill his duties hereunder that
goes uncorrected for a period of thirty (30) consecutive days after written
notice has been provided Employee.

<PAGE>

      4.2   In the event that the Board of Managers reasonably determines
that Employee has committed a felony (other than a motor vehicle related
matter), a material act of fraud or other willful tort against the Company,
it shall have the right to suspend Employee from his position and duties
hereunder without compensation until such time as either the action is
dropped or no longer pursued or a final adjudication of Employee's actions is
made by a court (whether civil or criminal as appropriate) of competent
jurisdiction.  Should said adjudication find Employee innocent (or not at
fault) or the action is dropped or no longer pursued, the Company shall
promptly pay him all unpaid back salary together with interest on said amount
(at the average consumer loan rate published by Citibank, N.A., during the
suspension period) and, if said final adjudication is rendered or action
dropped or no longer pursued within 12 months of Employee's suspension, he
may, at his option, be reinstated to his position and this Agreement
continued as if never interrupted.

      4.3 Permanent Disability of Employee.  The Company shall have the right
to terminate Employee's employment hereunder if the Managers shall in good
faith and on the basis of reasonable medical evidence determine that
Employee, by reason of physical or mental disability, has been unable to
perform the services required of him hereunder for more than 120 consecutive
days or an aggregate of 180 calendar days, during any 12-month period.  Such
termination shall be effective as of the last day of the month following the
month in which the Company shall have given notice to Employee of its
intention to terminate pursuant to this paragraph.  Company paid Disability
Benefits will be activated 90 days after termination.

      4.4   Compensation Upon Early Termination.

      (a) In the event of termination of this Agreement for "justifiable cause"
as described in Section 4.1, or pursuant to Section 1.2 hereof, Employee shall
be entitled to the compensation earned by him before the effective date of
termination, as provided for in this Agreement, computed pro rata up to and
including that date, in lieu of salary and other benefits under this Agreement.

      (b) If prior to the expiration of the term of this Agreement Employee
dies, the Company shall continue Employee's compensation and coverage of
Employee's direct dependents (if any and if they are eligible) under all plans
or programs of the types listed in Section 3.1 for a period of 120 days,
provided that no benefits will continue past the end of the term of this
Agreement.

<PAGE>

      (c) Upon a Change of Control or upon Employee's termination for "Good
Reason" as defined below, Employee shall then be entitled to receive, in lieu of
salary and other benefits under this Agreement, (i) an amount equal to his
then-current base salary, payable monthly in arrears without interest for a
period of one year, (ii) continued coverage under all plans or programs of the
types listed in Section 3.1 until the sooner of 1.5 years or one (1) month after
Employee becomes otherwise employed and eligible for other comparable coverage,
and (iii) all other benefits provided to Employee under this Agreement for a
period of thirty (30) days.

            4.5   In the event Employee is terminated for any reason other
than for "justifiable cause" as defined in Section 4.1 hereof, death,
disability or voluntary termination (unless the Company and Employee mutually
agree to such voluntary termination), then all unexercised options granted to
Employee under the Company's option plan (including without limitation the
Options granted pursuant to Section 2(b) hereof) shall be deemed fully vested
and exercisable immediately upon Employee's termination.  The foregoing
benefit shall be in addition to, and not in lieu of, any similar benefit that
may be contained in any other agreement between Company and Employee.

            4.6   (a) Upon the occurrence of a Change of Control of the
Company or Employee terminates for Good Reason pursuant to Section 4.6(d)(i),
all options granted to Employee under the Company option plan and the Options
granted to Employee pursuant to Section 2(b) hereof shall be automatically
fully vested and exercisable immediately upon a Change of Control.

                  (b) For purposes of this Agreement, "Change of Control"
shall be deemed to have occurred if, during the term of this agreement:

                  (i)   the beneficial ownership of at least 50% of the
Company's voting securities or all or substantially all of the assets of the
Company shall have been acquired, directly or indirectly by a single person
or a group of affiliated persons, other than the Employee or a group in which
the Employee is a member, in any transaction or series of transactions; or

                  (ii)  as the result of or in connection with any cash
tender offer, exchange offer, sale of assets, merger, consolidation or other
business combination of the Company with another corporation or entity the
new Board of Managers is comprised of a majority of Managers chosen or
elected by the members of the new/combined entity who were not members of the
Company before such cash tender offer, exchange offer, sale of assets,
merger, consolidation or other business combination of the Company with
another corporation or entity.

                  (c)   For purposes of this Agreement, the date of Change of
Control shall mean the earlier to occur of:

<PAGE>

                  (i)   the first date on which a single person or group of
affiliated persons acquires the beneficial ownership of 50% or more of the
Company's voting securities or all or substantially all of the Company's
assets in any transaction or series of transactions; or

                  (ii)  the date on which a cash tender offer, exchange
offer, sale of assets, merger, consolidation other business combination
resulting in the change in the Board of Managers contemplated by Section 4.5
hereof is consummated.

                  (d)   For purposes of this Agreement, the term "Good Reason"
shall mean the occurrence of any of the following events without the
Employee's express written consent.

                  (i)   the assignment to Employee of any duties that are not
in the same corporate capacity or area of operations or are not of the same
general nature as Employee's duties with Company; or

                  (ii)  the Company's assigning Employee to an office other
than the principal office of the Company.  The current principal office is
located in Princeton, New Jersey and the Company represents to Employee that
there is at this time no intention on the part of the Company to move said
principal office beyond a radius of 50 miles from Princeton, New Jersey.
This clause (ii), however, shall in no way limit the complete discretion of
the Board of Managers to relocate the principal office of the Company at any
time in the future.  In the event, however, that the Company does move its
principal office beyond a 50 mile radius of Princeton, N.J., Employee shall
have the right, for 120 days after the decision of the Board of Managers to
relocate, to elect (by written notice to the Board of Managers) to terminate
this Agreement and receive upon the date of termination, in lieu of all
compensation and privileges provided for herein (except as set forth in the
subsequent sentence), that number of options equal to one additional year's
vesting hereunder, provided Employee remains with the Company for a period
(up to 12 months) (the "Transition Period") sufficient to assist the Company
to make an expeditious and effective transition to the new location.  The end
of such Transition Period shall be deemed the date o termination for the
purposes of this Section.  Notwithstanding anything set forth herein to the
contrary, in the event the Company moves its principal office beyond a 50
mile radius from Princeton, New Jersey, the Company shall be obligated to pay
to Employee the amount of compensation and benefits set forth in Section
4.4(c) hereof commencing after the Transition Period set forth above.

5.    Confidentiality and Non-Competition.

      5.1   (i) Confidentiality.  During the term of employment under this
Agreement, Employee will have access to and become acquainted with various
confidential information including without limitation, trade secrets,
customer relationships, formulas, devices, inventions, processes, know-how,
financial information and other compilations of information, records, and
specifications, which are owned by the Company.  Employee shall not disclose

<PAGE>

any of the Company's confidential information, directly or indirectly, or use
them in any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of his employment for the
Company.  All files, records, documents, drawings, specifications, equipment
and similar items relating to the business of the Company, whether prepared
by Employee or otherwise coming into his possession, shall remain the
exclusive property of the Company and shall not be removed from the premises
of the Company under any circumstances whatsoever without the prior written
consent of the Company, and if removed shall be immediately returned to the
Company upon any termination of his employment and no copies thereof shall be
kept by Employee, provided, however, that Employee shall be entitled to
retain documents reasonably related to his interest as a shareholder.

            (ii)  Inventions and Shop Right. Every invention, discovery or
improvement made or conceived by Employee related to the business of the
Company during his employment by the Company whenever and wherever made or
conceived, and whether or not during business hours, of any product, article,
appliance, tool, device, formula, process, machinery or pattern similar to,
or which constitutes an improvement, on those heretofore, now or at any time
during this employment, manufactured or used by the Company in connection
with the manufacture or process of any product heretofore or now or hereafter
manufactured by the Company, or of any product which shall or could
reasonably be manufactured in the reasonable expansion of the Company's
business, shall be and continue remain the Company's exclusive property,
without any added compensation or any reimbursement for expenses to Employee,
and upon the conception of any and every such invention, discovery or
improvement and without waiting to perfect or complete it, Employee promises
and agrees that he will immediately disclose it to the Company and to no one
else and thenceforth will treat it as the property and secret of the
Company.  Employee will also execute any instruments requested from time to
time by the Company to vest in it complete title and ownership to such
invention, discovery or improvement and will, at the request of the Company,
do such acts and execute such instruments as the Company may require but at
the Company's expense to obtain Letters Patent in the United States and
foreign countries, for such invention, discovery or improvement and for the
purpose of vesting title thereto in the Company, all without any
reimbursement for expenses or otherwise and without any additional
compensation of any kind to Employee.

      5.2   Non-Competition.  In the event of a termination of this Agreement
for any reason, Employee shall be prohibited for a period of one (1) year
from the effective date of this separation from engaging in any business in
competition with that of the Company in those states within the United States
and those countries outside the United States in which the Company at the
time of Employee's separation has conducted business or where Company has
written a reasonable plan to conduct business in the next 12 months or
directly or indirectly advising or consulting to or otherwise performing
services for or providing assistance to any person, firm, corporation, or
other entity engaged in such competitive business, provided, however, nothing
herein contained shall be construed as (a) preventing Employee from investing

<PAGE>

his personal assets in any businesses which do not compete directly or
indirectly with the Company, provided such investment or investments do not
require any services on his part in the operation of the affairs of the
entity in which such investment is made and in which his participation is
solely that of an investor, (b) preventing Employee from purchasing
securities in any corporation whose securities in any corporation whose
securities are regularly traded, if such purchases shall not result in his
owning beneficially at any time 3% or more of equity securities of any
corporation engaged in a business which is competitive, directly or
indirectly, to that of the Company, (c) preventing Employee from engaging in
any activities, if he receives the prior authorization of the Managers.
Notwithstanding anything herein to the contrary this Section 5.2 shall not be
effective in the event Employee has been discharged for any reason other than
"justifiable cause" or voluntarily leaves the employment of the Company with
the mutual agreement of the Company.

      5.3   Subsequent to the termination of this Agreement, Employee will
not for a period of one (1) year materially interfere with or disrupt the
Company's business relationship with its customers or suppliers or employ any
person who was employed with the Company at any time during the 6 months
prior to Employee's termination, or for a period of three (3) years, directly
or indirectly solicit any of the employees to leave the employ of the Company.

6.    Notices.  All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its President or Secretary) or forty eight (48) hours after deposit thereof
in the U.S. mail, postage prepaid, addressed to Employee, at last known
address as carried in the records of the Company, or to the Company, at the
corporate headquarters, to the attention of the Secretary, or to such other
address as the party to be notified may specify by notice to the other party.

7.    Assigns and Successors.  The rights and obligations of the Company
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company and the rights and obligations of
Employee shall move to the benefit of and shall be binding on Employee and
his legal representatives or heirs.  This agreement constitutes a personal
service agreement and Employee's obligations hereunder may not be transferred
or assigned by Employee.

8.    Amendment Waiver. This Agreement may be amended, and any right or claim
hereunder waived, only by a written instrument signed by both Employee and
the Company, following authorization by a majority of Managers.  Nothing in
this Agreement, express or implied, is intended to confer upon any third
person any rights or remedies under or by reason of this Agreement.  No
amendment or waiver of this Agreement requires the consent of any individual,
partnership, corporation or other entity not a party of this Agreement.

9.    Injunction.

      (a)  Should Employee at any time violate or threaten to violate any of
the provisions of this Agreement, the Company shall be entitled to an
injunction restraining Employee from doing or continuing to do or performing
any such acts, and Employee hereby consents to the issuance of such an
injunction.

<PAGE>

      (b)  In the event that a proceeding is bought in equity to enforce the
provisions of this paragraph, Employee shall not urge as a defense that there
is an adequate remedy at law, nor shall the Company be prevented from seeking
any other remedies which may be available.

      (c)  The existence of a claim or cause of action by the Company against
Employee, or by Employee against the Company, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the endorsement by
the Company of the foregoing restrictive covenants but shall be litigated
separately.

      (d)  The provisions of this Section 9 shall survive termination of this
Agreement.

10.   Governing Law and Jurisdiction.  This Agreement in its interpretation
and application and enforcement shall be governed by the law of the State of
New Jersey without application of its conflict of laws provisions, and any
legal action commenced by either party seeking interpretation, application
and/or enforcement of this Agreement shall be brought only in the State of
New Jersey of federal court sitting in Princeton, NJ.

11.   Prior Agreements.  This Agreement supersedes and replaces any and all
prior agreements between the parties as to its subject matter.

12.   Construction.  Paragraph headings are for convenience only and shall
not be considered a part of the terms and provisions of this Agreement.

13.   Effective Date.  The effective date of this Agreement shall be July 18,
2003.

      IN WITNESS WHEREOF, the parties have executed this Agreement.

RENALTECH INTERNATIONAL, LLC                    EMPLOYEE

By: ___________________________________         ____________________
      Bruce Davis, Acting President and         Al Kraus
      Chief Executive Officer

Approved and Accepted:

Board of Managers

By:_________________________

<PAGE>

                       Appendix A - Management Targets

Completion Date   Target

Q4 03             Commence Beta-Sorb Pivotal Human Clinical Trial-50 patients

Q4 03             DMC Meeting FDA, approval to continue trial

Q4 03             Conclude 20mm financing round

Q1 04             Initiate Cohort B of Pivotal Trial

Q3 04             Conclude Commercial Polymer Supply Agreement

3Q 04             Complete Beta-Sorb Pivotal Human Trial-50 patients

3Q 04             Consolidate Company Operations in Princeton NJ

4Q 04             Complete Data Analysis and Study Report

4Q 04             Submit Beta-Sorb Marketing Application

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