Document:

10-KSB

Exhibit 10.11  

[TRANSLATION FROM
HEBREW] 

Cooperation and
Licensing Agreement  

Prepared
and signed on the 28th day of the month of October 2007. 

Between 

The Life Science Research Israel Ltd.

a governmental company, P.O.B. 139, Nes Tziona 70451 (“LSRI”) 

on the one part 

and 

Acro Inc.

a company registered in Nevada, U.S.A.

of which the registered address in Israel is - 37 Inbar St., Caesarea

by means of its managers authorized to bind the company

(“Acro”) 

on the other part 

	WHEREAS  	The
Israeli Biological  Research Institute ("MMBI") is a governmental  research institute
 specializing                   in  applied  research,  development,  and  manufacturing
 in the  fields  of  biology,  chemistry,  the                   environment,  and public
health and in the basic  research  derived from MMBI's applied  projects,  and
                  possesses knowledge and technology in the aforementioned fields; and 

	WHEREAS  	LSRI
is authorized to make commercial use of MMBI's  technologies and the research programs
 undertaken                   by MMBI; and 

	WHEREAS  	Acro
 operates in the area of  development,  manufacturing  and  marketing of the means to
identify and                   detect explosive material; and 

	WHEREAS  	Acro
is interested in  undertaking  Compatibility  Work, as defined  below,  and to receive
from LSRI a                   license to  manufacture  and market  identification
 systems - all in  accordance  with the  provisions                   herein; and 

	WHEREAS  	The
parties  wish to set forth in this  Agreement  the terms and  conditions  that shall
apply to their                   collaborative efforts. 

Therefore,
the parties have declared, stipulated and agreed, as follows: 

	1.  	Definitions  

	 	
In
this Agreement, language in the singular includes the plural, and vice versa, and
language that refers to males shall include females and vice verse, unless the content or
context require otherwise.  

	 	
In
this agreement the following terms shall have the meaning appearing next to them, unless
the content or context requires otherwise.  

	 	1.1. 	“Related
Party” – With regard to any person or entity; any                person or
entity that controls, is controlled by, or is jointly controlled. For                the
purposes of this Agreement “control” shall mean the effective
               power to influence or to cause to be influenced the management or policies
of a                person or entity, as above; 

	 	1.2. 	The
“Agreement” – This Agreement and all of its appendices
               and addendums; 

	 	1.3. 	“First
Commercial Sale” – The first sale of the                Identification
System as part of a commercial transaction at market terms; 

	 	1.4. 	“LSRI’s
Knowledge” – All knowledge, information,                materials, results,
instruments, procedures, processes, technologies,                components, versions,
protocols, techniques, methods, software, design, charts,                sketches,
figures, and details and/or any other information of any other kind,
               whether a patent can be registered for such or not, which is in LSRI’s
               possession prior to the signing of this Agreement or thereafter. As for
the                development of methods, [such includes] equipment and systems for the
detection                and identification of chemicals, including the ETK Kit and its
components,                including the chemical components. 

	 	1.5. 	“Acro’s
Knowledge” all knowledge, information, materials,                results,
instruments, procedures, processes, technologies, components, versions,
               protocols, techniques, methods, software, design, charts, sketches,
figures, and                details and/or any other information of any other kind,
whether a patent can be                registered for such or not, which is in Acro’s
possession prior to the                signing of this Agreement or thereafter with
regard to the Apparatus, as defined                below, and with regard to the means
for identifying peroxides, including U.S.                Patent No. 6,767,717. 

	 	1.6. 	The
“Knowledge” or “Joint Knowledge” –               all
knowledge, information, materials, results, instruments, processes,
               procedures, technologies, components, versions, protocols, techniques,
methods,                software, design, charts, sketches, figures, and details and/or
any other                information of any other kind, whether a patent can be
registered for such or                not, with regard to the Compatibility Work and the
Identification System, so                long as the foregoing does not include LSRI’s
knowledge or Acro’s                Knowledge. 

	 	1.7. 	The
“License” – The license and the right that shall be
               granted by LSRI to Acro to make use of the Joint Knowledge and the
               Identification System, in accordance with Section 5.1 below; 

	 	1.8. 	“Licensing
Fee” – the licensing fee discussed in Section                6.4 below; 

	 	1.9. 	“ETK
Kit” – A kit for the detection of explosive materials                that
was developed by MMBI and which is operated on the basis of wet
               chemicals/color reactions; 

	 	1.10. 	“Chemical
Components” – The chemical materials that                comprise the ETK
Kit; 

	 	1.11. 	The
“Apparatus” – the apparatus known commercially as
               “Explosive Tester P.E.T. Peroxide, whether such is manual, automatic,
or                semi-automatic, which was developed by Acro; 

	 	1.12. 	The
“Identification System” – A system for the
               identification of explosive materials based upon the arrangement of
chemical                components in the apparatus as set forth in the Specifications
and Protocol; 

	 	1.13. 	“Compatibility
Work” – Work to be undertaken by Acro, at                Acro’s cost,
as specified in the Protocol for the purpose of manufacturing                and
assembling the Identification System in accordance with the Specifications.
               In order to carry out the Compatibility Work, LSRI shall transfer to Acro
the                chemical components in order so that Acro may assemble them in the
Apparatus.                Upon completion of the Compatibility Work, Acro shall begin to
conduct the                Compatibility Tests in accordance with the timelines set forth
in the                Specifications and Protocol; 

	 	1.14. 	“Compatibility
Tests” – Examination of the compatibility                of the
Identification System with the Specifications and the Protocol; 

	 	1.15. 	“Net
Sales” – The total amount received by Acro, its                Related
Parties or parties that work with Acro and its distributors for the sale
               of the Identification System on market terms, [after] deducting the
following:                (1) commercial discounts and credits; (2) special credits and
additional                discounts that were given for returns or due to defects in the
Identification                Systems; (3) Delivery costs, shipment and insurance; and
(4) taxes, duties, and                governmental customs (excluding income tax), so
long as the amount of such is                reasonable and acceptable and were paid for
an actual sale as above, and were                not deducted from the aforementioned
total amount of intake. 

	 	1.16. 	“Royalties” – Royalties
shall be calculated on the basis                of Net Sales in accordance with Section 6
below; 

	 	1.17. 	“Protocol” – The
description of the scope of the planned                work in the framework of carrying
out the Compatibility Work, attached hereto as Appendix “A”; 

	 	1.18. 	“Specifications” – The
specifications attached hereto as Appendix “B”;

	 	1.19. 	The
“Consideration from Other Projects” – The
               consideration that shall be paid to LSRI for undertaking other work or
tests                that will be carried out by LSRI as mutually agreed by the parties,
as set forth                in the Protocol and in Section 6.2 below; 

	 	1.20. 	The
“Minimal Annual Quota” – The minimal sales quota for a
               given year, as set forth in Appendix “C”; 

	 	1.21. 	The
“Term of the Agreement” – The term of the Agreement,
               as set forth in Section 11 below. 

	 	1.22. 	“Acrotech” – Acrotech
Ltd., a subsidiary registered in                Israel, fully owned by Acro. 

	2. 	The
Compatibility Work

	 	2.1. 	General.
Acro shall be responsible for carrying out the Compatibility                Work and any
other work that is required for the purpose of manufacturing the
               Identification System in accordance with the Specifications, Protocols and
               provisions of this Agreement. Acro shall bear all costs incurred as a
result of                carrying out the Compatibility Work. For the purpose of such,
Acro shall                allocate the necessary manpower and technical resources to
carry out the                Compatibility Work in accordance with the terms and
conditions of this                Agreement. 

	 	2.2. 	Scope
of the Compatibility Work. (A) The Compatibility Work shall be                carried
out in accordance with the Protocol; (B) Acro shall develop                Compatibility
Tests, as set forth in Section 2.3; and (C) Acro shall prepare and                supply
the documentation, software, and services as set forth in the Protocol
               with regard to the Identification System; (D) LSRI shall supply to Acro
the                chemical components for the purpose of carrying out the Compatibility
Work, as                well as the documentation regarding the durability of the
chemical components in                the ETK Kit. 

	 	2.3. 	Compatibility
Tests. Acro, in coordination with LSRI, shall, in                accordance with the
Protocol, create a test to examine the compatibility of the                Identification
System to the Specifications. 

	 	
In
the event that the Compatibility Tests or trials of the Identification System per the
Protocol reveal that the Identification System is incompatible with the Specifications,
Acro (A) will notify LSRI about such incompatibility; and (B) Subject to the provisions
of Section 3.3 below, Acro will make the necessary repairs in order to make the
Identification System compatible with the Specifications within fourteen (14) days from
the time such incompatibility was discovered. 

	 	2.4. 	Modifications.
The parties hereto hereby affirm and agree that, in the                course of carrying
out the Compatibility Work, modifications to the Protocol may                be required
in order to provide a solution for unexpected events or results that                are
not within the reasonable control of the parties. Any modifications to the
               Protocol, as above, require the prior, written agreement of the parties,
so long                as the timeframes, required manpower, consideration and anything
else that is                affected by such modification are adjusted appropriately. 

	 	2.5. 	License
required for the Compatibility Work. Each party shall grant to                the
other, for no consideration, a non-exclusive, non-transferable,
               non-assignable license to use its rights, including LSRI’s Knowledge
and                Acro’s Knowledge, for the purpose of performing the Compatibility
Work                only. Such license shall be granted only for the aforementioned
purpose and only                in such cases where such a license is required to carry
out the Compatibility                Work. For the avoidance of doubt, the provisions of
this Agreement                notwithstanding, Acro does not and shall not have any right
to LSRI’s                Knowledge and/or that which is related thereto or any right
to cite figures or                details regarding any product that is not the
Identification System, and LSRI                shall not be obligated to develop, supply,
grant a license, or allow access to                knowledge, including regulatory
information, with regard to any product that is                not the Identification
System. 

	 	2.6. 	Supply
of the Chemical Components. LSRI shall supply Acro with the                chemical
components for both the Compatibility Work and for manufacturing                purposes.
For the purpose of carrying out the Compatibility Work, LSRI shall                supply
[to Acro] at LSRI’s cost the chemical components in the amounts set
               forth in Appendix “D1”. As for the chemical components
required                for manufacturing purposes, Acro shall pay LSRI in accordance
with the                provisions of Appendix “D2.” It is hereby agreed
that in any                event Acro shall grant LSRI the right of first refusal with
regard to the sale                of the chemical components to Acro for the ongoing
manufacturing. 

	 	2.7. 	Contact
persons. Each party hereto shall appoint its own contact person,                who
shall handle requests with regard to the Compatibility Work. 

	 	2.8. 	Additional
work. Any additional work that shall be required by Acro with                regard
to the Identification System that is to be performed by LSRI and which
               LSRI wishes to perform, at its discretion, shall be performed by LSRI
subject to                payment for such additional work in the amount that shall be
agreed by the                parties. 

	3. 	Manufacture

	 	3.1. 	Upon
completion of the Compatibility Work, Acro shall make use of the License to
               manufacture, market, supply and service the Identification System that is
               compatible with the Specifications, in accordance with all applicable
laws,                regulations, standards and rules. 

	 	3.2. 	Acro
shall be the party exclusively liable for obtaining all the licenses,
               approvals, and permits, and for carrying out all registrations under the
law;                for [upholding] all applicable standards that apply to the
manufacture,                marketing, supply and service of the Identification System;
and for the renewal                [of such license and permits] at the required time and
the safe-keeping thereof. 

	 	3.3. 	Acro
shall not make any change to the chemical components, to the
               specifications, to the Identification System, or to the manufacturing
process or                the testing of the Identification System, without the prior,
written approval of                LSRI, [which shall be granted] at its discretion. Upon
receiving such approval,                Acro shall have the right to make the desired
changes, so long as: 

	 	A. 	Such
changes are permitted under the law and/or by the relevant authorized
               authority, and are made in accordance with and fulfill the conditions of
any                license, registration, approval or permit that was granted with regard
to the                Identification System prior to the time that such change is made.  

	 	B. 	LSRI
receives copies of the documentation that relates to the approved changes.  

	 	3.4. 	So
far as such change, as described above, is contingent upon licenses,
               approvals, permits, or other or additional registration by any authorized
               authority, such change shall not be effected until after LSRI receives
written                verification that the permit or approval for the change was indeed
granted by                the authorized authority/authorities. The parties hereto shall
cooperate to                prepare the figures and details required in order to submit
an appropriate                request to the authorized authorities for the permit or
approval of the change                to the materials, Specifications, equipment,
manufacturing process or tests. So                far as a change is required pursuant to
the instructions of an authorized                authority, LSRI shall not withhold its
approval of such, without a reasonable                basis. 

	4. 	Commercialization

	 	4.1. 	Upon
completion of the Compatibility Work, Acro shall work continuously and
               consistently to develop and expand to the greatest extent possible the Net
Sales                of the Identification System. Acro shall carry out its First
Commercial Sale of                the Identification System no later than 90 days
following the signature of this                Agreement, and within thirty (30) days of
making such sale, Acro shall notify                LSRI. 

	 	4.2. 	Acro
shall be liable for fulfilling all that is required under the law,
               regulations, standards, and rules that apply to the sale of the
Identification                System and for the submission of any relevant information
related thereto. 

	 	4.3. 	For
the duration of the Term of the Agreement, Acro hereby undertakes to carry
               out sales of amounts of the Identification System that shall not fall
below the                Minimum Annual Sales Quota during the 12 months following the
First Commercial                Sale. The Minimum Annual Sales Quota with regard to every
country in which the                Identification System is to be sold is set forth in
Appendix                “C”. It is hereby clarified that the exclusive
status of Acro,                pursuant to the License [granted] under this agreement, is
conditioned upon: the                fulfillment of the Annual Sales Quotas, as reflected
by the reports that shall                be submitted in accordance with Section 7 below;
the payment in full and receipt                of such payment at the time such becomes
due of all of the amounts that are owed                to LSRI pursuant to the Annual
Sales Quota; and the fulfillment of all of the                other terms and conditions
set forth in this Agreement. 

	 	4.4. 	It
is hereby agreed and clarified that, subject to Acro’s fulfillment of
               all of its obligations under this Agreement with regard to the completion
of the                development and manufacture of the Identification System – it
is hereby                agreed that within 30 days from the date of the First Commercial
Sale, the                parties hereto will enter into good-faith negotiations regarding
the terms of an                agreement pursuant to which Acro will be granted a
worldwide license, excluding                Israel, to market and sell the ETK Kit. Such
agreement shall be based upon the                grant of territorial exclusivity,
subject to Acro’s meeting the sales                targets. The sales targets for
each territory shall be determined in accordance                with the level of LSRI’s
sales in such territory. In any event, it is                hereby agreed that only a
detailed and signed agreement by both parties shall                bind the parties with
regard to the foregoing. 

	5. 	The
License

	 	5.1. 	Subject
to the terms and conditions set forth herein, including, but without
               derogating from the above, the timely payment in full of the amounts set
forth                in this agreement, including the payment of Royalties, LSRI shall
grant Acro for                the Term of the Agreement an exclusive, worldwide license,
excluding Israel, for                the Joint Knowledge and the Identification System
for the purpose of producing,                manufacturing, using, marketing, offering,
selling, importing, exporting and                serving the Identification System. It is
hereby clarified that the grant of the                License to Acro as set forth in
this Section with regard to the State of Israel                shall be subject to the
terms that shall be set forth in the good-faith                negotiations between the
parties. With that said, Acro may undertake activities                related to the
marketing and sale of the new system in Israel, subject to                LSRI’s
advanced, written approval. 

	 	5.2. 	The
term of the License per this agreement shall apply for each country so long
               as such was not revoked due to a breach in accordance with this Agreement.
The                [grant of the] License is conditioned upon the fact that Acro will
make                reasonable commercial efforts to realize the potential of the
Identification                System; to foster sales of the Identification System to the
fullest extent                possible; and to advance other commercial initiatives with
regard to the                Identification System, and upon the fact that Acro will
perform sales that will                not fall below the [required] Minimal Annual Sales
Quota, as set forth in                Section 4.3 above and in Appendix “C”. 

	 	5.3. 	During
the Term of the Agreement, Acro will have the right to grant a                sub-license
to third parties that conforms to the provisions of this Agreement
               regarding the License, so long as Acro is and remains liable to LSRI with
regard                to the fulfillment of this Agreement by the sub-licensee, and
collects at the                time they become due all the payments that the
sub-licensee owes in full. A                grant of a sub-license pursuant to the
License, as set forth above, is                conditioned upon receipt of LSRI’s
advanced, written approval and the                submission of a copy of the sub-license
agreement to LSRI. For the avoidance of                doubt and subject to the above
provisions – LSRI hereby approves the grant                of a sub-license to
Acrotech. In the event that a sub-licensee is declared                insolvent or upon
the occurrence of one of the events described in Section 11                below to the
sublicense, Acro shall undertake the necessary actions to collect                from the
sub-licensee all of the payments that are owed pursuant to the                sublicense
and shall cause the revocation and/or forfeiture of the sub-license                by a
competent court. Upon termination of this Agreement for any reason and/or
               by any party hereto, all of the sub-licenses that were granted shall be
               terminated immediately. 

	6. 	The
Consideration

	 	
In
consideration for the grant of the License to Acro pursuant to this Agreement, Acro shall
pay LSRI the following payments:  

	 	6.1. 	Compatibility
Work. Acro alone shall fund the Compatibility Work, as set                forth in Appendices
“D1”-“D2”. 

	 	6.2. 	Consideration
for additional work. Acro shall pay LSRI for additional work in accordance
with the payments set forth in the                Protocol. 

	 	6.3. 	Royalties
for Net Sales. Acro shall pay LSRI Royalties each quarter in
               accordance with the quarterly report regarding sales of the new system.
The rate                of Royalties shall be as follows: for a year from the date of the
First Sale,                Acro shall pay an amount that equals 6% of Net Sales; for
sales in the second                year for a duration of a year, Acro shall pay an
amount equaling 8% of Net                Sales; and for sales from the third year and
onwards, Acro shall pay an amount                that equals 10% of Net Sales of the
Identification System that were made by                Acro, sub-licensees, distributors
or any other related party. 

	 	6.4. 	Licensing
Fee. Acro shall pay to LSRI a licensing fee in an amount that                equals
fifty percent (50%) of all intake and consideration (excluding Net Sales)
               that shall be received or produced by Acro, sub-licensees, distributors,
or any                other related party, with regard to or as a result of the
commercial utilization                of the License of the Identification System; the
following shall be deducted                from the forgoing: (a) any payment that was
received for research and                development; (b) any tax, duty, or government
impositions. 

	 	6.5. 	It
is hereby clarified that the forgoing in no way derogates from the [the
               requirements pursuant to the] Minimal Sales Quota, as defined above and as
set                forth in Appendix “C”. 

	7. 	Reporting
and Payments

	 	7.1. 	Payments
pursuant to Sections 6.3 and 6.4 above and reports with regard to the
               sales of the Identification System shall be made and submitted quarterly. 

	 	7.2. 	Unless
otherwise explicitly stated in this Agreement, Acro shall pay LSRI the
               payments owed pursuant to Section 6 above within sixty (60) days from the
end of                each quarter. Each payment as above, shall be accompanied by a
sufficiently                detailed report for the purpose of calculating and verifying
the payment that                was effected, which shall include, without derogating
from the foregoing,                [information regarding] the number of Identification
Systems that were sold in                each country; the gross income and Net Sales of
the Identification System; other                intake or consideration related to the
Identification System; income per country                with details regarding all
discounts granted and returns; Royalties that are                owed pursuant to Section
6.3 above; and Licensing Fees that are owed pursuant to                Section 6.4 above,
with [the foregoing] presented in USD amounts and including                the manner by
which the Royalties and Licensing Fees were calculated; the                exchange rate;
date of the invoice; and any other information that is necessary                to
calculate the payments due under this Agreement. The senior finance manager
               of Acro shall confirm in every report submitted to LSRI that such report
               correctly and accurately reflects all of the payments owed to LSRI.
Reports                shall be submitted throughout the Term of the Agreement, starting
from the date                for the First Commercial Sale, and including periods in
which the Identification                System was not sold and no payments were received
regarding the License and/or                the Identification System. In the event that
Acro does not effect payment at the                time such comes due, Acro shall owe
the same amount plus interest, per Section                7.5 below. 

	 	7.3. 	The
value of each sale of the Identification System, any other intake or
               consideration relating to the License and/or the Identification System
shall be                calculated in accordance with their USD value at the time of
receipt. Royalties                and Licensing Fees shall be calculated in USD and paid
in NIS in accordance with                the dollar exchange rate published by the Bank
of Israel on the date of payment                to LSRI. VAT, if applicable, shall be
added to each payment in accordance with                the rate set forth in the law at
the time. 

	 	7.4. 	All
payments by Acro to LSRI under this Agreement shall be effected by means of
               a bank transfer and actual receipt in the bank accounts so designated for
such                purpose by LSRI or by any other means as determined by LSRI in
writing. 

	 	7.5. 	Any
amount that is owed to LSRI under this Agreement that is not paid on the
               date it becomes due shall bear interest at the maximum rate charged by
Poalim                Bank Ltd. for unauthorized overdrafts, accumulating on a monthly
basis, starting                from the date upon which it became due until such amount
is actually paid. 

	 	7.6. 	Acro
shall maintain and cause all of the parties related to and involved with
               Acro, [its] sub-licensees and distributors to maintain books of accounting
in                which full and precise accounts of the sales of the Identification
System and/or                any other use of the License of the Identification will be
recorded and will                include necessary details so that LSRI can verify the
precise amounts of the                payments due to it under this Agreement. Pursuant
to a written request, which                may not be submitted more than once each
calendar year, LSRI will have the right                to audit such books by means of a
certified accountant in order to verify the                amount of Net Sales, Royalties
and Licensing Fees for each calendar year for the                three years preceding
the date upon which the audit was requested. LSRI shall                maintain in
confidence and see to it that the aforementioned accountant maintain                the
confidentiality of all of the information and not make any use thereof or
               reveal such, unless such disclosure is required to determine whether the
               provisions of this Agreement have, indeed, been fulfilled. The accountant’s
               visit as above shall be made during normal business hours and with
advanced,                written notice to Acro within a reasonable amount of time prior
to such visit.                In the event that an audit reveals that a payment was not
made in full, Acro                shall pay to LSRI the amount missing plus interest, [at
a rate] set forth in                Section 7.5 above. Such payment shall be made within
ten (10) days that the                results of the audit are submitted to the parties.
The parties shall make all of                the adjustments that are required in light
of the results of the audit without                delay. The party that carries out the
audit, as above, shall bear the costs                required for such. However, in the
event that the audit reveals that any payment                whatsoever that was made was
missing more than five percent (5%) of the amount                owed, Acro shall bear
the costs incurred by the audit. LSRI right to audit the                accounting books
as set forth above, shall continue for three (3) years beyond                the Term of
this Agreement. 

	8. 	Property
Rights

	 	8.1. 	All
the rights to LSRI’s Knowledge and the rights to the Knowledge related
               to the ETK Kit and/or derived from them, including the rights to all
               improvements, developments and modifications, are hereby the property of
LSRI                and shall remain as such. 

	 	8.2. 	All
the rights to the Joint Knowledge and the Identification System and/or all
               that is derived from them, including all improvements, developments, and
               modifications – except with regard to the ETK Kit – are hereby
jointly                owned by the parties in equal parts (50% LSRI and 50% Acro) and
shall remain as                such. 

	 	8.3. 	Acro
hereby undertakes to take all action necessary in order to give effect to
               this Section 8, including making the necessary changes to the protection
               [mechanisms that safeguard the rights of] the Acro Knowledge. 

	 	8.4. 	Acro
is hereby required to include in all communications with third parties
               related to the License a declaration that LSRI and Acro are the joint
owners of                all of the rights in every invention that shall be developed or
derived as a                result of the implementation and performance of this
Agreement with regard to                the Knowledge and the Identification System,
while LSRI [is and] shall continue                to be the exclusive owner of the
[rights] related to LSRI’s Knowledge and                the chemical components. 

	 	8.5. 	LSRI
shall have the right to make use freely of the Knowledge and of LSRI’s
               Knowledge for any purpose except the manufacture and marketing of the
               Identification System that is subject to the License. 

	 	8.6. 	Acro
shall act, at its cost, to [protect and] enforce all of its property rights
               of any kind, in whole or in part, which are subject to the License,
pursuant to                this Agreement, against infringement thereof by third parties.
The foregoing                shall not apply to all that is related to the protection of
the rights of LSRI                to LSRI’s Knowledge and the ETK Kit. In this
framework, and without                derogating from the above, Acro shall act at its
own cost and in coordination                with LSRI to apply for patents, to register
patents, to protect a patent and/or                a patent application with regard to
inventions and other discoveries related to                the Joint Knowledge and the
Identification System. In the event that Acro                receives monetary damages or
that the payment of royalties is ordered instead of                damages, Acro hereby
undertakes to pay LSRI Royalties for the amounts received,                as described
above, that exceed the costs of the lawsuit. Each party shall                report to
the other regarding any potential infringement of rights as above                within
thirty (30) days of becoming aware of such. 

	 	8.7. 	For
the avoidance of doubt, it is hereby clarified and agreed that the ownership
               to the information, including inventions, discoveries or any other
intellectual                property rights – whether such can be registered as a
patent or not –               that were produced or achieved during the Term of the
Agreement by either of the                parties or a representative thereof by chance
and/or without any relation to the                Identification System and/or the
Compatibility Work, shall remain the exclusive                property of the party that
discovered or invented such. For the avoidance of                doubt – such
information, as above, shall not include the Joint Knowledge                or the
Knowledge of the other party, as defined in this Agreement. 

	9. 	Liability

	 	9.1 	Acro
shall be exclusively liable for the manufacture of the Identification System, and shall
arrange for insurance coverage as is customary with regard to the License and/or the
Identification System. The insurance policies should include a provision regarding the
waiver of the right to recourse vis a vis LSRI. 

	 	9.2 	Acro
shall indemnify and compensate LSRI for all debts, lawsuit[s], payment[s], cost[s],
damage[s], or loss[es] that were caused by or as a result of: the License; the exercise
of Acro’s rights pursuant to this Agreement; or the manufacture, marketing, sale,
service or use of the Identification System. The foregoing shall not apply in a case in
which it was determined that LSRI’s liability was the result of the fact that LSRI’s
knowledge infringes upon the intellectual property rights of a third party. 

	 	9.3 	In
any event, LSRI shall not be held liable, either explicitly or implicitly, for any
indirect, accompanying or consequential damages or loss of income or profits that was
caused as a result of the manufacture, marketing, offer, sale, import, export, servicing,
or use of the Identification System. 

	 	9.4 	Acro
hereby declares and confirms that LSRI makes no representation herein regarding the
operation of the Identification System, the ETK Kit and the chemical components, [nor
regarding] their suitability for any use; their safety; their approval by local
authorities; the time or cost of the performance of the Compatibility Work and/or the
compatibility of the Identification System and/or the ability to protect the
Identification System by means of a patent. 

	10.  	Confidentiality
and Publication  

	 	10.1 	Any
information that is transferred from one party to another and is marked as “Confidential”:
(a) shall be maintained in full confidence by the recipient of such information; (b)
shall serve the recipient solely for the purpose of performing the provisions of this
Agreement; and (c) shall not be transferred by the recipient, his advisors, or employees
to another party (unless so required under the law or pursuant to a court order) without
the prior, written approval of the party that has submitted the information, unless the
recipient of the information possesses written proof that the information: 

	 	(a) 	was
publicly available at the time of its receipt; or  

	 	(b) 	became
publicly available after its receipt as a result of an act or omission by
               a party other than the recipient, his advisors, employees, or
representatives;                or  

	 	(c) 	was
transmitted to the recipient by a third party that was authorized to
               transmit such information; or  

	 	(d) 	was
already known to the recipient at the time of its receipt;  

	 	(e) 	was
developed independently by the recipient without any use of the confidential
               information of another [sic] party; or  

	 	(f) 	was
required to be transferred under the law or applicable regulations.  

	 	10.2 	The
confidentiality requirements under this Agreement shall be considered as having been
fulfilled by a party if such party treated the confidential information of the other
party in the same manner as such party would treat its own confidential information and
in a reasonable manner. Such [confidentiality] obligations shall apply during the Term of
the Agreement and for a period of ten (10) thereafter. 

	 	10.3 	LSRI
shall have the right to publish scientific discoveries related to the Knowledge and/or
LSRI’s Knowledge and/or the ETK Kit and/or the chemical components and/or the
Identification System, while giving proper attention to the interest of Acro. 

	11.  	Term
and Termination  

	 	11.1 	Term
of the Agreement. This Agreement shall remain in force from the date of signature of
this Agreement until the conclusion of five (5) years from the date of the First
Commercial Sale, unless it was terminated prior to such in accordance with the provisions
of this Agreement. The parties may extend the Term of the Agreement from time to time for
two additional one-year terms (the “Extended Term of the Agreement”),
contingent upon Acro’s performance of its obligations hereunder in full and
contingent upon the grant by both parties of their written agreement to such no later
than 60 days prior to the conclusion of the Term of this Agreement, so long as the terms
of the Minimal Annual Quota are fulfilled (Appendix C), as well as the other terms that
stem from the extension of the Term of the Agreement as above. 

	 	11.1 	Mutual
Termination of the Agreement. This Agreement may be terminated at any time by the
mutual, written consent of the parties. 

	 	11.2 	Termination
of the Agreement by LSRI. In the event that Acro fails to make any payment owed under
this Agreement when it becomes due, and such amounts remain outstanding thirty (30) days
after LSRI submits written notice that such amounts are due, LSRI has the right to
terminate the Agreement immediately, at any time, upon written notice to Acro. 

	 	11.3 	Termination
of the Agreement due to bankruptcy. Either party may terminate the Agreement
immediately, upon the submission of written notice to the other sides [sic], in the event
that the other party was declared bankrupt by a competent court; a request for
liquidation was submitted to a competent court, either willingly or otherwise, which was
not withdrawn within ninety (90) days; or a creditors’ arrangement was offered. 

	 	11.4 	Termination
due to a material breach of the Agreement. Either party may terminate the Agreement
in the event that the other party breaches the provisions of this Agreement (with the
exclusion of that which is set forth in Section 11.2 above) upon sixty (60) days advanced
notice by the non-breaching party, so long as such breach was not remedied within sixty
(60) days from the date that the termination notice was submitted. For the sake of
clarity, it is hereby noted that any breach of any of the provisions of this Agreement
that is not remedied within 60 days from the date upon which notice of termination is
submitted as above, shall be considered a fundamental breach for all purposes. 

	 	11.5 	Consequence
of termination; applicability of the provisions. 

	 	(a) 	If
this Agreement is terminated or the License that was granted to Acro by LSRI
               expires, all the rights to the Identification System and to the Knowledge,
               including any other right that may be derived from the License, shall
return to                be the exclusive and absolute property of LSRI.  

	 	(b) 	In
the event of the termination or expiration of this Agreement, as above, Acro
               shall return to LSRI all of the information that LSRI transferred to Ecro
in the                course of this Agreement (whether such information is found in the
possession of                Acro or was transferred by Acro to third parties) including,
but without                derogating from the above – the chemical components or
other substances;                written materials or documents; or [information]
contained in other media                including documents, drafts, figures, and the
like, [and] materials related to                the Knowledge or LSRI’s Knowledge,
including any copy of such materials. In                addition, and without derogating
from the above, LSRI shall return to Acro upon                termination of the
Agreement or expiration thereof, all of Acro’s Knowledge                that is in
LSRI’s possession at the time of the termination or expiration                of the
Agreement.  

	 	(c) 	Termination
of this Agreement or the expiration thereof shall not release the                parties
hereto from the obligations that accrued prior to the termination or
               expiration of this agreement, as described above; Acro shall continue to
be                bound by Sections 6 and 10 above and shall immediately cease all uses
of the                information and/or the Identification System in any manner
whatsoever. It is                hereby agreed that with the termination or expiration of
this Agreement, as set                forth above, Ecro shall be required to transfer to
LSRI any payment that is owed                for the period preceding the date of
termination or expiration of the Agreement                no later than thirty (30) days
from the date or termination or termination, as                discussed above.  

	 	11.6 	Remedies.
In the event of a breach of the provisions of this Agreement, in addition to the
termination rights as set forth above, each side shall have the rights and be entitled to
the remedies set forth in the applicable law for the enforcement of this Agreement. 

	12.  	Force
Majeure  

	 	
It
is hereby agreed and declared that a party shall not be liable for any loss or damage
incurred as a result of such party’s breach of this Agreement, excluding the duty to
effect payments on time, as a result of a war (whether such was declared or not), force
majeure, revolt, strike, fire, earthquake, flood, plague, riot, accident, labor dispute,
shortage of materials, equipment, transportation, or any other factor that is not beyond
the reasonable control of the parties, and performance of the obligations under this
Agreement will be postponed so long as the reason for the delay remains in existence, but
not beyond such time. A party that exercises its right under this Section 12 shall make
reasonable efforts to remove the cause of the delay of the fulfillment of such party’s
obligations under this Agreement and shall report such efforts to the other parties
[sic]. In the event that performance of the obligations hereunder was delayed as above
for one hundred eighty days (180), each [sic] other party shall have the right any time
thereafter, to terminate the Agreement immediately and the provisions of Section 11 above
shall apply.  

	13.  	Governing
Law  

	 	
The
laws of Israel shall govern this Agreement, and the competent courts of Tel Aviv-Jaffa
shall have exclusive jurisdiction [over any dispute which may arise hereunder].  

	14.  	General  

	 	14.1 	This
Agreement comprises and reflects all of the terms and conditions agreed upon by the
parties with regard to the approval system. Any oral or written representations,
agreements and understandings that was granted or made by the parties prior to the
signing of this agreement that is not explicitly stated herein shall not supplement,
derogate from, or alter the rights and duties set forth in this Agreement or that are
derived therefrom, and the parties shall not be bound by such from the date that this
Agreement is signed. 

	 	14.2 	The
Agreement shall have no effect unless it is signed by both Parties.

	 	14.3 	Any
amendment to the provisions of this Agreement must be made in writing only and such
amendment shall not be valid unless made in writing and signed by the authorized
representative of each party. 

	 	14.4 	It
is hereby declared and agreed that each party hereto is an independent contractor and no
employment relationship and/or agency and/or partnership, exists or shall be created
between the parties and/or their employees. 

	 	14.5 	The
parties hereto are not permitted to transfer and/or assign their rights and/or their
obligations hereunder unless the parties grant their prior, written approval. The
foregoing shall not apply to transfers or assignments to Related Parties, so long as the
party that wishes to transfer or assign its rights or obligations to the Related Party as
above remains responsible and liable for the fulfillment of the provisions of this
Agreement by the Related Party vis a vis the other parties [sic] and shall cause the
Related Party to fulfill all of its obligations under this Agreement. In the event that
such Related Party ceases to be a Related Party of the assigning party, the parties must
approve in writing the continuation of such assignment of rights; otherwise such
assignment shall be considered void. 

	 	14.6 	No
waiver, allowance, default, grant of an extension, failure to respond in the event of a
breach, non-fulfillment of any term of this Agreement, or failure to exercise one or more
of the rights granted herein shall be considered as a waiver of any right granted
hereunder or as a forfeiture thereof. 

	 	14.7 	Each
party hereto shall bear the costs it incurred related to the preparation of this
Agreement.

	 	14.8 	Headings
that appear herein are provided for the sake of convenience only, and shall not be used
for interpretation purposes. 

	 	14.9 	The
preamble to this Agreement and all appendices and addendums constitute an integral party
of this agreement. In the event of a contradiction or incompatibility between the
provisions of this Agreement and the provisions of any appendix or addendum to this
Agreement, the provisions of this Agreement shall prevail. 

	 	14.10 	Any
agreement, approval or offer that was made or granted by one of the parties shall not be
binding unless signed by the party’s authorized representatives. 

	 	14.11 	In
the event that a provision of this Agreement or implementation thereof in accordance with
this Agreement was deemed void or declared by a competent court to be illegal, invalid or
unenforceable, this Agreement will [nonetheless] remain in full effect and shall be
interpreted in such a way that its illegal, void or unenforceable portion will be severed
and replaced by a provision that achieves, to the extent possible, the economic,
business, and other goals of that illegal, void, or unenforceable provision. 

	15.  	Notices  

	 	
The
parties’ addresses for purposes of this Agreement shall be as they appear above. Any
notice that is sent via registered mail or via a messenger by a party to the other at the
address that appears above shall be considered as having been delivered to its destination
after 7 (seven) days, if it was sent by registered mail, or upon delivery, if hand
delivered, whichever was earlier. 

And
as witness hereto, the parties have hereunto signed: 

		/s/ Acro Inc.
—————————

Acro Inc.	/s/ Life Science Research Israel Ltd.
————————————————

Life Science Research Israel Ltd.

Appendices A and B  

Protocol and
Specifications 

Experimental development
of the Acro-NET 

General 

	 	—  	The
general idea is to use the same device that was developed by Acro for testing peroxide
explosives (Acro-PET)

	 	—  	The
Acro-NET will be color coded differently (blue and white) from the Acro-PET (black and
yellow).

	 	—  	The
Acro-NET will comprise three ampoules, 300 ML each, containing solutions 1, 2, and 3 of
the ETK. 

Experiments 

	 	—  	Loading
of all three ampoules will be carried under nitrogen atmosphere using either a glove box
or a glove bag. 

	 	—  	The
Acro-NET will be examined for sensitivity, selectivity (false positive and false
negative), mechanical reliability, and shelf life. 

	 	—  	Three
representative explosives will be used: TNT, RDX and ammonium nitrate (AN). 

	 	—  	The
sensitivity limit of each explosive will be determined by examining a solution of each
explosive is known concentration in either alcohol (ethanol or isopropanol) for TNT and
RDX or water for AN. 

	 	—  	False
positive tests will be carried out with variety of household powders, such as sugars,
flowers and other foods, washing machine powders, etc. 

	 	—  	False
negative experiments will be carried out with the explosives mixed together with
non-explosive powders and liquids 

	 	—  	Shelf
life will be estimated by keeping the Acro-NET at elevated temperatures (up to 50oC)
for extended periods of times before checking their performance 

	 	— 	Mechanical
reliability will be examined by testing a set of 100 units. This experiment may be used
for final determination of the sensitivity limit by using 33 unites for each explosive. 

Appendix C  

Minimum Sales Quota  

In 2008 – 1,000 units,
primarily for the purposes of testing and demonstrations –an effort will be made to
charge the minimum price of USD $5.00 for each unit; the total consideration is estimated
to be a few thousand USD.  

		
		
		
		
		
	In 2009 - 5,000 units - with a net price of $10 -	total $50,000
	 
	In 2010 - 10,000 units - same as above -	total $100,000
	 
	In 2011 - 10,000 units - same as above -	total $100,000
	 
	In 2012 - 10,000 units - same as above -	total $100,000
		

Note:
all prices are in USD

The amount charged (in accordance
with the rate of Royalties set forth in Section 6.3 of the Agreement) shall be in New
Israeli Shekels, in accordance with the published dollar exchange rate on the date the
invoice is issued + VAT.  

Appendix “D1”  

The amount of chemical
components needed for the Compatibility Work  

At the R7D stage, the amount of
Reagents that are sufficient for 1,000 syringes (approximately a half-liter), and, if
required, and additional amount will be given, in accordance with the additional request
submitted by Acro.  

Appendix “D2”  

Prices of the chemical
components for production purposes  

The
price of the chemical components for a cartridge (according to a calculation of 0.3 ML per
cartridge) 

The
prices [listed below] are based on a single order and can be modified based upon the size
of the order. 

For
an amount between 1,000-5,000 cartridges – $0.80 

For an
amount between 5,000-10,000 cartridges – $0.65 

For
an amount above 10,001 cartridges – $0.50 

The amount charged shall be in New
Israeli Shekels, in accordance with the published dollar exchange rate on the date the
invoice is issued + VATSECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this "Agreement") is dated as of February 26, 2008 between Aurelio Resource Corporation, a Nevada corporation (the "Company"), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a "Purchaser" and collectively the "Purchasers").

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

	

DEFINITIONS

	Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

"Action" shall have the meaning ascribed to such term in Section 3.1(j).

"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.  With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

"Board of Directors" means the board of directors of the Company.

"Business Day" means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

"Closing" means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

"Closing Date" means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers' obligations to pay the Subscription Amount and (ii) the Company's obligations to deliver the Securities have been satisfied or waived.

 "Commission" means the Securities and Exchange Commission.

"Common Stock" means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

"Common Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"Company Counsel" means Clark Wilson LLP, with offices located at 800 885 West Georgia Street, Vancouver, Canada. .

"Conversion Price" shall have the meaning ascribed to such term in the Debentures.

"Debentures" means the 10% Convertible Debentures due, subject to the terms therein, June 27, 2009, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

"Disclosure Schedules" shall have the meaning ascribed to such term in Section 3.1.

"Effective Date" means the date that the initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission.

 "Evaluation Date" shall have the meaning ascribed to such term in Section 3.1(r). 

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock compensation or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities,  (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, (d) securities, including Common Stock and warrants, issued for cash, so long as the effective price per share of Common Stock is at least equal to or  higher than the Conversion Price, (e) convertible debentures entered into by a Subsidiary of the Company for up to $6,000,000 to assist the Subsidiary to purchase land or pay land payment obligations, which convertible debenture is convertible into Common Stock of the Company, so long as the effective price per share of Common Stock is at least equal to or  higher than the Conversion Price, and (f) Common Stock issued for services provided to the Company, so long as the price per share of Common Stock is at least equal to or higher than the Conversion Price.

.

 "FWS" means Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

"GAAP" shall have the meaning ascribed to such term in Section 3.1(h). 

"Incremental Financing Participation Maximum" shall have the meaning ascribed to such term in Section 4.12. 

"Indebtedness" shall have the meaning ascribed to such term in Section 3.1(aa).

"Intellectual Property Rights" shall have the meaning ascribed to such term in Section 3.1(o).

"Legend Removal Date" shall have the meaning ascribed to such term in Section 4.1(c). 

"Liens" means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction. 

"Material Adverse Effect" shall have the meaning assigned to such term in Section 3.1(b).

"Material Permits" shall have the meaning ascribed to such term in Section 3.1(m).

"Maximum Rate" shall have the meaning ascribed to such term in Section 5.17.

 "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"Pre-Notice" shall have the meaning ascribed to such term in Section 4.12. 

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"Purchaser Party" shall have the meaning ascribed to such term in Section 4.10.

"Registration Rights Agreement" means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.

"Registration Statement" means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.

"Required Approvals" shall have the meaning ascribed to such term in Section 3.1(e).

"Required Minimum" means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise or conversion in full of all Warrants and Debentures (including Underlying Shares issuable as payment of interest), ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination.

"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).

"Securities" means the Debentures, the Warrants, the Warrant Shares and the Underlying Shares.

"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"Series A Warrants" means, collectively, the Series A Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Series A Warrants shall be exercisable on the 181st calendar day following following the date of issuance and have a term of exercise equal to five years and an exercise price equal to $0.35 subject to adjustment therein, in the form of Exhibit C attached hereto.

"Series B Warrants" means, collectively, the Series B Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Series B Warrants shall be exercisable immediately following the date of issuance and have a term of exercise equal to 18 months and an exercise price equal to $0.35 subject to adjustment therein, in the form of Exhibit C attached hereto.

 "Short Sales" means all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

"Subscription Amount" means, as to each Purchaser, the aggregate amount to be paid for Debentures and Warrants purchased hereunder as specified below such Purchaser's name on the signature page of this Agreement and next to the heading "Subscription Amount," in United States dollars and in immediately available funds. The Subscription Amount for any Purchaser together with its Affiliates shall not exceed $500,000.

"Subsequent Financing" shall have the meaning ascribed to such term in Section 4.12.

"Subsequent Financing Notice" shall have the meaning ascribed to such term in Section 4.12. 

"Subsidiary" means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 "Trading Day" means a day on which the New York Stock Exchange is open for trading.

"Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 "Transaction Documents" means this Agreement, the Debentures, the Warrants, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

"Transfer Agent" means Empire Stock Transfer Inc., the current transfer agent of the Company with a mailing address of  7251 West Lake Mead Blvd, Suite 300, Las Vegas, NV  89128  and a facsimile number of _(702) 974-1444, and any successor transfer agent of the Company.

"Underlying Shares" means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of interest on the Debentures in accordance with the terms of the Debentures.

"Variable Rate Transaction" shall have the meaning ascribed to such term in Section 4.13.

 "VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market other than the OTC Bulletin Board, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time); (b)  if the Common Stock is trading only on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

"Warrants" means the Series A Warrants and the Series B Warrants.

"Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants.

	

PURCHASE AND SALE

	Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $1,500,000 in principal amount of the Debentures.  Each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective Debenture and a Warrant, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such other location as the parties shall mutually agree.

	Deliveries

	On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

	this Agreement duly executed by the Company;

	a legal opinion of Company Counsel, in substantially the form of Exhibit D attached hereto; 

	a Debenture with a principal amount equal to such Purchaser's Subscription Amount, registered in the name of such Purchaser;

	the Series A Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 75% of such Purchaser's Subscription Amount divided by the Conversion Price; 

	the Series B Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchaser's Subscription Amount divided by the Conversion Price; and

	the Registration Rights Agreement duly executed by the Company.

	On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following: 

	this Agreement duly executed by such Purchaser;

	such Purchaser's Subscription Amount by wire transfer to the account as specified in writing by the Company; and
	the Registration Rights Agreement duly executed by such Purchaser.

	Closing Conditions. 

	The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

	the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;

	all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

	the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

	The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

	the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

	all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; 

	the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; 

	there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

	from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission  or the Company's principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

	

REPRESENTATIONS AND WARRANTIES

	Representations and Warranties of the Company.  

Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

	Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

	Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

	Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company's stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

	No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

	Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.6, (ii) the filing with the Commission of the Registration Statement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the "Required Approvals").

	Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.  

	Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company's stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company's employee stock purchase plans and pursuant to the conversion or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities, and except as set out in Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders.

	SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the "SEC Reports") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

	Material Changes.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option and stock compensation  plans. The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made.

	Litigation. .The Company and the SEC are currently discussing the change of year end that occurred last year and the appropriate filing periods as a result, which could have the effect of the Company being required to refile certain 10-Qs and the 10-K for periods ending on different dates. Except those discussions with the SEC, and except as disclosed on Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.  

	Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.  None of the Company's or its Subsidiaries' employees is a member of a union that relates to such employee's relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

	Compliance.  Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

	Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. However, the Company will require additional permits in order to construct mines and to extract the resources on its properties, which will be applied for as development on the properties continues. 

	Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple (to all real property owned by them, mineral right in various unpatented mining claims located by the Company, leasehold interests in certain State of Arizona prospecting permits and leases,  and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as set out on Schedule 3.1(n) and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

	Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the "Intellectual Property Rights").  Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

	Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.The Company does not maintain any directors and officers insurance coverage.. . Neither the Company nor any 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 without a significant increase in cost.

	Transactions with Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (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 entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

	Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.  The Company and the 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 GAAP 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. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.  The Company's certifying officers have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by the Company's most recently filed periodic report under the Exchange Act (such date, the "Evaluation Date").  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company's internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

	Certain Fees.  Except as set forth on Schedule 3.1(s), no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.  

	Private Placement.  Assuming the accuracy of the Purchasers' representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market upon which the Company's Common Stock is listed.

	Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

	Registration Rights. Other than each of the Purchasers and the investors in the non-brokered $1.33 million  and September, 2006 $1.6 million financings, and for shares issued to Torrey Hills for marketing and investment banking advisory services, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

	Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

	Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company's issuance of the Securities and the Purchasers' ownership of the Securities.

	Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.   The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

	No Integrated Offering. Assuming the accuracy of the Purchasers' representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated. 

	Solvency.  Based on the consolidated financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company's assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company's assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof, and (iii) the current cash of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, "Indebtedness" means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

	Tax Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

	No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other "accredited investors" within the meaning of Rule 501 under the Securities Act.

	Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

	Accountants.  The Company's accounting firm is set forth on Schedule 3.1(ee) of the Disclosure Schedule. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company's Annual Report for the year ended December 31, 2007. 

	Seniority.  As of the Closing Date, no Indebtedness or other claim against the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).

	No Disagreements with Accountants 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 and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company's ability to perform any of its obligations under any of the Transaction Documents.

	Acknowledgment Regarding Purchasers' Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Purchaser is 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 thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers' purchase of the Securities.  The Company further represents to each Purchaser that the Company's decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

	Acknowledgment Regarding Purchasers' Trading Activity.  Notwithstanding anything in this Agreement or elsewhere herein to the contrary (except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the Company that (i) none of the Purchasers has been asked to agree by the Company, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or "derivative" securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or "derivative" transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company's publicly-traded securities, (iii) any Purchaser, and counter-parties in "derivative" transactions to which any such Purchaser is a party, directly or indirectly, may presently have a "short" position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm's length counter-party in any "derivative" transaction.  The Company further understands and acknowledges that (a) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (b) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

	Regulation M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the securities of the Company, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company's placement agent in connection with the placement of the Securities.

	Representations and Warranties of the Purchasers.    Each Purchaser, for itself and for no other Purchaser hereby, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

	Organization; Authority.  Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

	Own Account.  Such Purchaser understands that the Securities are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser's right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law.  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

	Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises any Warrants or converts any Debentures it will be either: (i) an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

	Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

	General Solicitation.  Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

	Short Sales and Confidentiality Prior To The Date Hereof.  Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder until the date hereof ("Discussion Time").  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

	

OTHER AGREEMENTS OF THE PARTIES

	Transfer Restrictions.

	The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. Upon a cashless exercise of the Warrant, the holding period for purposes of Rule 144 shall tack back to the original date of issuance of such Warrant.

	The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an "accredited investor" as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser's expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.

	Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder.  If all or any portion of a Debenture or Warrant is converted or exercised (as applicable) at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k) or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be issued free of all legends.  The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such third Trading Day, the "Legend Removal Date"), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section.  Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser's prime broker with the Depository Trust Company System as directed by such Purchaser.

	In addition to such Purchaser's other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day 5 Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend.  Nothing herein shall limit such Purchaser's right to pursue actual damages for the Company's failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

	Each Purchaser, severally and not jointly with the other Purchasers, agrees that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company's reliance upon this understanding.

	Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

	Furnishing of Information.  Until the earliest of the time that no Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.    As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144.  The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

	Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities to the Purchasers in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.

	Conversion and Exercise Procedures.  The form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Debentures.  No additional legal opinion or other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Debentures.  The Company shall honor exercises of the Warrants and conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

	Securities Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New York City time) on the Trading Day following the date hereof issue a press release disclosing the material terms of the tranasactions contemplated hereby, and no later than the third  Trading Day following the date hereof, issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching the Transaction Documents as exhibits thereto.  The Company and a representative of the Purchasers shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of a representative of the  Purchasers, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) any registration statement contemplated by the Registration Rights Agreement (B) in the form 8-K disclosing the material terms of the Transaction Documents, and (C) the filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).

	Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an "Acquiring Person" under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

	Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

	Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds for (a) the satisfaction of any portion of the Company's debt (other than payment of trade payables in the ordinary course of the Company's business and prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents, or (c) the settlement of any outstanding litigation.

	Indemnification of Purchasers.   Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a "Purchaser Party") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser's representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company's prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

	Reservation and Listing of Securities.

	The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.

	If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company's certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.

	The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing, and (iv) maintain the listing of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. 

	Participation in Future Financing. 

	From the date hereof until the date that is the 12 month anniversary of the Effective Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent Financing"), each Purchaser shall have the right to participate in up to an amount of the Subsequent Financing equal to 50% of the Subsequent Financing (the "Incremental Financing Participation Maximum" or "IFPM") on the same terms, conditions and price provided for in the Subsequent Financing, which participation, if any, shall be in addition to amounts raised in the Subsequent Financing. For clarity, the total participation of all Purchasers in the IFPM shall not exceed 50% of the Subsequent Financing.  

	At least 5 Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a "Subsequent Financing Notice").  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than 1 Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.    

	Any Purchaser desiring to participate in such IFPM must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice that the Purchaser is willing to participate in the IFPM, the amount of the Purchaser's participation, and that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.  If the Company receives no notice from a Purchaser as of such 5th Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.  

	If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the IFPM, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the IFPM.  "Pro Rata Portion" means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.12.

	The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 60 Trading Days after the date of the initial Subsequent Financing Notice. 

	Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock.

	Prohibition on Variable Rate Transactions.  From the date hereof until such time as no Purchaser holds any of the Securities, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a Variable Rate Transaction. "Variable Rate Transaction" means a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price.    

	Equal Treatment of Purchasers.  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 the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. Further, the Company shall not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal amounts outstanding on the Debentures at any applicable time.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

	Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it, will execute any Short Sales during the period commencing at the Discussion Time and ending at the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 4.6.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  Each Purchaser severally and not jointly with any other Purchaser, acknowledges the positions of the Commission as set forth in Item 65, Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance.  Notwithstanding the foregoing, no Purchaser makes any representation, warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 4.6.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

	Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

	Capital Changes.  Until the one year anniversary of the Effective Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in principal amount outstanding of the Debentures.

4.18 Directors and Officers Insurance. The Company shall purchase a directors' and officers' liability insurance policy with a coverage amount of not less than $2,000,000 within 90 calendar days of Closing. Failure to obtain such policy within such time shall conclusively be an Event of Default under the Debentures.

	

MISCELLANEOUS

	Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser's obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before February 29, 2008; provided, however, that such termination will not affect the right of any party to sue for any breach by the other party (or parties).

	Fees and Expenses.  The Company shall deliver to each Purchaser, prior to the Closing, a completed and executed copy of the Closing Statement attached hereto as Annex A.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

	Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

	Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

	Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers of at least 51% in interest of the Securities still held by Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

	Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

	Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the "Purchasers."

	No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10.

	Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.   If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

	Survival.  The representations and warranties shall survive the Closing and the delivery of the Securities for the applicable statute of limitations.

	Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature page were an original thereof.

	Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

	Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock delivered in connection with any such rescinded conversion or exercise notice.

	Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

	Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.  

	Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

	Usury.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser's election.

	Independent Nature of Purchasers' Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents.  For reasons of administrative convenience only, Purchasers and their respective counsel have chosen to communicate with the Company through FWS.  FWS does not represent all of the Purchasers but only Rodman & Renshaw, LLC, the placement agent for the transactions contemplated hereby. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.

	Liquidated Damages.  The Company's obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

	Saturdays, Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

	Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

	Waiver of Jury Trial.  In any action, suit or proceeding in any jurisdiction brought by any party against any other party, the parties each knowingly and intentionally, to the greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury.

(Signature Pages Follow)

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

	
aurelio resource corporation

 
	
Address for Notice:

	
By:__________________________________________

     Name:

     Title:

	
Fax:

	
With a copy to (which shall not constitute notice):

 

 
	 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

[PURCHASER SIGNATURE PAGES TO aulo SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: ________________________________________________________

Signature of Authorized Signatory of Purchaser: __________________________________

Name of Authorized Signatory: ____________________________________________________

Title of Authorized Signatory: _____________________________________________________

Email Address of Purchaser: ________________________________________________

Facsimile Number of Purchaser: ________________________________________________

Address for Notice of Purchaser:

 

 

 

Address for Delivery of Securities for Purchaser (if not same as address for notice):

 

 

 

 

Subscription Amount: _____________

Warrant Shares: _________________

 

 

 

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

 

 

 

Annex A 

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers shall purchase up to $1,500,000 of Debentures and Warrants from Aurelio Resource Corporation (the "Company").  All funds will be wired into an account maintained by the Company.  All funds will be disbursed in accordance with this Closing Statement.  

Disbursement Date:February __, 2008

	
I.   PURCHASE PRICE

	 
	
Gross Proceeds to be Received 
	
$

	 	 
	
II.DISBURSEMENTS

	 
	
 
	
$

	
 
	
$

	 	
$

	 	
$

	 	
$

	 	 
	
Total Amount Disbursed:
	
$

	 	 
	 	 
	 	 
	
WIRE INSTRUCTIONS:

 
	 
	
To: _____________________________________

 

 

 

 
	 
	
To: _____________________________________

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