Document:

Exhibit
      10.1

    

    ____________________

    

    Enigma
      Software Group, Inc.

    ____________________

    

    

     

    This
      offering consists of $1,000,000 of the Company’s 5 Year Convertible

    Debentures
      convertible into the

    Company’s
      Common Stock.

    

     

    ____________________

    

     

    SUBSCRIPTION
      AGREEMENT

    
 

    ___________________

    

    

    
      
         

      

      
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    SUBSCRIPTION
      PROCEDURES

     

    Convertible
      Debentures of Enigma
      Software Group, Inc. (the
      “Company”) are being offered (the “Debentures”). This offering is being made in
      accordance with the exemptions from registration provided for under Section
      4(2)
      of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506 of
      Regulation D promulgated under the 1933 Act. 

    

    In
      order
      to purchase Debentures, each subscriber must complete and execute a
      questionnaire (the “Questionnaire”) and a subscription agreement (the
“Subscription Agreement”). In addition, the Holder, as defined herein, must make
      a payment for the amount being purchased directly to the Company. All
      subscriptions are subject to acceptance by the Company, which shall not occur
      until the Company has returned the signed Company Signature Page. 

    

    The
      Questionnaire is designed to enable the Holder to demonstrate the minimum legal
      requirements under federal and state securities laws to purchase the Debentures.
      The Signature Page for the Questionnaire and the Subscription Agreement contain
      representations relating to the subscription and should be reviewed carefully
      by
      each subscriber.

    

    If
      you
      are a foreign person or foreign entity, you may be subject to a withholding
      tax
      equal to thirty percent (30%) of any dividends paid by the Company. In order
      to
      eliminate or reduce such withholding tax you must submit a properly executed
      I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
      Connected with the Conduct of a Trade or Business in the United States) or
      I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
      exemption from withholding or eligibility for treaty benefits in the form of
      a
      lower rate of withholding tax on interest or dividends.

    

    Payment
      of the full subscription amount will be made by wire transfer by Dutchess
      Private Equities Fund, LP & Dutchess Private Equities Fund, II, LP (the
“Holder”) on or prior to the closing per the wire instructions that will be
      established. In the event of a termination of the offering or the rejection
      of a
      subscription, subscription funds will be returned by the Company without
      interest or charges. 

    

    
      
         

      

      
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    THE
      SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
      IN
      RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
      SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
      NOT
      BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
      REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
      OR
      DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
      AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
      THE
      MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
      ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

     

    SUBSCRIPTION
      AGREEMENT

     

    To: Enigma
      Software Group, Inc.

    

    This
      Subscription Agreement is made between Enigma
      Software Group, Inc.,
      a
      Delaware corporation (the “Company”), and the undersigned prospective Holder
      (the “Holder”) who is subscribing hereby for the Company’s convertible
      debentures (the “Debentures”) on June 28, 2006. This subscription is submitted
      to you in accordance with and subject to the terms and conditions described
      in
      this Subscription Agreement, together with any Exhibits thereto, relating to
      an
      offering (the “Offering”) of One Million dollars ($1,000,000) of Debentures. The
      Offering is limited to accredited Investors and is made in accordance with
      the
      exemptions from registration provided for under Section 4(2) of the 1933 Act
      and
      Rule 506 of Regulation D promulgated under the 1933 Act (“Regulation
      D”).

    

    Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Debenture Registration Rights Agreement, the
      Debenture Agreement, Security Agreement and Warrant Agreement (collectively,
      the
      "Transaction Documents").

    

    1. SUBSCRIPTION.

    

    (a) The
      closing shall be deemed to have occurred on June 28, 2006 (the “Closing Date” or
      a “Closing”). The Company shall pay twelve percent (12%) annual coupon on the
      unpaid principal amount of this Debenture (the “Debenture”) at such times and in
      such amounts as outlined in the Debenture Agreement. 

    

    
      
         

      

      
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    (b) Upon
      receipt by the Company of the requisite payment for the Debentures being
      purchased, the Debentures so purchased will be forwarded by the Company to
      the
      Holder or its broker, as listed on the signature page, and the name of the
      Holder will be registered on the Debenture transfer books of the Company as
      the
      record owner of such Debentures. 

    

    (c) As
      long
      as the Holder owns the Debenture, the Holder shall have the right, to change
      the
      terms for the balance of the Debenture it then holds, to match the terms of
      any
      other offering of securities made by the Company.

     

    (d)
      The
      Holder shall fund five hundred thousand dollars ($500,000) upon the initial
      closing and an additional five hundred thousand dollars ($500,000)
      simultaneously on the date the registration statement covering this Offering
      is
      filed with the United States Securities and Exchange Commission
      ("SEC").

    

    (e)
      The
      Holder will be granted a security interest in all of the Company's and its
      Subsidiaries' assets, currently owned or hereinafter acquired, (as defined
      in
      Schedule 3(a) of this Agreement), as more fully set forth in the Security
      Agreement between the Company and the Holder of this date.

     

    2. REPRESENTATIONS
      AND WARRANTIES OF THE HOLDER.

     

    The
      Holder hereby represents and warrants to, and agrees with, the Company as
      follows:

     

    (a) The
      Holder has been furnished with, and has carefully read the applicable form
      of
      Debenture Registration Rights Agreement, and the Debenture and
      is
      familiar with and understands the terms of the Offering. With respect to tax
      and
      other economic considerations involved in his investment, the Holder is not
      relying on the Company. The Holder has carefully considered and has, to the
      extent the Holder believes such discussion necessary, discussed with the Holder
      's professional legal, tax, accounting and financial advisors the suitability
      of
      an investment in the Company, by purchasing the Debentures, for the Holder
      's
      particular tax and financial situation and has determined that the investment
      being made by the Holder is a suitable investment for the Holder.

    

    (b) The
      Holder acknowledges that all documents, records, and books pertaining to this
      investment which the Holder has requested, have been made available for
      inspection, or the Holder has had access thereto.

    

    (c) The
      Holder has had a reasonable opportunity to ask questions of and receive answers
      from a person or persons acting on behalf of the Company concerning the
      Offering, and if such opportunity was taken, then all such questions have been
      answered to the full satisfaction of the Holder.

    

    
      
         

      

      
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    (d) The
      Holder will not sell, or otherwise dispose of the Debentures or the Common
      Stock
      issued upon conversion of the Debentures without registration under the 1933
      Act
      or applicable state securities laws or compliance with an exemption therefrom
      including but not limited to: Rule 144A, 144 (k), promulgated under the
      Securities Act of 1933 (herein after referred to as an "Exemption"). The
      Debentures have not been registered under the 1933 Act or under the securities
      laws of any state. Resales of the Common Stock underlying the Debentures or
      issued in payment of accrued interest on the Debentures are to be registered
      by
      the Company pursuant to the terms of the Debenture Registration Rights Agreement
      incorporated herein and made a part hereof. 

    

    (e) The
      Holder recognizes that an investment in the Debentures involves substantial
      risks, including loss of the entire amount of such investment. Further, the
      Holder has carefully read and considered the schedules attached
      hereto.

    

    (f)
       The
      Holder acknowledges that each certificate representing the Debentures (and
      the
      shares of Common Stock issued upon conversion of the Debentures, unless
      registered or with an Exemption) or in payment of interest on the Debentures
      shall be stamped or otherwise imprinted with a legend substantially in the
      following form:

    

    THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
      TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
      (OR
      ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
      OR
      (iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
      ACT.

    

    If
      the
      Holder sends a Notice of Conversion (See Exhibit A attached hereto), and
      provided a registration statement under the Securities Act of 1933 is in effect
      as to the sale, then in such event the Company shall have its transfer agent
      send Holder the appropriate number of shares of Common Stock without restrictive
      legends (other than a legend referring to the resale registration and prospectus
      delivery requirements) and not subject to stop transfer instructions.

    

    (g) If
      this
      Subscription Agreement is executed and delivered on behalf of a corporation
      or
      legal entity other than a natural person: (i) such corporation or other entity
      has the full legal right and power and all authority and approval required
      (a)
      to execute and deliver, or authorize execution and delivery of this Subscription
      Agreement and all other Transaction Documents executed and delivered by or
      on
      behalf of such corporation in connection with the purchase of the Debentures,
      and (b) to purchase and hold the Debentures; and (ii) the signature of the
      party
      signing on behalf of such corporation or entity is binding upon such
      corporation. 

    

    
      
         

      

      
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    (h) The
      Holder is not subscribing for the Debentures as a result of, or pursuant to,
      any
      advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or meeting.

    

    (i) The
      Holder is purchasing the Debentures for its own account for investment, and
      not
      with a view toward the resale or distribution thereof, except pursuant to sales
      registered or exempted from registration under the 1933 Act. The Holder has
      not
      offered or sold any portion of the Debentures being acquired nor does the Holder
      have any present intention of dividing the Debentures with others or of selling,
      distributing or otherwise disposing of any portion of the Debentures either
      currently or after the passage of a fixed or determinable period of time or
      upon
      the occurrence or non-occurrence of any predetermined event or circumstance
      in
      violation of the 1933 Act provided, however, that by making the representations
      herein, the Holder does not agree to hold any of the Debentures for any minimum
      or other specific term and reserves the right to dispose of the Debentures
      at
      any time in accordance with or pursuant to a registration statement or an
      exemption under the 1933 Act. The Holder is neither an underwriter of, nor
      a
      dealer in, the Debentures or the Common Stock issuable upon conversion thereof
      or upon the payment of interest thereon and is not participating in the
      distribution or resale of the Debentures or the Common Stock issuable upon
      conversion or exercise thereof. 

    

    (j) The
      Holder or the Holder's representatives, as the case may be, has such knowledge
      and experience in financial, tax and business matters so as to enable the Holder
      to utilize the information made available to the Holder in connection with
      the
      Offering to evaluate the merits and risks of an investment in the Debentures
      and
      to make an informed investment decision with respect thereto. 

    

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

    

    Except
      as
      set forth in the Schedules attached hereto, the Company represents and warrants
      to the Holder that:

    

    a.
       Organization
      and Qualification.
      The
      Company and its “SUBSIDIARIES” (which for purposes of this Subscription
      Agreement means any entity in which the Company, directly or indirectly, owns
      capital stock or holds an equity or similar interest) (a complete list of which
      is set forth in Schedule 3(a)) are corporations duly organized and validly
      existing in good standing under the laws of the respective jurisdictions of
      their incorporation, and have the requisite corporate power and authorization
      to
      own their properties and to carry on their business as now being conducted.
      Both
      the Company and its Subsidiaries are duly qualified to do business and are
      in
      good standing in every jurisdiction in which their ownership of property or
      the
      nature of the business conducted by them makes such qualification necessary,
      except to the extent that the failure to be so qualified or be in good standing
      would not have a Material Adverse Effect. As used in this Subscription
      Agreement, “MATERIAL ADVERSE EFFECT” means any material adverse effect on the
      business, properties, assets, operations, results of operations, financial
      condition or prospects of the Company and its Subsidiaries, if any, taken as
      a
      whole, or on the transactions contemplated hereby or by the agreements and
      instruments to be entered into in connection herewith, or on the authority
      or
      ability of the Company to perform its obligations under the Transaction
      Documents (as defined in Section 3(b) below).

    

    
      
         

      

      
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    b.
       Authorization;
      Enforcement; Compliance with Other Instruments.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents, and to issue the
      Debentures in accordance with the terms hereof and thereof, (ii) the execution
      and delivery of the Transaction Documents by the Company and the consummation
      by
      it of the transactions contemplated hereby and thereby, including without
      limitation the reservation for issuance and the issuance of the Debentures
      pursuant to this Subscription Agreement, have been duly and validly authorized
      by the Company's Board of Directors and no further consent or authorization
      is
      required by the Company, its Board of Directors, or its shareholders, (iii)
      the
      Transaction Documents have been duly and validly executed and delivered by
      the
      Company, and (iv) the Transaction Documents constitute the valid and binding
      obligations of the Company enforceable against the Company in accordance with
      their terms, except as such enforceability may be limited by general principles
      of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
      liquidation or similar laws relating to, or affecting generally, the enforcement
      of creditors' rights and remedies.

    

    c.
       Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      100,000,000 shares of Common Stock, of which as of the date hereof,
      approximately 16,243,267 shares are issued and outstanding. All of such
      outstanding shares have been, or upon issuance will be, validly issued and
      are
      fully paid for and nonassessable. Except as disclosed in Schedule 3(c) which
      is
      attached hereto and made a part hereof (i) no shares of the Company's capital
      stock are subject to preemptive rights or any other similar rights or any liens
      or encumbrances suffered or permitted by the Company, (ii) there are no
      outstanding debt securities, (iii) there are no outstanding shares of capital
      stock, options, warrants, scrip, rights to subscribe to, calls or commitments
      of
      any character whatsoever relating to, or securities or rights convertible into,
      any shares of capital stock of the Company or any of its Subsidiaries, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any of its Subsidiaries is or may become bound to issue additional shares of
      capital stock of the Company or any of its Subsidiaries or options, warrants,
      scrip, rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, any shares of capital
      stock of the Company or any of its Subsidiaries, (iv) there are no agreements
      or
      arrangements under which the Company or any of its Subsidiaries is obligated
      to
      register the sale of any of their securities under the 1933 Act (except the
      as
      otherwise set forth in the Transaction Documents), (v) there are no outstanding
      securities of the Company or any of its Subsidiaries which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its Subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      Subsidiaries, (vi) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities as described in this Subscription Agreement, (vii) the Company
      does not have any stock appreciation rights or "phantom stock" plans or
      agreements or any similar plan or agreement, and (viii) there is no dispute
      as
      to the class of any shares of the Company's capital stock. The Company has
      furnished to the Holder, or the Holder has had access through EDGAR to, true
      and
      correct copies of the Company's Articles of Incorporation, as in effect on
      the
      date hereof (the “ARTICLES OF INCORPORATION”), and the Company's By-laws, as in
      effect on the date hereof (the “BY-LAWS ‘).

    

    
      
         

      

      
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    d. Issuance
      of Debentures. A
      sufficient number of Debentures issuable pursuant to this Subscription
      Agreement, but in no event a number equal to more than 4.99% of the shares
      of
      Common Stock outstanding as of the date hereof (if, and only if, the Company
      becomes listed on Nasdaq or the American Stock Exchange), has been duly
      authorized and reserved for issuance pursuant to this Subscription Agreement.
      Upon issuance in accordance with this Subscription Agreement, the Debentures
      will be validly issued, fully paid for and nonassessable and free from all
      taxes, liens and charges with respect to the issue thereof. In the event the
      Company cannot register a sufficient number of shares of Common Stock, due
      to
      the remaining number of authorized shares of Common Stock being insufficient,
      the Company will use its best efforts to register the maximum number of shares
      it can based on the remaining balance of authorized shares and will use its
      best
      efforts to increase the number of its authorized shares as soon as reasonably
      practicable.

    

    e.
       No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby will not (i) result in a violation of the Certificate of Incorporation,
      any Certificate of Designations, Preferences and Rights of any outstanding
      series of preferred stock of the Company or the By-laws or (ii) conflict with,
      or constitute a material default (or an event which with notice or lapse of
      time
      or both would become a material default) under, or give to others any rights
      of
      termination, amendment, acceleration or cancellation of, any material agreement,
      contract, indenture mortgage, indebtedness or instrument to which the Company
      or
      any of its Subsidiaries is a party, or result in a violation of any law, rule,
      regulation, order, judgment or decree, including United States federal and
      state
      securities laws and regulations and the rules and regulations of the principal
      securities exchange or trading market on which the Common Stock is traded or
      listed (the “Principal Market”), applicable to the Company or any of its
      Subsidiaries or by which any property or asset of the Company or any of its
      Subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither
      the Company nor its Subsidiaries is in violation of any term of, or in default
      under, the Articles of Incorporation, any Certificate of Designations,
      Preferences and Rights of any outstanding series of preferred stock of the
      Company or the By-laws or their organizational charter or by-laws, respectively,
      or any contract, agreement, mortgage, indebtedness, indenture, instrument,
      judgment, decree or order or any statute, rule or regulation applicable to
      the
      Company or its Subsidiaries, except for possible conflicts, defaults,
      terminations, amendments, accelerations, cancellations and violations that
      would
      not individually or in the aggregate have a Material Adverse Effect. The
      business of the Company and its Subsidiaries is not being conducted, and shall
      not be conducted, in violation of any law, statute, ordinance, rule, order
      or
      regulation of any governmental authority or agency, regulatory or
      self-regulatory agency, or court, except for possible violations the sanctions
      for which either individually or in the aggregate would not have a Material
      Adverse Effect. Except as specifically contemplated by this Subscription
      Agreement and as required under the 1933 Act, the Company is not required to
      obtain any consent, authorization, permit or order of, or make any filing or
      registration (except the filing of a registration statement) with, any court,
      governmental authority or agency, regulatory or self-regulatory agency or other
      third party in order for it to execute, deliver or perform any of its
      obligations under, or contemplated by, the Transaction Documents in accordance
      with the terms hereof or thereof. All consents, authorizations, permits, orders,
      filings and registrations which the Company is required to obtain pursuant
      to
      the preceding sentence have been obtained or effected on or prior to the date
      hereof and are in full force and effect as of the date hereof. Except as
      disclosed in Schedule 3(e), the Company and its Subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing. The
      Company is not, and will not be, in violation of the listing requirements of
      the
      Principal Market as in effect on the date hereof and on each of the Closing
      Dates and is not aware of any facts which would reasonably lead to delisting
      of
      the Common Stock by the Principal Market in the foreseeable future.

     

    
      
         

      

      
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    f.
       SEC
      Documents; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it with the Securities and Exchange Commission (“SEC”)
      pursuant to the reporting requirements of the Securities and Exchange Act of
      1934 (“1934 Act”) (all of the foregoing filed since the date hereof and all
      exhibits included therein and financial statements and schedules thereto and
      documents incorporated by reference therein being hereinafter referred to as
      the
      "SEC DOCUMENTS"). The Company has delivered to the Holder or its
      representatives, or they have had access through EDGAR, to true and complete
      copies of the SEC Documents. As of their respective dates, the SEC Documents
      complied in all material respects with the requirements of the 1934 Act and
      the
      rules and regulations of the SEC promulgated thereunder applicable to the SEC
      Documents, and none of the SEC Documents, at the time they were filed with
      the
      SEC, contained any untrue statement of a material fact or omitted to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, and are
      not
      misleading. As of their respective dates, the financial statements of the
      Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). No other written information provided by or on behalf of the
      Company to the Holder which is not included in the SEC Documents, including,
      without limitation, information referred to in Section 3(d) of this Subscription
      Agreement, contains any untrue statement of a material fact or omits to state
      any material fact necessary to make the statements therein, in the light of
      the
      circumstance under which they are or were made, and are not
      misleading.

     

    
      
         

      

      
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    g.
       Absence
      of Certain Changes.
      Except
      as disclosed in Schedule 3(g) or the SEC Documents filed at least thirty (30)
      days prior to the date hereof, there has been no change or development in the
      business, properties, assets, operations, financial condition, results of
      operations or prospects of the Company or its Subsidiaries which has had or
      reasonably could have a Material Adverse Effect. The Company has not taken
      any
      steps, and does not currently expect to take any steps, to seek protection
      pursuant to any bankruptcy law nor does the Company or its Subsidiaries have
      any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings.

    

    h.
       Absence
      of Litigation.
      Except
      as set forth in the Company’s SEC filings, there is no action, suit, proceeding,
      inquiry or investigation before or by any court, public board, government
      agency, self-regulatory organization or body pending or, to the knowledge of
      the
      executive officers of Company or any of its Subsidiaries, threatened against
      or
      affecting the Company, the Common Stock or any of the Company's Subsidiaries
      or
      any of the Company's or the Company's Subsidiaries' officers or directors in
      their capacities as such, in which an adverse decision could have a Material
      Adverse Effect.

    

    i.
       Acknowledgment
      Regarding the Purchase of Debentures.
      The
      Company acknowledges and agrees that the Holder is acting solely in the capacity
      of an arm's length investor with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby. The Company further acknowledges
      that the Holder is not acting as a financial advisor or fiduciary of the Company
      (or in any similar capacity) with respect to the Transaction Documents and
      the
      transactions contemplated hereby and thereby and any advice given by the Holder
      or any of its respective representatives or agents in connection with the
      Transaction Documents and the transactions contemplated hereby and thereby
      is
      merely incidental to the Holder's purchase of the Debentures. The Company
      further represents to the Holder that the Company's decision to enter into
      the
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company and its representatives.

    

    j. Intentionally
      omitted.

    

    k.
       Employee
      Relations.
      Neither
      the Company nor any of its Subsidiaries is involved in any union labor dispute
      nor, to the knowledge of the Company or any of its Subsidiaries, is any such
      dispute threatened. Neither the Company nor any of its Subsidiaries is a party
      to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that relations with their employees are good. No executive officer
      (as
      defined in Rule 501(f) of the 1933 Act) has notified the Company that such
      officer intends to leave the Company's employ or otherwise terminate such
      officer's employment with the Company.

     

    
      
         

      

      
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    l.
       Intellectual
      Property Rights.
      All
      patents, patent applications, trademark registrations and applications for
      trademark registration held by the Company are owned free and clear of all
      mortgages, liens, charges or encumbrances whatsoever. No licenses have been
      granted with respect to these items and the Company and its Subsidiaries do
      not
      have any knowledge of any infringement by the Company or its Subsidiaries of
      trademark, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade secret
      or other similar rights of others, and, except as set forth on Schedule 3(l),
      there is no claim, action or proceeding being made or brought against, or to
      the
      Company's knowledge, being threatened against, the Company or its Subsidiaries
      regarding trademark, trade name, patents, patent rights, invention, copyright,
      license, service names, service marks, service mark registrations, trade secret
      or other infringement; and the Company and its Subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing. The
      Company and its Subsidiaries have taken reasonable security measures to protect
      the secrecy, confidentiality and value of all of their intellectual
      property.

    

    m.
       Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all applicable
      foreign, federal, state and local laws and regulations relating to the
      protection of human health and safety, the environment or hazardous or toxic
      substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective businesses, and (iii)
      are in compliance with all terms and conditions of any such permit, license
      or
      approval where, in each of the three foregoing cases, the failure to so comply
      would have, individually or in the aggregate, a Material Adverse
      Effect.

    

    n.
       Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule 3(n) or such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company or any of its Subsidiaries. Any real property
      and
      facilities held under lease by the Company or any of its Subsidiaries are held
      by them under valid, subsisting and enforceable leases with such exceptions
      as
      are not material and do not interfere with the use made and proposed to be
      made
      of such property and buildings by the Company and its Subsidiaries.

     

    
      
         

      

      
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    o.
       Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not have a Material
      Adverse Effect.

    

    p.
       Regulatory
      Permits.
      The
      Company and its Subsidiaries have in full force and effect all certificates,
      approvals, authorizations and permits from the appropriate federal, state,
      local
      or foreign regulatory authorities and comparable foreign regulatory agencies,
      necessary to own, lease or operate their respective properties and assets and
      conduct their respective businesses, and neither the Company nor any such
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, approval, authorization or permit, except
      for such certificates, approvals, authorizations or permits which if not
      obtained, or such revocations or modifications which, would not have a Material
      Adverse Effect.

    

    q.
       Internal
      Accounting Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management's general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management's general or specific authorization, and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

    

    r.
       No
      Materially Adverse Contracts.
      Neither
      the Company nor any of its Subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company's officers has or is expected in the future
      to have a Material Adverse Effect. Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company's officers has or is expected to have a Material Adverse
      Effect.

    

    s.
       Tax
      Status.
      Except
      as set forth in Schedule 3(s), the Company has filed all federal and state
      income tax returns, as required and the Company and each of its Subsidiaries
      has
      made or filed all United States federal and state income and all other tax
      returns, reports and declarations required by any jurisdiction to which it
      is
      subject. The Company represents that there are no unpaid taxes in any material
      amount claimed to be due by the taxing authority of any jurisdiction, and the
      officers of the Company know of no basis for any such claim.

     

    
      
         

      

      
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    t.
       Certain
      Transactions.
      Except
      as set forth in the SEC Documents filed at least ten days prior to the date
      hereof and except for arm's length transactions pursuant to which the Company
      makes payments in the ordinary course of business upon terms no less favorable
      than the Company could obtain from third parties and other than the grant of
      stock options disclosed on Schedule 3(c), none of the officers, directors,
      or
      employees of the Company is presently a party to any transaction with the
      Company or any of its Subsidiaries (other than for services as employees,
      officers and directors), including any contract, agreement or other arrangement
      providing for the furnishing of services to or by, providing for rental of
      real
      or personal property to or from, or otherwise requiring payments to or from
      any
      officer, director or such employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any officer, director,
      or any such employee has a substantial interest or is an officer, director,
      trustee or partner.

    

    u.
       Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of shares of Common Stock
      issuable upon purchases pursuant to this Subscription Agreement will increase
      in
      certain circumstances including, but not necessarily limited to, the
      circumstance wherein the trading price of the Common Stock declines following
      the effective date of the registration statement covering the Common Stock
      underlying the Debentures (the “Effective Date”). The Company’s executive
      officers and directors have studied and fully understand the nature of the
      transactions contemplated by this Subscription Agreement and recognize that
      they
      have a potential dilutive effect. The board of directors of the Company has
      concluded, in its good faith business judgment that such issuance is in the
      best
      interests of the Company. The Company specifically acknowledges that, subject
      to
      such limitations as are expressly set forth in the Transaction Documents, its
      obligation to issue shares of Common Stock upon purchases pursuant to this
      Subscription Agreement is absolute and unconditional regardless of the dilutive
      effect that such issuance may have on the ownership interests of other
      shareholders of the Company.

    

    v.
      Additional
      Financings.
      The
      Company shall not, directly nor indirectly, without the prior written consent
      of
      the Holder, offer, sell, grant any option to purchase, or otherwise dispose
      of
      (or announce any offer, sale, grant or any option to purchase or other
      disposition) any of its Common Stock or securities convertible into Common
      Stock, or file any registration statement, including those on Form S-8 for
      any
      securities (a "SUBSEQUENT FINANCING"), in either case ending on the earlier
      to
      occur of (i) 360 (three hundred and sixty) days after the effective date of
      the
      registration statement covering resale of the shares of Common Stock underlying
      the Debentures (the “Effective Date”) or (ii) the date on which the full Face
      Amount, accrued interest and penalties, if any, on the Debentures have been
      paid
      (either being the "Lock Up Period"), as set forth in the Debenture
      Agreement.

    

    During
      the Lock Up Period, the Holder shall retain a first right of refusal for any
      additional financings. The Company must submit to the Holder a duly authorized
      term sheet of the financing and the Holder may elect, in writing within five
      (5)
      business days, to exercise its right to finance the Company upon the same terms
      and conditions, as set forth in the Debenture Agreement. In the event the Holder
      does not elect to complete such financing within such period, the Company may
      proceed with the proposed third-party financing on the same terms and conditions
      as contained in the notice to Holder. 

     

    
      
         

      

      
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    If
      at any
      time while the Debenture or Warrants are outstanding, if the Company issues
      or
      agrees 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 prior to the execution of this Agreement) to any person or entity
      at
      a price per share or conversion or exercise price per share less than the
      Conversion Price, or less than the Warrant exercise price with respect to the
      Warrant Shares, with or without the consent of the Holder, the Conversion Price
      and Warrant Exercise Price shall automatically be reduced to a price twenty
      percent (20%) lower than the price of the new issuance. Additionally, if the
      Company shall issue or agree to issue any of the aforementioned services to
      any
      person, firm or corporation at terms deemed by the Holder to be more favorable
      to the other person or entity than the terms or conditions of this Offering,
      then the Holder is granted the right, at its election, to modify any term of
      this Offering to match any more favorable term provided by the Company to such
      person or entity. The rights of the Holder in this Section (v) are in addition
      to any other right the Holder has pursuant to this Subscription Agreement and
      the Transaction Documents.

    

    In
      the
      event the exercise of the rights described in the preceding paragraph
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 the Holder calculated in the
      manner described in Section 3 (d) of this Agreement, then the issuance 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 the manner described in Section 3 (d) of this Agreement.
      The
      determination of when such common stock may be issued shall be made by the
      Holder.

    

    w.
      Sarbanes-Oxley
      Compliance. The
      Company hereby acknowledges that they are current with the requirement of
      Sarbanes-Oxley Act of 2002 (“Sarbox”), and will remain compliant with Sarbox and
      its rules and regulations for reporting requirements in the time frame required
      by Sarbox, and any updates to deadlines imposed by Sarbox.

    

    x.
      Code
      of Ethics.
      The
      Company has adopted a Code of Ethics and has filed the Code with the
      SEC.

    

    y.
      No
      Disagreements with Accountants, Auditors and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants, auditors
      and
      lawyers formerly or presently used by the Company, including but not limited
      to
      disputes or conflicts over payment owed to such accountants, auditors or
      lawyers.

    

    z.
      Investment
      Company.
      Neither
      the Company nor any Affiliate is an "investment company" within the meaning
      of
      the Investment Company Act of 1940.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    aa.
      Company
      Predecessor. All
      representations made by or relating to the Company of a historical nature and
      all undertaking described herein shall relate and refer to the Company, its
      predecessors, and the Subsidiaries. 

    

    bb.
      Option
      Plan Restrictions.
      The
      only officer, director, employee and consultant stock option or stock incentive
      plan currently in effect or contemplated by the Company has been submitted
      to
      the Holder or is described in past filings with the SEC. No other plan will
      be
      adopted nor may any options or equity not included in such plan be issued until
      after the Debenture is paid in full.

    

    4. COVENANTS
      OF THE COMPANY

    

    a.
       Best
      Efforts.
      The
      Company shall use its best efforts timely to satisfy each of the conditions
      to
      be satisfied by it as provided in this Subscription Agreement.

     

    b.
       Blue
      Sky.
      The
      Company shall, at its sole cost and expense, make all filings and reports
      relating to the offer and sale of the Debentures and the Common Stock underlying
      the Debentures as required under the applicable securities or “Blue Sky” laws of
      such states of the United States as specified by the Holder or as required
      by
      law.

    

    c.
       Reporting
      Status.
      Until
      the earlier of (i) the date that the Holder may sell all of the Common Stock
      underlying the Debentures acquired pursuant to this Subscription Agreement
      without restriction pursuant to Rule 144(k) promulgated under the 1933 Act
      (or
      successor thereto), or (ii) the date on which the Holder shall have sold all
      the
      Common Stock underlying the Debentures, the Company shall file all reports
      required to be filed with the SEC pursuant to the 1934 Act, and the Company
      shall not terminate its status as a reporting company under the 1934
      Act.

    

    d. Use
      of
      Proceeds.
       The
      Company shall use the entire proceeds from this Debenture exclusively to further
      the growth and interest of the Company. Any other use of the funds contemplated
      herein, shall be considered a breach of contract and an event of
      Default.

    

    e. Conditions
      to Closing. The
      Company shall sign and be in compliance with the Transaction Documents with
      the
      Holder. 

    

    f.
       Financial
      Information.
      The
      Company agrees to make available to the Holder via EDGAR or other electronic
      means the following: (i) within five (5) business days after the filing thereof
      with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
      on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements
      or amendments filed pursuant to the 1933 Act; (ii) on the same day as the
      release thereof, facsimile copies of all press releases issued by the Company
      or
      any of its Subsidiaries, (iii) copies of any notices and other information
      made
      available or given to the shareholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      shareholders and (iv) within two (2) calendar days of filing or delivery
      thereof, copies of all documents filed with, and all correspondence sent to,
      the
      Principal Market, any securities exchange or market, or the National Association
      of Securities Dealers, Inc. 

     

    
      
         

      

      
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    g. Reservation
      of Common Stock.
      Subject
      to the following sentence, the Company shall take all action necessary to at
      all
      times have authorized, and reserved for the purpose of issuance, a sufficient
      number of shares of Common Stock to provide for the issuance of the Common
      Stock
      underlying the Debentures. In the event that the Company determines that it
      does
      not have a sufficient number of authorized shares of Common Stock to reserve
      and
      keep available for issuance, the Company shall use its best efforts to increase
      the number of authorized shares of Common Stock by seeking shareholder approval
      for the authorization of such additional shares. The Holder shall have the
      right
      to reasonably determine the amount of shares to be re-registered such as are
      necessary to satisfy the terms of the Agreement. 

    

    h.
       Listing.
      The
      Company shall promptly secure the listing of all of the Common Stock underlying
      the Debentures upon the Principal Market and each other national securities
      exchange and automated quotation system, if any, upon which shares of Common
      Stock are then listed (subject to official notice of issuance) and shall
      maintain, such listing. The Company shall maintain the Common Stock's
      authorization for quotation on the Principal Market, unless the Holder and
      the
      Company agree otherwise. Neither the Company nor any of its Subsidiaries shall
      take any action which would be reasonably expected to result in the delisting
      or
      suspension of the Common Stock on the Principal Market (excluding suspensions
      of
      not more than one trading day resulting from business announcements by the
      Company). The Company shall promptly provide to the Holder copies of any notices
      it receives from the Principal Market regarding the continued eligibility of
      the
      Common Stock for listing on such automated quotation system or securities
      exchange. The Company shall pay all fees and expenses in connection with
      satisfying its obligations under this Section.

     

    i. Transactions
      With Affiliates.
      During
      the Lock-Up Period, set forth in Section 3 (v), the Company shall not, and
      shall
      cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
      or permit any Subsidiary to enter into, amend, modify or supplement, any
      agreement, transaction, commitment or arrangement with any of its or any
      Subsidiary's officers, directors, persons who were officers or directors at
      any
      time during the previous two years, shareholders who beneficially own five
      percent (5%) or more of the Common Stock, or affiliates or with any individual
      related by blood, marriage or adoption to any such individual or with any entity
      in which any such entity or individual owns a five percent (5%) or more
      beneficial interest (each a “RELATED PARTY”) during the Lock Up Period; except
      for (i) customary employment arrangements and benefit programs on reasonable
      terms (including changes currently under discussion with the Company's Board
      of
      Directors concerning the compensation, to be payable in stock, of the Chairman
      of the Board), (ii) any agreement, transaction, commitment or arrangement on
      an
      arms-length basis on terms no less favorable than terms which would have been
      obtainable from a person other than such Related Party, or (iii) any agreement,
      transaction, commitment or arrangement which is approved by a majority of the
      disinterested directors of the Company.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    During
      the Lock-Up Period, the management and Affiliates will not transfer, pledge,
      hypothecate, encumber, sell or otherwise dispose of any of the Common Stock
      owned in their name, a trust, corporation, LLC or those individuals or entities
      that are considered within an "arm's length" transaction (as defined by the
      SEC). The Company shall also agree to include Jessup and Lamont in all
      restrictions from selling the Common Stock during the Lock Up Period as outlined
      in this Section.

    

    For
      purposes hereof, any director who is also an officer of the Company or any
      Subsidiary of the Company shall not be a disinterested director with respect
      to
      any such agreement, transaction, commitment or arrangement. “AFFILIATE” for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i) has a five percent (5%) or more equity
      interest in that person or entity, (ii) has five percent (5%) or more common
      ownership with that person or entity, (iii) controls that person or entity,
      or
      (iv) shares common control with that person or entity. “CONTROL” or "CONTROLS"
      for purposes hereof means that a person or entity has the power, direct or
      indirect, to conduct or govern the policies of another person or
      entity.

    

    j.
       Corporate
      Existence.
      The
      Company shall use its commercially reasonable best efforts to preserve and
      continue the corporate existence of the Company.

    

    k. Notice
      of Certain Events Affecting Registration.
      The
      Company shall promptly notify Holder upon the occurrence of any of the following
      events in respect of a registration statement or related prospectus covering
      the
      Common Stock underlying the Debentures: (i) receipt of any request for
      additional information by the SEC or any other federal or state governmental
      authority during the period of effectiveness of the registration statement
      for
      amendments or supplements to the registration statement or related prospectus;
      (ii) the issuance by the SEC or any other federal or state governmental
      authority of any stop order suspending the effectiveness of any registration
      statement or the initiation of any proceedings for that purpose; (iii) receipt
      of any notification with respect to the suspension of the qualification or
      exemption from qualification of any of the Common Stock underlying the
      Debentures for sale in any jurisdiction or the initiation or threatening of
      any
      proceeding for such purpose; (iv) the happening of any event that makes any
      statement made in such registration statement or related prospectus or any
      document incorporated or deemed to be incorporated therein by reference untrue
      in any material respect or that requires the making of any changes in the
      registration statement, related prospectus or documents so that, in the case
      of
      a registration statement, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein not misleading, and that in the case
      of
      the related prospectus, it will not contain any untrue statement of a material
      fact or omit to state any material fact required to be stated therein or
      necessary to make the statements therein, in the light of the circumstances
      under which they were made, not misleading; and (v) the Company's reasonable
      determination that a post-effective amendment to the registration statement
      would be appropriate, and the Company shall promptly make available to the
      Holder any such supplement or amendment to the related prospectus. 

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    l.
      Indemnification.
      In
      consideration of the Holder’s execution and delivery of this Agreement and the
      Debenture Registration Rights Agreement and acquiring the Debentures hereunder
      and in addition to all of the Company's other obligations under the Transaction
      Documents, the Company shall defend, protect, indemnify and hold harmless the
      Holder and all of its shareholders, officers, directors, employees and direct
      or
      indirect investors and any of the foregoing person's agents or other
      representatives (including, without limitation, those retained in connection
      with the transactions contemplated by this Agreement) (collectively, the
      "Indemnitees") from and against any and all actions, causes of action, suits,
      claims, losses, costs, penalties, fees, liabilities and damages, and expenses
      in
      connection therewith (irrespective of whether any such Indemnitee is a party
      to
      the action for which indemnification hereunder is sought), and including
      reasonable attorneys' fees and disbursements (the “Indemnified Liabilities”),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (i)
      any misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (ii) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby,
      (iii) any cause of action, suit or claim brought or made against such Indemnitee
      by a third party and arising out of or resulting from the execution, delivery,
      performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (iv) any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Debentures, (v) the status
      of the Holder as an investor in the Company, except, in the case of any of
      such
      clauses, insofar as any such Indemnified Liability was attributable to gross
      negligence, willful misconduct or any illegal activity on the part of Holder
      and, in the case of clause, (v) only, insofar as any such Indemnified Liability
      was attributable to an untrue statement, alleged untrue statement, omission
      or
      alleged omission made in reliance upon and in conformity with written
      information furnished to the Company by the Holder which is specifically
      intended by the Holder for use in the preparation of any Registration Statement,
      preliminary prospectus or prospectus. To the extent that the foregoing
      undertaking by the Company may be unenforceable for any reason, the Company
      shall make the maximum contribution to the payment and satisfaction of each
      of
      the Indemnified Liabilities which is permissible under applicable law. The
      indemnity provisions contained herein shall be in addition to any cause of
      action or similar rights the Holder may have, and any liabilities to which
      the
      Holder may be subject. Notwithstanding the foregoing, the Company shall have
      no
      indemnification responsibility in the event Holder fails to timely notify the
      Company of a claim or potential claim for which indemnification is sought,
      but
      only to the extent the Company is prejudiced thereby. The Company shall have
      the
      right to control the defense of any such claim and the Holder shall not consent
      to any settlement of any such claim without the prior written consent of the
      Company (which shall not be unreasonably withheld or delayed). The Holder shall
      provide indemnification comparable in scope and coverage to the Company and
      corresponding related persons in respect of any Indemnified Liability if and
      to
      the extent attributable to gross negligence, willful misconduct or any illegal
      activity on the part of the Holder, and shall be obligated to reimburse the
      Company and such persons to the same extent as the Company’s reimbursement
      obligations under Section 4(m) below. 

     

    
      
         

      

      
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    m. Reimbursement.
      If (i)
      the Holder, other than by reason of its gross negligence or willful misconduct,
      becomes involved in any capacity in any action, proceeding or investigation
      brought by any shareholder of the Company, in connection with or as a result
      of
      the consummation of the transactions contemplated by the Transaction Documents,
      or if the Holder is impleaded in any such action, proceeding or investigation
      by
      any person, or (ii) the Holder, other than by reason of its gross negligence
      or
      willful misconduct or by reason of its trading of the Common Stock in a manner
      that is illegal under the federal securities laws, becomes involved in any
      capacity in any action, proceeding or investigation brought by the SEC against
      or involving the Company or in connection with or as a result of the
      consummation of the transactions contemplated by the Transaction Documents,
      or
      if the Holder is impleaded in any such action, proceeding or investigation
      by
      any person, then in any such case, the Company will reimburse the Holder for
      its
      reasonable legal and other expenses (including the cost of any investigation
      and
      preparation) incurred in connection therewith, as such expenses are incurred.
      In
      addition, other than with respect to any matter in which the Holder is a named
      party, the Company will pay to the Holder the charges, as reasonably determined
      by the Holder, for the time of any officers or employees of the Holder devoted
      to appearing and preparing to appear as witnesses, assisting in preparation
      for
      hearings, trials or pretrial matters, or otherwise with respect to inquiries,
      hearing, trials, and other proceedings relating to the subject matter of this
      Subscription Agreement. The reimbursement obligations of the Company under
      this
      section shall be in addition to any liability which the Company may otherwise
      have, shall extend upon the same terms and conditions to any affiliates of
      Holder that are actually named in such action, proceeding or investigation,
      and
      partners, directors, agents, employees, attorneys, accountants, auditors and
      controlling persons (if any), as the case may be, of Holder and any such
      affiliate, and shall be binding upon and inure to the benefit of any successors
      of the Company, Holder and any such affiliate and any such person.

    

    n.
      Transfer
      Agent.
      The
      Company covenants and agrees that, in the event that the Company's agency
      relationship with the transfer agent should be terminated for any reason prior
      to the Maturity Date (as defined in the Debenture Agreement), the Company shall
      immediately appoint a new transfer agent.

     

    5. OPINION
      LETTER/BOARD RESOLUTION

    

    Prior
      to
      or on the Closing Date the Company shall deliver to the Holder an opinion letter
      signed by counsel for the Company in the form attached hereto as Exhibit D.
      

    

    If
      so
      requested by the Holder, the Company shall instruct counsel to write a 144
      opinion letter provided the necessary paperwork has been submitted and the
      Exemption applies (as defined in the Debenture Agreement). If the Company’s
      counsel fails to provide a Rule 144 opinion letter in a timely manner, then
      the
      Company shall: (a) pay the Investor’s counsel to write said Rule 144 opinion
      letter; and (b) instruct the designated transfer agent to accept and rely upon
      the Rule 144 Opinion letter. Also, prior to or on the Closing Date, the Company
      shall deliver to the Holder a signed Board Resolution authorizing this Offering,
      which shall be attached hereto as Exhibit E.

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    6. DELIVERY
      INSTRUCTIONS; FEES  

    

    The
      Debentures being purchased hereunder shall be delivered to the Holder on the
      Closing Date at which time funds will be wired to the Company and the Debentures
      will be delivered to the Holder, per the Holder’s written
      instructions.

     

    7. UNDERSTANDINGS.

    

    The
      Holder understands, acknowledges and agrees as follows:

    

    a. No
      U.S.
      federal or state agency or any agency of any other jurisdiction has made any
      finding or determination as to the fairness of the terms of the Offering for
      investment nor any recommendation or endorsement of the Debentures or the
      Company.

    

    b. The
      representations, warranties and agreements of the Holder and the Company
      contained herein shall be true and correct in all material respects on and
      as of
      the date of the sale of the Debentures as if made on and as of such date and
      shall survive the execution and delivery of this Subscription Agreement and
      the
      purchase of the Debentures.

    

    c. In
      making
      an investment decision, the Holder is relying on its own examination of the
      Company and the terms of the Offering, including the merits and risks involved.
      The shares have not been recommended by any federal or state securities
      commission or regulatory authority. Furthermore, the foregoing authorities
      have
      not confirmed the accuracy or determined the adequacy of this document. Any
      representation to the contrary is a criminal offense.

    

    d. The
      Offering is intended to be exempt from registration by virtue of Section 4(2)
      of
      the 1933 Act and the provisions of Regulation D thereunder, which is in part
      dependent upon the truth, completeness and accuracy of the statements made
      by
      the undersigned herein and in the Questionnaire.

    

    e. It
      is
      understood that in order not to jeopardize the Offering’s exempt status under
      Section 4(2) of the 1933 Act and Regulation D, the Holder may, at a minimum,
      be
      required to fulfill the investor suitability requirements
      thereunder.

    

    f. The
      shares may not be resold except as permitted under the 1933 Securities Act
      and
      applicable state securities laws, pursuant to registration or exemption
      therefrom. Holder should be aware that they will be required to bear the
      financial risks of this investment for an indefinite period of
      time.

    

    
      
         

      

      
        21

        
          

        

      

      
         

      

       

    

    g. The
      Holder agrees not to short the Company's common shares during the Lock-Up
      Period.

    

    
      
        8.
          DISPUTES
          SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS
          LAW.

      

    

    

    a.
       All
      disputes arising under this agreement shall be governed by and interpreted
      in
      accordance with the laws of the Commonwealth of Massachusetts, without regard
      to
      principles of conflict of laws. The parties to this agreement will submit all
      disputes arising under this agreement to arbitration in Boston, Massachusetts
      before a single arbitrator of the American Arbitration Association (“AAA”). The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this agreement will challenge the jurisdiction or venue provisions as
      provided in this section. Nothing in Section 8 shall limit the Holder's right
      to
      seek and obtain an injunction for violation of the terms and conditions of
      this
      Agreement. Any injunction obtained shall remain in full force and effect until
      the arbitrator, as set forth in section 8, fully adjudicates the
      dispute.

    

    9. MISCELLANEOUS.

    

    a. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Subscription Agreement must be in writing and
      will
      be deemed to have been delivered (i) upon receipt, when delivered personally;
      (ii) upon receipt, when sent by facsimile (provided a confirmation of
      transmission is mechanically or electronically generated and kept on file by
      the
      sending party); or (iii) one (1) day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

    

    If
      to the
      Company:

     

    Colorado
      Stark

    Enigma
      Software Group, Inc.

    2
      Stamford Landing, Suite 100

    Stamford,
      CT 06902 

    Telephone:
      (888) 360-0646 

    Facsimile:
      (203) 621-3334

    

    If
      to the
      Holder:

    

    At
      the
      address listed in the Questionnaire.

    

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

       

    

    a. All
      pronouns and any variations thereof used herein shall be deemed to refer to
      the
      masculine, feminine, impersonal, singular or plural, as the identity of the
      person or persons may require.

    

    b. Neither
      this Subscription Agreement nor any provision hereof shall be waived, modified,
      changed, discharged, terminated, revoked or canceled, except by an instrument
      in
      writing signed by the party effecting the same against whom any change,
      discharge or termination is sought.

    

    c. Notices
      required or permitted to be given hereunder shall be in writing and shall be
      deemed to be sufficiently given when personally delivered or sent by facsimile
      transmission: (i) if to the Company, at it’s executive offices, or (ii) if to
      the Holder, at the address for correspondence set forth in the Questionnaire,
      or
      at such other address as may have been specified by written notice given in
      accordance with this paragraph.

    

    d. This
      Subscription Agreement shall be enforced, governed and construed in all respects
      in accordance with the laws of the Commonwealth of Massachusetts, as such laws
      are applied by Massachusetts courts to agreements entered into, and to be
      performed in, Massachusetts by and between residents of Massachusetts, and
      shall
      be binding upon the undersigned, the undersigned's heirs, estate and legal
      representatives and shall inure to the benefit of the Company and its
      successors. If any provision of this Subscription Agreement is invalid or
      unenforceable under any applicable statue or rule of law, then such provisions
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any
      provision hereof that may prove invalid or unenforceable under any law shall
      not
      affect the validity or enforceability of any other provision
      hereof.

    

    e. This
      Agreement shall not be assignable.

    

    f. This
      Subscription Agreement, together with Exhibits A, B, C, D, and E attached hereto
      and made a part hereof, constitute 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 hereto.

    

    g. This
      Subscription Agreement may be executed in two or more counterparts, all of
      which
      taken together shall constitute one instrument. Execution and delivery of this
      Subscription Agreement by exchange of facsimile copies bearing the facsimile
      signature of a party shall constitute a valid and binding execution and delivery
      of this Subscription Agreement by such party. Such facsimile copies shall
      constitute enforceable original documents.

    

    h.
       When
      in
      this Agreement or the Transaction Documents, reference is made to any party,
      such reference shall be deemed to include the successors, assigns, heirs and
      legal representatives of such party. No party hereto may transfer any rights
      under this Agreement or the Transaction Documents, unless the transferee agrees
      to be bound by, and comply with all of the terms and provision of this Agreement
      and the Transaction Documents, as if an original signatory hereto on the date
      hereof.

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    10.
      RESERVED

    

    11.
      WAIVER.

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waiver, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    12.
      No Oral Agreements

    

    This
      Written Agreement and the accompanying Transaction Documents represent the
      FINAL
      AGREEEMENTS between the Company and the Holder and may not be contradicted
      by
      evidence of prior, contemporaneous, or subsequent oral agreements of the
      parties; there are no unwritten oral agreements among the
      parties.

    

    

    [BALANCE
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    Enigma
      Software Group, Inc.

    SIGNATURE
      PAGE

    

    Your
      signature on this Signature Page evidences your agreement to be bound by the
      Questionnaire, Subscription Agreement, Warrant Agreement, Debenture Agreement
      and Debenture Registration Rights Agreement. 

    

    1. The
      undersigned hereby represents that (a) the information contained in the
      Questionnaire is complete and accurate and (b) the undersigned will notify
      the
      Company
      immediately if any material change in any of the information occurs prior to
      the
      acceptance of the undersigned’s subscription and will promptly send the
Company
      written
      confirmation of such change.

    

    2. The
      undersigned signatory hereby certifies that he/she has read and understands
      the
      Subscription Agreement and Questionnaire, and the representations made by the
      undersigned in the Subscription Agreement and Questionnaire are true and
      accurate.

     

    
      	
              $1,000,000

            	 	
              June
                28, 2006

            
	
              Amount
                of Debentures being
                purchased

            	 	
              Date

            

    

     

    
      	 	 	 
	 	Private
              Equities
              Fund, LP
	 	Dutchess Private Equities Fund II,
              LP
	 
 	 
 	 
 
	 	By:  	/s/ Douglas
              H. Leighton 
	 	
              
                

              
(Signature)
	 	 
	 	Name:
               Douglas
              H. Leighton 
	 	
              
                

              
(Please Type or Print)
	 	 
	 	Title: Managing Member,
	 	Dutchess Capital Management, LLC;
	 	General Partner to:
	 	Dutchess Private Equities Fund, LP  and
              Dutchess Private Equities Fund II, LP
	 	
              
                

              
(Please Type or
              Print)

    

    

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

    

     

    COMPANY
      ACCEPTANCE PAGE

    

    

    This
      Subscription Agreement accepted and agreed 

    to
      this
      28th day of June, 2006.

    

    

    By
      Enigma Software Group, Inc.
      and duly
      authorized to sign on behalf of the Company:

    

    
      	 	 	 	 
	By /s/ Colorado
              Stark	 	 	 
	
              
Name: Colorado
              Stark	 	 	
            
	Title:
 Executive
              Chairman	 	 	 

    

     

     

    
      
        	 	 	 	 
	By /s/
                Alvin Estevez	 	 	 
	
                
Name:
                Alvin Estevez 	 	 	
              
	Title:
                President
                and Chief Executive Officer 	 	 	 

      

       

       

    

    
      
        	 	 	 	 
	By /s/
                Richard M. Scarlata	 	 	 
	
                
Name:
                Richard M. Scarlata	 	 	
              
	Title:
 Chief
                Financial Officer	 	 	 

      

    

     

    
      
         

      

      
        26Exhibit
      10.2

    

    DEBENTURE
      REGISTRATION
      RIGHTS AGREEMENT

     

    DEBENTURE
      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 28, 2006,
      by
      and among Enigma Software Group, Inc., a company incorporated under the laws
      of
      state of Delaware (the “Company”), and Dutchess Private Equities Fund, LP &
Dutchess Private Equities Fund, II, LP (collectively, the
“Holder”).

    

    WHEREAS,
      upon the terms and subject to the conditions of the Subscription Agreement
      between the Holder and the Company (the “Subscription Agreement”), the Company
      has agreed to issue and sell to the Holder convertible debentures of the Company
      (the “Debentures”), which will be convertible into shares of common stock, $.001
      par value per share (the “Common Stock”), of the Company. 

    

    WHEREAS,
      to induce the Holder to execute and deliver the Subscription Agreement, Warrant
      Agreement, Security Agreement and the Debenture Agreement (collectively, the
      "Transaction Documents"), the Company has agreed to provide certain registration
      rights under the Securities Act of 1933, as amended, and the rules and
      regulations thereunder, or any similar successor statute (collectively, the
      “1933 Act”), and applicable state securities laws, with respect to the shares of
      Common Stock issuable pursuant to the Subscription Agreement, Warrant Agreement
      and Debenture Agreement.

    

    NOW,
      THEREFORE, in consideration of the foregoing promises and the mutual covenants
      contained hereinafter and other good and valuable consideration, the receipt
      and
      sufficiency of which are hereby acknowledged, the Company and the Holder hereby
      agree as follows:

     

    1.
      DEFINITIONS.

    

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

    

    a.
      “Closing Date” shall mean the date in the preamble of this
      Agreement.

    

    b.
      “Debenture” or "Debentures" mean the convertible debenture issued by the Company
      to the Holder.

    

    c.
      “Holder” shall mean Dutchess Private Equities Fund, LP & Dutchess Private
      Equities Fund, II, LP.

    

    d.
      "Effective Date" shall mean the date the United States Securities and Exchange
      Commission ("SEC") has declared the Registration Statement effective and the
      Company has filed all necessary amendments, including the letter to request
      accelerated effectiveness and the Prospectus covering the resale of
      Shares.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    e.
      "Face
      Amount" means one million dollars ($1,000,000) to be invested by the
      Holder.

    

    f.
      "Filing Date" shall mean the date the Registration Statement has been filed
      with
      the SEC (as determined by EDGAR) and no stop order of acceptance has been issued
      by the SEC.

    

    g.
      “Person” means a corporation, a limited liability company, an association, a
      partnership, an organization, a business, an individual, a governmental or
      political subdivision thereof or a governmental agency. 

    

    h.
      "Potential Material Event" means any of the following: (i) the possession by
      the
      Company of material information not ripe for disclosure in a Registration
      Statement, which shall be evidenced by determinations in good faith by the
      Board
      of Directors of the Company that disclosure of such information in the
      Registration Statement would be detrimental to the business and affairs of
      the
      Company, or (ii) any event or activity concerning the Company which would,
      based
      on a good faith determination by the Company's Board of Directors, adversely
      affect the Company or its shareholders if it were included in a Registration
      Statement or other filing.

    

    i.
      “Principal Market” means either The American Stock Exchange, Inc., The New York
      Stock Exchange, Inc., the Nasdaq National Market, The Nasdaq SmallCap Market
      or
      the National Association of Securities Dealer’s, Inc. OTC electronic bulletin
      board, whichever is the principal market on which the Common Stock is listed.
      

     

    j.
      “Register,” “Registered,” and “Registration” refer to a registration effected by
      preparing and filing with
      the
      SEC one
      or
      more Registration Statements in compliance with the 1933 Act and pursuant to
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous basis ("Rule 415"), and effectiveness
      of such Registration Statement(s).

    

    k.
      “Registrable Securities” means the shares of Common Stock issued or issuable (i)
      pursuant to the Subscription Agreement, and (ii) any shares of capital stock
      issued or issuable with respect to such shares of Common Stock and Warrants,
      if
      any, as a result of any stock split, stock dividend, recapitalization, exchange
      or similar event or otherwise, which have not been (x) included in a
      Registration Statement that has been declared effective by the SEC, (y) sold
      under circumstances meeting all of the applicable conditions of Rule 144,
      promulgated under the Securities Act of 1933 (or any similar provision then
      in
      force) under the 1933 Act or (z) saleable without limitation as to time, manner
      and volume pursuant to Rule 144(k) (or any similar provision then in force)
      under the 1933 Act. 

    

    l.
      “Registration Statement” means a registration statement of the Company filed
      under the 1933 Act.

    

    m.
      "$"
      and/or "Dollar" shall mean legal currency of the United States of
      America.

     

    All
      capitalized terms used in this Agreement and not otherwise defined herein shall
      have the same meaning ascribed to them in the Subscription Agreement or
      Debenture Agreement.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    For
      the
      purposes of determining dates for penalties or filing deadlines, as outlined
      in
      this Agreement, both parties agree that the date given by the SEC shall
      constitute the official date.

    

    2. REGISTRATION.

    

    a. Mandatory
      Registration. Within thirty (30) days of the Closing Date, the Company shall
      prepare and file with the SEC a Registration Statement or Registration
      Statements (as is necessary) on Form SB-2 (or, if such form is unavailable
      for
      such a registration, on such other form as is available for such a
      registration), covering the resale of all of the Registrable Securities, which
      Registration Statement(s) shall state that, in accordance with Rule 415
      promulgated under the 1933 Act, such Registration Statement also covers such
      indeterminate number of additional shares of Common Stock as may become issuable
      upon stock splits, stock dividends or similar transactions. The Company shall
      initially register for resale an amount of shares of Common Stock which would
      be
      issuable on the date preceding the filing of the Registration Statement based
      on
      the Conversion Price (as defined in the Debenture Agreement) of the Debentures
      on June 28, 2006 and the amount reasonably calculated that represents the number
      of shares issuable pursuant to the terms of the Offering, including those Shares
      underlying the Warrant Agreement. The total amount of Shares registered shall
      be
      fifty-eight million (58,000,000) shares. In the event the Company cannot
      register sufficient shares of Common Stock, due to the remaining number of
      authorized shares of Common Stock being insufficient, the Company will use
      its
      best efforts to register the maximum number of shares it can based on the
      remaining balance of authorized shares and will use its best efforts to increase
      the number of its authorized shares as soon as reasonably
      practicable.

    

    b. The
      Company shall use its best efforts to have the Registration Statement filed
      with
      the SEC within thirty (30) calendar days after the Closing Date ("Filing
      Deadline"). If the Registration Statement covering the Registrable Securities
      required to be filed by the Company pursuant to Section 2(a) hereof is not
      filed
      by the Filing Deadline, then the Company shall pay the Holder the sum of two
      percent (2%) per month of the Face Amount of the Debentures outstanding as
      liquidated damages, and not as a penalty. In addition, if the Company fails
      to
      initially file the Registration Statement by the Filing Deadline, and for each
      fifteen (15) day calendar period the Company fails to file the Registration
      Statement, the Conversion Price of the Debentures will decrease by ten percent
      (10%) of the original Conversion Price. For example, in the event that upon
      the
      thirty-first (31st) day following Closing, the Registration Statement has not
      been filed with the SEC, the Conversion Price shall decrease by seven-tenths
      cents (.007) per share. (.07 x 10%=.007). The Holder shall have the right to
      lower the Conversion Price as described herein, at the time of each
      conversion.

    

    Notwithstanding
      the foregoing, the amounts payable by the Company pursuant to this Section
      shall
      not be payable to the extent any delay in the filing of the Registration
      Statement occurs because of an act of, or a failure to act or to act timely
      by
      the Holder or is otherwise attributable to the Holder. 

    

    The
      liquidated damages set forth in this Section shall continue until the obligation
      is fulfilled and shall be paid, at the Holder's option in cash or common stock
      priced at the Conversion Price, or portion thereof, until the Registration
      Statement is filed. Failure of the Company to make payment within said three
      (3)
      business days shall be considered a breach of this Agreement, and the Holder
      may
      elect to pursue remedies as outlined in this Section.  

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

    The
      Company acknowledges that its failure to have the Registration Statement filed
      within said thirty (30) calendar day period will cause the Holder to suffer
      irreparable harm, and, that damages will be difficult to ascertain. Accordingly,
      the parties agree that it is appropriate to include in this Agreement a
      provision for liquidated damages. The parties acknowledge and agree that the
      liquidated damages provision set forth in this section represents the parties’
good faith effort to quantify such damages and, as such, agree that the form
      and
      amount of such liquidated damages are reasonable and will not constitute a
      penalty. The payment of liquidated damages shall not relieve the Company from
      its obligations to register the Common Stock and deliver the Common Stock
      pursuant to the terms of this Agreement, the Subscription Agreement and the
      Debenture.

    

    c. The
      Company shall use its best efforts and take all available steps to have the
      Registration Statement declared effective by the SEC within ninety (90) calendar
      days after the Closing Date. If the Registration Statement covering the
      Registrable Securities required to be filed by the Company pursuant to Section
      2(a) hereof has
      not
become
      effective within ninety (90) calendar days following the Closing Date, then
      the
      Company shall pay the Holder the sum of two percent (2%) of the Face Amount
      as
      liquidated damages, and not as a penalty, for each thirty (30) calendar day
      period, pro rata, compounded daily, following the ninety (90) calendar day
      period until the Registration Statement becomes effective. 

    

    If
      the
      Registration Statement covering the Registrable Securities required to be filed
      by the Company pursuant to Section 2(a) hereof has
      become
      effective, and, thereafter, the Holder’s right to sell is suspended, for any
      reason, for a period of five (5) business days, then the Company shall pay
      the
      Holder the sum of two percent (2%) of the Face Amount plus interest and
      penalties due to the Holder for the Registrable Securities pursuant to the
      Subscription Agreement for each ten (10) calendar day period, pro rata,
      compounded daily, following the suspension, until such suspension ceases.

    

    Notwithstanding
      the foregoing, the amounts payable by the Company pursuant to this Section
      shall
      not be payable to the extent any delay in the effectiveness of the Registration
      Statement or any suspension of the effectiveness occurs because of an act of,
      or
      a failure to act or to act timely by the Holder or is otherwise attributable
      to
      the Holder. 

    

    The
      damages set forth in this Section shall continue until the obligation is
      fulfilled and shall be paid, at the Holder's option in cash or common stock
      priced at the Conversion Price,, or portion thereof, until the Registration
      Statement is declared effective or such suspension is released. Failure of
      the
      Company to make payment within said three (3) business days shall be considered
      a default.  

    

    The
      Company acknowledges that its failure to have the Registration Statement
become effective
      within said ninety (90) calendar day period or to permit the suspension of
      the
      effectiveness of the Registration Statement, will cause the Holder to suffer
      irreparable harm and, that damages will be difficult to ascertain. Accordingly,
      the parties agree that it is appropriate to include in this Agreement a
      provision for liquidated damages. The parties acknowledge and agree that the
      liquidated damages provision set forth in this section represents the parties’
good faith effort to quantify such damages and, as such, agree that the form
      and
      amount of such liquidated damages are reasonable and will not constitute a
      penalty. The payment of liquidated damages shall not relieve the Company from
      its obligations to register the Common Stock and deliver the Common Stock
      pursuant to the terms of this Agreement, the Subscription Agreement and the
      Debenture.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

    d.
       The
      Company agrees to only register such securities as are necessary to meet its
      obligations to the Holder and agrees not to register additional securities
      without the Holder's prior written consent. Furthermore,
      the Company agrees that it will not file any other Registration Statement,
      including those on Form S-8, for other securities, until the Face Amount has
      been fully paid to the Holder, and any interest and penalties then due, unless
      it has the prior written approval from the Holder. Failure to obtain prior
      written approval from the Holder will cause the Holder to suffer damages that
      will be difficult to ascertain. Accordingly, the parties agree that it is
      appropriate to include a provision for liquidated damages and the Company agrees
      to pay the Holder the sum of two percent (2%) of the Face Amount as liquidated
      damages and not as a penalty for each thirty (30) calendar day period, pro
      rata,
      compounded daily, until the unauthorized Registration Statement is
      withdrawn.

     

    3. RELATED
      OBLIGATIONS.

    

    At
      such
      time as the Company is obligated to prepare and file a Registration Statement
      with the SEC pursuant to Section 2(a), the Company will use its best efforts
      to
      effect the registration of the Registrable Securities in accordance with the
      intended method of disposition thereof and, with respect thereto, the Company
      shall have the following obligations:

     

    a. The
      Company shall use its best efforts to cause such Registration Statement relating
      to the Registrable Securities to become effective within ninety (90) calendar
      days after the Closing Date and shall keep such Registration Statement effective
      pursuant to Rule 415 until the date on which (A) the Holder shall have sold
      all
      the Registrable Securities or the shares included therein otherwise cease to
      be
      Registrable Securities, and (B) the Holder has no right to convert the
      securities it owns into Common Stock under the Subscription Agreement, Debenture
      Agreement or Warrant Agreement, respectively (the "Registration Period"), which
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall, as of the date thereof, 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, in light of
      the
      circumstances in which they were made, not misleading. The Company shall respond
      to any and all SEC comments or correspondence, whether written or oral, direct
      or indirect, formal or informal ("Comments"), within seven (7) business days
      of
      receipt by the Company of such Comments. If the Company fails to respond within
      seven (7) business days of receipt of Comments, the Company shall pay to the
      Holder an amount equal to two percent (2%) per month, on a pro rata basis,
      compounded daily, of the Face Amount as liquidated damages and not as a penalty;
      provided
      that the
      seven (7) business day period provided herein shall be extended as may be
      required by delays caused by Holder's counsel pursuant to paragraph 3(g) below,
      and, provided
      further, that
      such
      seven (7) business day period shall be extended two (2) business days for
      responses to SEC staff accounting comments. The Company shall cause the
      Registration Statement relating to the Registrable Securities to become
      effective no later than two (2) business days after notice from the SEC that
      the
      Registration Statement has been cleared of all comments. Failure to do so will
      result in the Face Amount of the Debentures to be increased, as liquidated
      damages, by five percent (5%) per calendar day for each day that the Company
      does not request acceleration for effectiveness from the SEC. In
      addition, if the Company fails to accept effectiveness of the Registration
      Statement within two (2) business day of being cleared of all Comments, and
      for
      each one (1) business day the Company fails to accept effectiveness by filing
      the letter of acceleration or any other means by which the Company fails to
      accept effectiveness, the Conversion Price of the Debentures will decrease
      by
      ten percent (10%) of the original Conversion Price. 

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective during the Registration
      Period, and, during such period, comply with the provisions of the 1933 Act
      with
      respect to the disposition of all Registrable Securities of the Company covered
      by such Registration Statement until such time as all of such Registrable
      Securities shall have been disposed of in accordance with the intended methods
      of disposition by the Holder as set forth in such Registration Statement. In
      the
      event the number of shares of Common Stock available under a Registration
      Statement filed pursuant to this Agreement is at any time insufficient to cover
      all of the Registrable Securities, the Company shall amend such Registration
      Statement, or file a new Registration Statement (on the short form available
      therefor, if applicable), or both, so as to cover all of the Registrable
      Securities, in each case, as soon as practicable, but in any event within thirty
      (30) calendar days after the necessity therefor arises (based on the then
      Purchase Price of the Common Stock and other relevant factors on which the
      Company reasonably elects to rely), assuming the Company has sufficient
      authorized shares at that time, and if it does not, within thirty (30) calendar
      days after such shares are authorized. The Company shall use it best efforts
      to
      cause such amendment and/or new Registration Statement to become effective
      as
      soon as practicable following the filing thereof. 

    

    Prior
      to
      conversion of all the Shares (as defined in the Debenture Agreement between
      the
      Company and the Holder of this date) if at any
      time
      the
      conversion of all the Shares outstanding would result in an insufficient number
      of authorized shares of Common Stock being available to cover all the
      conversions, or in the event that Holder deems that the Shares authorized will
      become insufficient, the Company will move to call and hold a shareholder’s
      meeting within thirty (30) calendar days for the sole purpose of authorizing
      additional shares of Common Stock to facilitate the conversions. In such an
      event the Company shall recommend to all shareholders and management of the
      Company to vote their shares in favor of increasing the authorized number of
      shares of Common Stock in sufficient number to fully cover the Holder's
      conversion rights. The Company represents and warrants that under no
      circumstances will it deny or prevent Holder’s right to convert the Shares as
      permitted under the terms of the Subscription Agreement or the Debenture
      Registration Rights Agreement. The Holder retains the right to request
      additional shares upon the determination the company may not be able to
      facilitate conversions in the future.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

       

    

    c The
      Company shall furnish to the Holder and its legal counsel without charge and
      upon request (i) promptly after the same is prepared and filed with the SEC
      at
      least one copy of such Registration Statement and any amendment(s) thereto,
      including financial statements and schedules, all documents incorporated therein
      by reference and all exhibits, the prospectus included in such Registration
      Statement (including each preliminary prospectus) and, with regards to such
      Registration Statement(s), any correspondence by or on behalf of the Company
      to
      the SEC or the staff of the SEC and any correspondence from the SEC or the
      staff
      of the SEC to the Company or its representatives, (ii) upon the effectiveness
      of
      any Registration Statement, a copy of the prospectus included in such
      Registration Statement and all amendments and supplements thereto (or such
      other
      number of copies as the Holder may reasonably request) and (iii) such other
      documents, including copies of any preliminary or final prospectus, as the
      Holder may reasonably request from time to time in order to facilitate the
      disposition of the Registrable Securities. The Company filing the documents
      described in this paragraph through the Electronic Data Gathering Analysis
      and
      Retrieval System (“EDGAR”) shall constitute delivery.

     

    d. The
      Company shall use reasonable efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under the applicable securities
      or "blue sky" laws of such states of the United States as reasonably specified
      by the Holder, (ii) prepare and file in those jurisdictions, such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the Registration Period, (iii) take such other actions as may be necessary
      to
      maintain such registrations and qualifications in effect at all times during
      the
      Registration Period, and (iv) take all other actions reasonably necessary or
      advisable to qualify the Registrable Securities for sale in such jurisdictions;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (x) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
      or (z) file a general consent to service of process in any such jurisdiction.
      The Company shall promptly notify the Holder who holds Registrable Securities
      of
      the receipt by the Company of any notification with respect to the suspension
      of
      the registration or qualification of any of the Registrable Securities for
      sale
      under the securities or “blue sky” laws of any jurisdiction in the United States
      or its receipt of actual notice of the initiation or threatening of any
      proceeding for such purpose.

    

    e.
      The
      Company shall immediately notify the Holder in writing of the happening of
      any
      event as a result of which the prospectus included in a Registration Statement,
      as then in effect, would then contain an untrue statement of a material fact
      or
      omission to state a material fact, which would otherwise be required to be
      stated therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading; and, as a result,
      is
      required to be supplemented or as a result of which the Registration Statement
      is required to be amended (“Registration Default”) and use all diligent efforts
      to promptly prepare any necessary supplement to such prospectus or amendment
      to
      such Registration Statement and take any other necessary steps to cure the
      Registration Default, (which, if such Registration Statement is on Form S-3,
      may
      consist of a document to be filed by the Company with the SEC pursuant to
      Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to
      be
      incorporated by reference in the prospectus) to correct such untrue statement
      or
      omission, and deliver one (1) copy of such supplement or amendment to Holder
      (or
      such other number of copies as Holder may reasonably request; delivery via
      EDGAR
      shall constitute delivery). Failure to cure the Registration Default within
      five
      (5) business days shall result in the Company paying liquidated damages of
      two
      percent (2%) of the then outstanding principal amount of the Debentures then
      held by the Holder for each thirty (30) calendar day period or portion thereof,
      beginning on the date of suspension. The Company shall also promptly notify
      Holder in writing (i) when a prospectus or any prospectus supplement or
      post-effective amendment has been filed, and when a Registration Statement
      or
      any post-effective amendment has become effective (notification of such
      effectiveness shall be delivered to Holder by facsimile on the same day of
      such
      effectiveness and by overnight mail), (ii) of any request by the SEC for
      amendments or supplements to a Registration Statement or related prospectus
      or
      related information, (iii) of the Company's reasonable determination that a
      post-effective amendment to a Registration Statement would be appropriate,
      (iv)
      in the event the Registration Statement is no longer effective or, (v) the
      Registration Statement is stale for a period of more than five (5) Trading
      Days
      as a result of the Company’s failure to timely file its financials with the SEC.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    The
      Company acknowledges that its failure to cure the Registration Default within
      five
      (5)
      business days will cause the Holder irreparable harm, and that damages will
      be
      difficult to ascertain. Accordingly, the parties agree that it is appropriate
      to
      include in this Agreement a provision for liquidated damages. The parties
      acknowledge and agree that the liquidated damages provision set forth in this
      section represents the parties’ good faith effort to quantify such damages and,
      as such, agree that the form and amount of such liquidated damages are
      reasonable and will not constitute a penalty. 

    

    It
      is the
      intention of the parties that interest payable under any of the terms of this
      Agreement shall not exceed the maximum amount permitted under any applicable
      law. If a law, which applies to this Agreement which sets the maximum interest
      amount, is finally interpreted so that the interest in connection with this
      Agreement exceeds the permitted limits, then: (1) any such interest shall be
      reduced by the amount necessary to reduce the interest to the permitted limit;
      and (2) any sums already collected (if any) from the Company which exceed the
      permitted limits will be refunded to the Company. The Holder may choose to
      make
      this refund by reducing the amount that the Company owes under this Agreement
      or
      by making a direct payment to the Company. If a refund reduces the amount that
      the Company owes the Holder, the reduction will be treated as a partial payment.
      In the event that any provision of this Agreement is held by a court of
      competent jurisdiction to be excessive in scope or otherwise invalid or
      unenforceable, such provision shall be adjusted rather than voided, if possible,
      so that it is enforceable to the maximum extent possible, and the validity
      and
      enforceability of the remaining provisions of this Agreement will not in any
      way
      be affected or impaired thereby. 

    

    f.
       The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify the Holder of the issuance of such order and the resolution thereof.
      The
      Company will immediately notify the Holder of a proceeding, or threat of
      proceeding, the result of which could effect the effectiveness of the
      registration statement.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    g. The
      Company shall permit the Holder and its counsel, of the Holder's choosing,
      to
      review and comment upon all Registration Statements, amendments and supplements,
      at least seven (7) days prior to filing. The Company shall not file any
      Registration Statement with which Holder or its counsel reasonably objects.
      

    

    h. At
      the
      request of the Holder, the Company shall cause to be furnished to the Holder,
      on
      the date of the effectiveness of a Registration Statement, an opinion, dated
      as
      of such date, of counsel representing the Company for purposes of such
      Registration Statement, in the form of Exhibit D attached to the Subscription
      Agreement.

    

    i. The
      Company shall make available for inspection by (i) the Holder and (ii) one
      firm
      of attorneys and one firm of accountants or other agents retained by the Holder
      (collectively, the "Inspectors") all pertinent financial and other records,
      and
      pertinent corporate documents and properties of the Company (collectively,
      the
“Records”), as shall be reasonably deemed necessary by each Inspector, and cause
      the Company's officers, directors and employees to supply all information which
      any Inspector may reasonably request; provided, however, that each Inspector
      shall hold in strict confidence and shall not make any disclosure (except to
      the
      Holder) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. The Holder agrees
      that it shall, upon learning that disclosure of such Records is sought in or
      by
      a court or governmental body of competent jurisdiction or through other means,
      give prompt notice to the Company and allow the Company, at its expense, to
      undertake appropriate action to prevent disclosure of, or to obtain a protective
      order for, the Records deemed confidential.

    

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

    

    k. The
      Company shall use its best efforts to secure designation and quotation of all
      the Registrable Securities covered by any Registration Statement on the
      Principal Market. If, despite the Company's best efforts, the Company is
      unsuccessful in satisfying this obligation, it shall use its best efforts to
      cause all the Registrable Securities covered by any Registration Statement
      to be
      listed on each other national securities exchange and automated quotation
      system, if any, on which securities of the same class or series issued by the
      Company are then listed, if any, if the listing of such Registrable Securities
      is then permitted under the rules of such exchange or system. If, despite the
      Company's best efforts, the Company is unsuccessful in satisfying its obligation
      in this Section, it will use its best efforts to secure the inclusion for
      quotation with Pink Sheets, LLC. The Company shall pay all fees and expenses
      in
      connection with satisfying its obligation under this Section 3(k).

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    l. The
      Company shall cooperate with the Holder to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Holder may reasonably request and registered in such names of the
      Persons who shall acquire such Registrable Securities from the Holder, as the
      Holder may request.

    

    m. The
      Company shall provide a transfer agent for all the Registrable Securities not
      later than the Closing Date of the first Registration Statement filed pursuant
      hereto.

    

    n. If
      requested by the Holder, the Company shall (i) as soon as reasonably practical,
      incorporate in a prospectus supplement or post-effective amendment such
      information as Holder reasonably determines should be included therein relating
      to the sale and distribution of Registrable Securities, including, without
      limitation, information with respect to the offering of the Registrable
      Securities to be sold in such offering; (ii) make all required filings of such
      prospectus supplement or post-effective amendment as soon as notified of the
      matters to be incorporated in such prospectus supplement or post-effective
      amendment; and (iii) supplement or make amendments to any Registration Statement
      if reasonably requested by Holder.

    

    o. The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

    

    p. The
      Company shall make available to the Holder as soon as reasonably practical,
      but
      not later than ninety (90) calendar days after the close of the period covered
      thereby, an earnings statement (in form complying with the provisions of Rule
      158 under the 1933 Act) covering a twelve-month period beginning not later
      than
      the first day of the Company's fiscal quarter next following the effective
      date
      of any Registration Statement. Filing via EDGAR shall constitute
      delivery.

    

    q. The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

    

    r. Within
      one (1) business day after the Registration Statement which includes Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities, with copies to the Holder, confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit A. Failure to do so will result in the Face Amount
      on
      the Debentures to be increased by two percent (2%) per day, as liquidated
      damages, and not as a penalty.

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    s. After
      the
      SEC declares the Registration Statement cleared of all comments and the
      Company's acceptance of the effectiveness of the Registration Statement, the
      Company shall file a prospectus covering the resale of the Shares ("Prospectus")
      within two (2) trading days. In the event the Company does not file the
      Prospectus within two (2) trading days of the Effective Date, then the Company
      shall pay the Holder the sum of five percent (5%) of the Face Amount due to
      the
      Holder for each two (2) trading day period, pro rata, compounded daily,
      following the two (2) trading day period until the Prospectus is filed.
In
      addition, if the Company fails to the Prospectus within two (2) business day
      of
      being cleared of the Effective Date, and for each one (1) business day the
      Company fails to file the Prospectus, the Conversion Price of the Debentures
      will decrease by ten percent (10%) of the original Conversion Price.

    

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

    

    4. OBLIGATIONS
      OF THE HOLDER.

    

    a. At
      least
      five (5) calendar days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify the Holder in writing of the
      information the Company requires from the Holder. The Holder covenants and
      agrees that, in connection with any resale of Registrable Securities by it
      pursuant to a Registration Statement, it shall comply with the "Plan of
      Distribution" section of the current prospectus relating to such Registration
      Statement.

    

    b. The
      Holder, by the Holder's acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder and
      in
      responding to SEC comments in connection therewith.

    

    c. The
      Holder agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section 3(f) or the first sentence of
      3(e), the Holder will immediately discontinue disposition of Registrable
      Securities pursuant to any Registration Statement(s) covering such Registrable
      Securities until Holder's receipt of the copies of the supplemented or amended
      prospectus contemplated by Section 3(f) or the first sentence of
      3(e).

    

    5. EXPENSES
      OF REGISTRATION.

    

    All
      expenses, other than underwriting discounts and commissions, incurred in
      connection with registrations, filings or qualifications pursuant to Sections
      2
      and 3, including, without limitation, all registration, listing and
      qualifications fees, printing and accounting fees, and reasonable fees and
      disbursements of counsel for the Company shall be paid by, and are the sole
      obligation of, the Company.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

       

    

    6. INDEMNIFICATION.

    

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

     

    a. To
      the
      fullest extent permitted by law, the Company will, and hereby agrees to,
      indemnify, hold harmless and defend the Holder who holds such Registrable
      Securities, the directors, officers, partners, employees, agents,
      representatives of, and each Person, if any, who controls Holder within the
      meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
      (the
“1934 Act”) (each, an “Indemnified Person”), against any losses, claims,
      damages, liabilities, judgments, fines, penalties, charges, costs, attorneys'
      fees, amounts paid in settlement or expenses, joint or several (collectively,
      “Claims”), incurred in investigating, preparing or defending any action, claim,
      suit, inquiry, proceeding, investigation or appeal taken from the foregoing
      by
      or before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified Damages"), to which any of
      them
      may become subject insofar as such Claims (or actions or proceedings, whether
      commenced or threatened, in respect thereof) arise out of or are based upon:
      (i)
      any untrue statement or alleged untrue statement of a material fact in a
      Registration Statement or any post-effective amendment thereto or in any filing
      made in connection with the qualification of the offering under the securities
      or other "blue sky" laws of any jurisdiction in which Registrable Securities
      are
      offered ("Blue Sky Filing"), or the omission or alleged omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which the statements therein were
      made, not misleading, (ii) any untrue statement or alleged untrue statement
      of a
      material fact contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in light of the circumstances under which
      the
      statements therein were made, not misleading, or (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement (the matters in the foregoing
      clauses (i) through (iii) being, collectively, "Violations"). Subject to the
      restrictions set forth in Section 6(c) with respect to the number of legal
      counsel, the Company shall reimburse the Holder and each such controlling
      person, promptly as such expenses are incurred and are due and payable, for
      any
      reasonable legal fees or other reasonable expenses incurred by them in
      connection with investigating or defending any such Claim. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(a): (i) shall not apply to a Claim arising out
      of or
      based upon a Violation committed by any Indemnified Person or which occurs
      in
      reliance upon and in conformity with information furnished in writing to the
      Company by any Indemnified Person expressly for use in connection with the
      preparation of the Registration Statement or any such amendment thereof or
      supplement thereto, if such prospectus were timely made available by the Company
      pursuant to Section 3(c); (ii) shall not be available to the extent such Claim
      is based on (a) a failure of the Holder to deliver or to cause to be delivered
      the prospectus made available by the Company or (b) the Indemnified Person's
      use
      of an incorrect prospectus despite being promptly advised in advance by the
      Company in writing not to use such incorrect prospectus; and (iii) shall not
      apply to amounts paid in settlement of any Claim if such settlement is effected
      without the prior written consent of the Company, which consent shall not be
      unreasonably withheld. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of the Indemnified Person
      and shall survive the resale of the Registrable Securities by the Holder
      pursuant to the Registration Statement.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

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

    

    c. Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses to
      be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The indemnifying party shall pay for only one
      separate legal counsel for the Indemnified Persons or the Indemnified Parties,
      as applicable, and such counsel shall be selected by the Holder, if the Holder
      is entitled to indemnification hereunder, or the Company, if the Company is
      entitled to indemnification hereunder, as applicable. The Indemnified Party
      or
      Indemnified Person shall cooperate fully with the indemnifying party in
      connection with any negotiation or defense of any such action or claim by the
      indemnifying party and shall furnish to the indemnifying party all information
      reasonably available to the Indemnified Party or Indemnified Person which
      relates to such action or claim. The indemnifying party shall keep the
      Indemnified Party or Indemnified Person fully apprised at all times as to the
      status of the defense or any settlement negotiations with respect thereto.
      No
      indemnifying party shall be liable for any settlement of any action, claim
      or
      proceeding effected without its written consent, provided, however, that the
      indemnifying party shall not unreasonably withhold, delay or condition its
      consent. No indemnifying party shall, without the consent of the Indemnified
      Party or Indemnified Person, consent to entry of any judgment or enter into
      any
      settlement or other compromise which does not include as an unconditional term
      thereof the giving by the claimant or plaintiff to such Indemnified Party or
      Indemnified Person of a release from all liability in respect to such Claim.
      Following indemnification as provided for hereunder, the indemnifying party
      shall be subrogated to all rights of the Indemnified Party or Indemnified Person
      with respect to all third parties, firms or corporations relating to the matter
      for which indemnification has been made. The failure to deliver written notice
      to the indemnifying party within a reasonable time of the commencement of any
      such action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is actually prejudiced in its ability to
      defend such action.

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    d. The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

    

    e. The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

    

    7. CONTRIBUTION.

    

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

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

       

    

    8. REPORTS
      UNDER THE EXHANGE ACT. 

     

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

     

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

     

    (b)
      file
      with the SEC in a timely manner all reports and other documents required of
      the
      Company under the Securities Act and the Exchange Act so long as the Company
      remains subject to such requirements and the filing of such reports and other
      documents as are required by the applicable provisions of Rule 144; and

     

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

    

    9. NO
      ASSIGNMENT OF REGISTRATION RIGHTS.

    

    The
      registration rights and obligations under this Agreement shall not be
      assignable. 

    

    10. AMENDMENT
      OF REGISTRATION RIGHTS.

    

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of both the Company and the Holder
      of the Registrable Securities. Any amendment or waiver effected in accordance
      with this Section 10 shall be binding upon the Holder and the Company. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the Holders of the Registrable Securities. No consideration shall be offered
      or
      paid to any Person to amend or consent to a waiver or modification of any
      provision of any of this Agreement unless the same consideration also is offered
      to all of the parties to this Agreement.

    

    11. MISCELLANEOUS.

    

    a. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    If
      to the
      Company:

    Colorado
      Stark

    Enigma
      Software Group, Inc.

    2
      Stamford Landing, Suite 100

    Stamford,
      CT 06902 

    Telephone:
      (888) 360-0646 

    Facsimile:
      (203) 621-3334

    

    If
      to the
      Holder:

    

    At
      the
      address listed in the Questionnaire.

    Each
      party shall provide five (5) business days prior notice to the other party
      of
      any change in address, phone number or facsimile number.

    

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

    

    b.
       All
      disputes arising under this agreement shall be governed by and interpreted
      in
      accordance with the laws of the Commonwealth of Massachusetts, without regard
      to
      principles of conflict of laws. The parties to this agreement will submit all
      disputes arising under this agreement to arbitration in Boston, Massachusetts
      before a single arbitrator of the American Arbitration Association (“AAA”). The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this agreement will challenge the jurisdiction or venue provisions as
      provided in this section. Nothing in this section shall limit the Holder's
      right
      to obtain an injunction for a breach of this Agreement from a court of
      law.

    

    c.
       This
      Agreement and the Transaction Documents
      (as
      defined in the Subscription Agreement) constitute
      the entire set of agreements among the parties hereto with respect to the
      subject matter hereof and thereof. There are no restrictions, promises,
      warranties or undertakings, other than those set forth or referred to in the
      Transaction Documents.

    

    d. This
      Agreement and the Transaction Documents supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

    

    e. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    f.
       This
      Agreement may be executed in two or more counterparts, all of which taken
      together shall constitute one instrument. Execution and delivery of this
      Agreement by exchange of facsimile copies bearing the facsimile signature of
      a
      party shall constitute a valid and binding execution and delivery of this
      Agreement by such party. Such facsimile copies shall constitute enforceable
      original documents.

    

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

    

    h. All
      consents and other determinations to be made by the Holder pursuant to this
      Agreement shall be made, unless otherwise specified in this Agreement, by the
      Holder holding a majority of the Registrable Securities.

    

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

    

    12.
      WAIVER.

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any undertakings, agreements or covenants shall not
      waive, affect, or diminish any right of the Holder under this Agreement to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    13.
      PAYMENT OF PENALTIES

    

    Any
      accrued penalties incurred herein by the Company for failure to act in a timely
      manner, as described in this Agreement, shall be charged to the Face Amount
      of
      the Debenture (as defined in the Debenture), unless specifically noted
      otherwise. The Holder reserves the rights to take Payment of Penalties in cash
      or in Common Stock priced at the Conversion Price (as defined in the Debenture
      Agreement).

    

    *
      *
      *

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
      to
      be duly executed as of the day and year first above written. Duly authorized
      to
      sign on behalf of:

     

    
      	 	 	 
	 	ENIGMA
              SOFTWARE
              GROUP, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Colorado
              Stark
	 	
              
Name: Colorado
              Stark
	 	Title: Executive
              Chairman

      	 	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Alvin
              Estevez 
	 	
              
Name:
              Alvin Estevez
	 	Title:
              President and Chief Executive Officer

      	
            	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Richard
              M. Scarlata
	 	
              
Name:
              Richard M. Scarlata
	 	Title: Chief
              Financial Officer

    

     

     

    
      	
            	 	 
	 	DUTCHESS PRIVATE EQUITIES FUND, LP
	 	DUTCHESS PRIVATE EQUITIES FUND, II,
              L.P.
	 	BY ITS GENERAL PARTNER DUTCHESS 
	 	CAPITAL
              MANAGEMENT, LLC 
	 
 	 
 	 
 
	 	By:  	/s/ Douglas
              H. Leighton
	 	
              
Name:
              Douglas H. Leighton
	 	Title:
              A
              Managing Member 

    

     

    
      
         

      

      
        18

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