Document:

SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of March 30, 2007, by and among Conspiracy Entertainment Holdings, Inc.,
      a
      Utah corporation (the “Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

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

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall subscribe to Eighty Thousand
      Dollars ($80,000) (the "Purchase
      Price")
      of
      promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A,
      convertible into shares of the Company's common stock, $0.001 par value (the
      "Common
      Stock")
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”).
      The
      Notes and the shares of Common Stock issuable upon conversion of the Notes
      (the
“Shares”)
      are
      collectively referred to herein as the "Securities";
      and

     

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

     

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

     

    1. Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Closing Date, each Subscriber shall purchase and the Company shall sell
      to
      each Subscriber a Note in the principal amount designated on the signature
      page
      hereto for the purchase price set forth on the signature page hereto. The
      consummation of the transactions contemplated herein shall take place at the
      offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
      New York 10176, as soon as practicable following the satisfaction or waiver
      of
      all conditions to closing set forth in this Agreement (the “Closing
      Date”).

    

    2. Intentionally
      Deleted.

    

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

     

    (a) Organization
      and Standing of the Subscribers.
      If the
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or organization and
      has
      the requisite corporate power to own its assets and to carry on its
      business.

    

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

    (d) Information
      on Company.
      The
      Subscriber has been furnished with the audited financial statements of the
      Company for the year ended December 31, 2005 (hereinafter referred to as the
      "Reports").
      Such
      financial statements were prepared pursuant to General Accepted Accounting
      Practices in the United States and fairly present in all material respects
      the
      financial position of the Company and its consolidated subsidiaries, if any,
      as
      of and for the dates thereof and the results of operations and cash flows for
      the periods then ended, subject to normal, immaterial adjustments. In addition,
      the Subscriber has received in writing from the Company such other information
      concerning its operations, financial condition and other matters as the
      Subscriber has requested in writing (such other information is collectively,
      the
      "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities.

     

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

    (f) Purchase
      of Notes.
      On the
      Closing Date, the Subscriber will purchase the Notes as principal for its own
      account for investment only and not with a view toward, or for resale in
      connection with, the public sale or any distribution thereof, but Subscriber
      does not agree to hold the Notes for any minimum amount of time.

     

    (g) Compliance
      with Securities Act.
      The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt
      from such registration. Notwithstanding anything to the contrary contained
      in
      this Agreement, such Subscriber may transfer (without restriction and without
      the need for an opinion of counsel) the Securities to its Affiliates (as defined
      below) provided that each such Affiliate is an “accredited investor” under
      Regulation D and such Affiliate agrees to be bound by the terms and conditions
      of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate when employed in connection with the Company
      includes each Subsidiary [as defined in Section 4(a)] of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

     

    
      
        
        

      

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

     

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

     

    (i) Note
      Legend.
      The
      Note shall bear the following legend:

     

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

     

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

     

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

    

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

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

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

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 3
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      agreements entered into by the Company relating thereto by the Company
      will:

     

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

     

    (ii) result
      in
      the creation or imposition of any Lien (as defined in Section 9(r)(i)) upon
      the
      Securities or any of the assets of the Company or any of its Affiliates other
      then Permitted Liens (as defined in Section 9(r)(i)); or

     

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

     

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

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

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

    

    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares, will be duly and validly issued, fully paid and nonassessable and,
      if
      registered pursuant to the 1933 Act and resold pursuant to an effective
      registration statement, will be free trading and unrestricted except to the
      extent of any restrictions pursuant to the 1933 Act or the Exchange Act that
      may
      be applicable to any Subscriber due to such Subscriber’s affiliate or insider
      status with respect to the Company or such Subscriber’s possession of material
      non-public information with respect to the Company;

     

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

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

     

    (v) will
      have
      been issued in reliance upon an exemption from the registration requirements
      of
      and will not result in a violation of Section 5 under the 1933 Act provided
      Subscriber’s representations herein are true and accurate and Subscribers take
      no actions or fail to take any actions required for their purchase of the
      Securities to be in compliance with all applicable laws and
      regulations.

     

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

     

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

     

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

     

    (k) Information
      Concerning Company.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition as of their respective dates and all the
      information required to be disclosed therein. Since the last day of the fiscal
      year of the most recent audited financial statements included in the Reports
      (“Latest
      Financial Date”),
      and
      except as modified in the Other Written Information or in the Schedules hereto,
      there has been no Material Adverse Event relating to the Company's business,
      financial condition or affairs not disclosed in the Reports. The Reports
      including the financial statements therein do not contain any untrue statement
      of a material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading in light
      of
      the circumstances when made.

     

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

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (u)  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, including but not limited to
      disputes or conflicts over payment owed to such accountants and lawyers, nor
      have there been any such disagreements during the two years prior to the Closing
      Date.

    

    (v) Transfer
      Agent/DTC Status.
      The
      Company’s transfer agent is a participant in and the Common Stock is eligible
      for transfer pursuant to the Depository Trust Company Automated Securities
      Transfer Program. The name, address, telephone number, fax number, contact
      person and email address of the Company transfer agent is set forth on
Schedule
      4(v)
      hereto.

    

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

    

    (x) Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 4(a), (b),
      (c),
      (d), (e), (f), (h), (k), (m), (q), (r), (u) and (w) of this Agreement, as same
      relate to each Subsidiary of the Company.

    

    (y) Company
      Predecessor.
      All
      representations made by or relating to the Company of a historical or
      prospective nature and all undertakings described in Sections 9(g) through
      9(l)
      shall relate, apply and refer to the Company and its predecessors, if
      any.

     

    (z) Solvency.
      Based
      on the 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 Company’s fair saleable value of its 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 for the current fiscal
      year
      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 flow 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 debt 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).

     

    (AA) Preservation
      of Corporate Existence.
      The
      Company shall preserve and maintain its corporate existence, rights, privileges
      and franchises in the jurisdiction of its incorporation, and qualify and remain
      qualified, as a foreign corporation in each jurisdiction in which such
      qualification is necessary in view of its business or operations and where
      the
      failure to qualify or remain qualified might reasonably have a Material Adverse
      Effect upon the financial condition, business or operations of the Company
      and
      its Subsidiaries taken as a whole.

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

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

     

    6.1. Conversion
      of Note.

    

    (a) Upon
      the
      conversion of a Note or part thereof, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its permitted nominee) or such other
      persons as designated by Subscriber and in such denominations to be specified
      at
      conversion representing the number of shares of Common Stock issuable upon
      such
      conversion. The Company warrants that no instructions other than these
      instructions have been or will be given to the transfer agent of the Company's
      Common Stock and that the certificates representing such shares shall contain
      no
      legend other than the usual 1933 Act restriction from transfer legend. If and
      when the Subscriber sells the Shares, assuming (i) the Registration Statement
      (as defined below) is effective and the prospectus, as supplemented or amended,
      contained therein is current and (ii) the Subscriber confirms in writing to
      the
      transfer agent that the Subscriber has complied with the prospectus delivery
      requirements, the restrictive legend can be removed and the Shares will be
      free
      trading, and freely transferable. In the event that the Shares are sold in
      a
      manner that complies with an exemption from registration, the Company will
      promptly instruct its counsel to issue to the transfer agent an opinion
      permitting removal of the legend (indefinitely, if pursuant to Rule 144(k)
      of
      the 1933 Act). 

    

    (b) Subscriber
      will give notice of its decision to exercise its right to convert the Note,
      interest, any sum due to the Subscriber under the Transaction Documents or
      part
      thereof by telecopying an executed and completed Notice
      of Conversion
      (a form
      of which is annexed as Exhibit
      A
      to the
      Note) to the Company via confirmed telecopier transmission or otherwise pursuant
      to Section 13(a) of this Agreement. The Subscriber will not be
      required to surrender the Note
      until
      the Note has been fully converted or satisfied. Each date on which a Notice
      of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      shall be deemed a Conversion
      Date.
      The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company's Common Stock certificates representing the Shares issuable upon
      conversion of the Note to the Subscriber via express courier for receipt by
      such
      Subscriber within four (4) business days after receipt by the Company of the
      Notice of Conversion (such fourth day being the "Delivery
      Date").
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber
      and the Subscriber has complied with all applicable securities laws in
      connection with the sale of the Common Stock, including, without limitation,
      the
      prospectus delivery requirements. A Note representing the balance of the Note
      not so converted will be provided by the Company to the Subscriber if requested
      by Subscriber, provided the Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion, the
      Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note. “Business
      day”
and
      “trading
      day”
as
      employed in the Transaction Documents is a day that the New York Stock Exchange
      is open for trading for three or more hours.

     

    (c) The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 6.1 hereof, or the Mandatory Redemption Amount
      described in Section 6.2 hereof, respectively after the Delivery Date or the
      Mandatory Redemption Payment Date (as hereinafter defined) could result in
      economic loss to the Subscriber. As compensation to the Subscriber for such
      loss, the Company agrees to pay (as liquidated damages and not as a penalty)
      to
      the Subscriber for late issuance of Shares in the form required pursuant to
      Section 6.1 hereof upon Conversion of the Note in the amount of $100 per
      business day after the Delivery Date for each $10,000 of Note principal amount
      being converted of the corresponding Shares which are not timely delivered.
      The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand. Furthermore, in addition to any other remedies
      which may be available to the Subscriber, in the event that the Company fails
      for any reason to effect delivery of the Shares by the Delivery Date or make
      payment by the Mandatory Redemption Payment Date, the Subscriber may revoke
      all
      or part of the relevant Notice of Conversion or rescind all or part of the
      notice of Mandatory Redemption by delivery of a notice to such effect to the
      Company whereupon the Company and the Subscriber shall each be restored to
      their
      respective positions immediately prior to the delivery of such notice, except
      that the liquidated damages described above shall be payable through the date
      notice of revocation or rescission is given to the Company.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

    

    6.2. Mandatory
      Redemption at Subscriber’s Election.
      In the
      event (i) the Company is prohibited from issuing Shares, (ii) the Company fails
      to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of any
      other Event of Default (as defined in the Note or in this Agreement), any of
      the
      foregoing that continues for more than twenty (20) business days, (iv) a Change
      in Control (as defined below), or (v) of the liquidation, dissolution or winding
      up of the Company, then at the Subscriber's election, the Company must pay
      to
      the Subscriber ten (10) business days after request by the Subscriber
      (“Calculation
      Period”),
      a sum
      of money determined by multiplying up to the outstanding principal amount of
      the
      Note designated by the Subscriber by 120%, together with accrued but unpaid
      interest thereon ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by the Subscriber on the same
      date
      as the Shares otherwise deliverable or within ten (10) business days after
      request, whichever is sooner ("Mandatory
      Redemption Payment Date").
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Note principal
      and interest will be deemed paid and no longer outstanding. Liquidated damages
      calculated pursuant to Section 6.1(c) hereof, that have been paid or accrued
      for
      the ten day period prior to the actual receipt of the Mandatory Redemption
      Payment by the Subscriber shall be credited against the Mandatory Redemption
      Payment. For purposes of this Section 6.2, “Change
      in Control”
shall
      mean (i) the Company no longer having a class of shares publicly traded,
      included for quotation or listed on a Principal Market, (ii) the Company
      becoming a Subsidiary of another entity (other than a corporation formed by
      the
      Company for purposes of reincorporation in another U.S. jurisdiction), (iii)
      a
      majority of the board of directors of the Company as of the Closing Date no
      longer serving as directors of the Company except due to natural causes, (iv)
      the sale, lease or transfer of substantially all the assets of the Company
      or
      Subsidiaries, (v) if the holders of the Company’s Common Stock as of the Closing
      Date beneficially own at any time after the Closing Date less than forty percent
      of the Common Stock owned by them on the Closing Date, or (vi) if the Chief
      Executive Officer of the Company, as of the Closing Date, no longer serves
      as
      Chief Executive Officer of the Company. 

    

    6.3. Maximum
      Conversion.
      The
      Subscriber shall not be entitled to convert on a Conversion Date that amount
      of
      the Note in connection with that number of shares of Common Stock which would
      be
      in excess of the sum of (i) the number of shares of common stock beneficially
      owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Subscriber
      and its Affiliates of more than 4.99% of the outstanding shares of common stock
      of the Company on such Conversion Date. Beneficial ownership shall be determined
      in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
      Subscriber shall not be limited to aggregate exercises which would result in
      the
      issuance of more than 4.99%. The
      restriction described in this paragraph may be waived, in whole or in part,
      upon sixty-one (61) days prior notice from the Subscriber to the Company to
      increase such percentage to up to 9.99%, but not in excess of 9.99%. The
      Subscriber may decide whether to convert a Convertible Note to achieve an actual
      4.99% or up to 9.99% ownership position as described above, but not in excess
      of
      9.99%.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    6.4. Injunction
      Posting of Bond.
      In the
      event a Subscriber shall elect to convert a Note or part thereof, the Company
      may not refuse conversion based on any claim that such Subscriber or any one
      associated or affiliated with such Subscriber has been engaged in any violation
      of law, or for any other reason, unless, an injunction from a court, on notice,
      restraining and or enjoining conversion of all or part of such Note shall have
      been sought and obtained by the Company
      or at
      the Company’s request or with the Company’s assistance, and
      the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the outstanding principal and interest of the Note, or
      aggregate purchase price of the Shares which are sought to be subject to the
      injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.

    

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

    

    6.6. Adjustments.
      The
      Conversion Price and amount of Shares issuable upon conversion of the Notes
      shall be adjusted as described in this Agreement and the Notes.

     

    6.7. Redemption.
      The
      Note shall not be redeemable or mandatorily convertible except as described
      in
      the Note. 

    

    7. Finder/Due
      Diligence Fee.

     

    (a) Finder’s
      Commission.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agrees to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or similar
      fees other than the party identified on Schedule
      8
      hereto
      (the “Finder”)
      on
      account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby and arising out of such party’s actions. Anything in this
      Agreement to the contrary notwithstanding, each Subscriber is providing
      indemnification only for such Subscriber’s own actions and not for any action of
      any other Subscriber. Each Subscriber’s liability hereunder is several and not
      joint. The Company agrees that it will pay the Finder on the Closing Date
      directly out of the funds held pursuant to the Escrow Agreement (“Finder’s
      Fees”)
      as
      more fully described on Schedule
      8
      hereto.
      The Company represents that there are no other parties entitled to receive
      fees,
      commissions, or similar payments in connection with the Offering.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (b) Due
      Diligence Fee.
      The
      Company will pay a due diligence fee (“Due
      Diligence Fee”)
      described on Schedule
      8 hereto
      to
      the parties identified on Schedule
      8
      hereto
      (“Due
      Diligence Fee Recipient”).

     

    8. Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a cash fee of $5,000
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes (the “Offering”).
      The
      Legal Fees and reimbursement for estimated UCC searches, if any (less any
      amounts paid prior to a Closing Date), and estimated printing and shipping
      costs
      for the closing statements to be delivered to Subscribers, will be payable
      on
      the Closing Date out of funds held pursuant to the Escrow
      Agreement.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.
      Except as set forth on Schedule
      9(e),
      the
      Purchase Price may not and will not be used for accrued and unpaid officer
      and
      director salaries, payment of financing related debt, redemption of outstanding
      notes or equity instruments of the Company, litigation related expenses or
      settlements, brokerage fees, nor non-trade obligations outstanding on a Closing
      Date.

     

    (f) Reservation.
      Prior
      to the Closing Date, the Company undertakes to reserve, pro rata,
      on
      behalf of the Subscribers from its authorized but unissued common stock, a
      number of common shares equal to 150%
      of
      the amount of Common Stock necessary to allow each Subscriber to be able to
      convert all Notes issuable pursuant to this Agreement and interest thereon.
      Failure to have sufficient shares reserved pursuant to this Section 9(f) shall
      be a material default of the Company’s obligations under this Agreement and an
      Event of Default under the Note.

     

    (g) Taxes.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company will promptly pay and discharge, or cause to be
      paid and discharged, when due and payable, all lawful taxes, assessments and
      governmental charges or levies imposed upon the income, profits, property or
      business of the Company; provided, however, that any such tax, assessment,
      charge or levy need not be paid if the validity thereof shall currently be
      contested in good faith by appropriate proceedings and if the Company shall
      have
      set aside on its books adequate reserves with respect thereto, and provided,
      further, that the Company will pay all such taxes, assessments, charges or
      levies forthwith upon the commencement of proceedings to foreclose any lien
      which may have attached as security therefore.

     

    (h) Insurance.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company will keep its assets which are of an insurable
      character insured by financially sound and reputable insurers against loss
      or
      damage by fire, explosion and other risks customarily insured against by
      companies in the Company’s line of business, in amounts sufficient to prevent
      the Company from becoming a co-insurer and not in any event less than one
      hundred percent (100%) of the insurable value of the property insured less
      reasonable deductible amounts; and the Company will maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner customary
      for
      companies in similar businesses similarly situated and to the extent available
      on commercially reasonable terms.

     

    (i) Books
      and Records.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company will keep true records and books of account in which
      full, true and correct entries will be made of all dealings or transactions
      in
      relation to its business and affairs in accordance with generally accepted
      accounting principles applied on a consistent basis.

     

    (j) Governmental
      Authorities.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company shall duly observe and conform in all material
      respects to all valid requirements of governmental authorities relating to
      the
      conduct of its business or to its properties or assets.

     

    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company shall maintain in full force and effect its
      corporate existence, rights and franchises and all licenses and other rights
      to
      use intellectual property owned or possessed by it and reasonably deemed to
      be
      necessary to the conduct of its business, unless it is sold for
      value.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (l) Properties.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company will keep its properties in good repair, working
      order
      and condition, reasonable wear and tear excepted, and from time to time make
      all
      necessary and proper repairs, renewals, replacements, additions and improvements
      thereto; and the Company will at all times comply with each provision of all
      leases to which it is a party or under which it occupies property if the breach
      of such provision could reasonably be expected to have a Material Adverse
      Effect.

     

    (m) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the sooner of (i) three (3) years after the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company agrees that except in
      connection with a Form 8-K or the Registration Statement or as otherwise
      required in any other Commission filing, it will not disclose publicly or
      privately the identity of the Subscribers unless expressly agreed to in writing
      by a Subscriber, only to the extent required by law and then only upon five
      days
      prior notice to Subscriber. In any event and subject to the foregoing, the
      Company shall file
      a
      Form 8-K or make a public announcement describing the Offering not later than
      the first business day after the Closing Date. In the Form 8-K or public
      announcement, the Company will specifically disclose the amount of common stock
      outstanding immediately after the Closing. A form of the proposed Form 8-K
      or
      public announcement to be employed in connection with the Closing is annexed
      hereto as Exhibit
      D.

     

    (n) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement and registration of the Company’s securities issued
      under certain Securities Purchase Agreements dated as of August 31, 2004,and
      January 31, 2005, as amended pursuant to an Amendment, Modification and Consent
      to Transaction Documents Agreement, dated as of August 5,2005 and further
      amended pursuant to the Second Amendment, Modification and Consent to
      Transaction Documents Agreement, dated as of August 11, 2006, the Company will
      not file with the Commission or with state regulatory authorities, any
      registration statements including but not limited to Forms S-8, or amend any
      already filed registration statement to increase the amount of Common Stock
      registered therein, or reduce the price of which such Common Stock is registered
      therein without the consent of the Subscriber until the expiration of the
“Exclusion
      Period”,
      which
      shall be defined as the first to occur of (i) the Registration Statement having
      been current and available for use in connection with the resale of all of
      the
      Registrable Securities (as defined in Section 11.1(i)) for a period of 365
      days,
      (ii) until all the Shares have been resold or transferred by the Subscribers
      pursuant to the Registration Statement or Rule 144, without regard to volume
      limitations, or (iii) the satisfaction of the Notes. The Exclusion Period will
      be tolled during the pendency of an Event of Default as defined in the
      Note.

     

    (o) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company. The Company will offer to the Subscriber an opportunity to
      review and comment on the Registration Statement thereto between three and
      five
      business days prior to the proposed filing date thereof.

     

    (p) Additional
      Negative Covenants.
      So long
      as the Notes are outstanding and during the pendency of an Event of Default
      (as
      defined in the Note), without the consent of the Subscribers, the Company will
      not and will not permit any of its Subsidiaries to directly or
      indirectly:

    

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

     

    
      
        
        

      

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

     

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

     

    (iv) prepay
      any financing related or other outstanding debt obligations; or

     

    (v) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $10,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Registrable Securities copies of all filings and Commission letters of comment
      and notify Subscribers (by telecopier and by e-mail addresses provided by
      Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com)
      on or
      before the first business day thereafter that the Company receives notice that
      (i) the Commission has no comments or no further comments on the Registration
      Statement, and (ii) the registration statement has been declared effective
      (failure to timely provide notice as required by this Section 11.2(a) shall
      be a
      material breach of the Company’s obligation and an Event of Default as defined
      in the Notes
      and
      a Non-Registration Event as defined in Section 11.4 of this Agreement);

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period; 

     

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

     

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

     

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

     

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

     

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

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission. 

     

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

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Company does not comply with its obligations set forth in Section
      11.1.

     

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

     

    
      
        
        

      

      
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    11.6. Indemnification
      and Contribution.

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

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

     

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

     

    11.7. Delivery
      of Unlegended Shares.

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

    

    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
      result in economic loss to Subscriber. As compensation to Subscriber for such
      loss, the Company agrees to pay late payment fees (as liquidated damages and
      not
      as a penalty) to the Subscriber for late delivery of Unlegended Shares in the
      amount of $100 per business day after the Delivery Date for each $10,000 of
      Purchase Price of the Unlegended Shares subject to the delivery default. If
      during any 360 day period, the Company fails to deliver Unlegended Shares as
      required by this Section 11.7 for an aggregate of thirty (30) days, then each
      Subscriber or assignee holding Securities subject to such default may, at its
      option, require the Company to redeem all or any portion of the Shares subject
      to such default at a price per share equal to 120% of the Purchase Price of
      such
      Shares (“Unlegended
      Redemption Amount”).

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

    

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

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    12. (a) Favored
      Nations Provision.
      Except
      in
      connection with (i) full or partial consideration in connection with a strategic
      merger, acquisition, consolidation or purchase of substantially all of the
      securities or assets of corporation or other entity provided such issuances
      are
      not for the purpose of raising capital which holders of such securities or
      debt
      are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which
      holders of such securities or debt are not at any time granted registration
      rights,
      (iii)
      the Company’s issuance of Common Stock or the issuances or grants of options to
      purchase Common Stock pursuant to stock option plans and employee stock purchase
      plans described on Schedule
      4(d)
      hereto
      at prices equal to or higher than the closing price of the Common Stock on
      the
      issue date of any of the foregoing, (iv) as a result of the conversion of Notes
      which are granted or issued pursuant to this Agreement or that have been issued
      prior to the Closing Date, the issuance of which has been disclosed in a Report
      filed not less than five (5) days prior to the Closing Date, and (v) the payment
      of any interest on the Notes and Liquidated Damages pursuant to the Transaction
      Documents (collectively
      the foregoing are “Excepted
      Issuances”),
      if at
      any time while Notes are outstanding the Company shall offer, issue or agree
      to
      issue any common stock or securities convertible into or exercisable for shares
      of common stock (or modify any of the foregoing which may be outstanding) to
      any
      person or entity at a price per share or conversion or exercise price per share
      which shall be less than the Conversion Price in respect of the Shares, without
      the consent of each Subscriber holding Notes or Shares, then the Company shall
      issue, for each such occasion, additional shares of Common Stock to each
      Subscriber so that the average per share purchase price of the shares of Common
      Stock issued to the Subscriber (of only the Common Stock still owned by the
      Subscriber) is equal to such other lower price per share and the Conversion
      Price shall automatically be adjusted as provided in the Notes. The delivery
      to
      the Subscriber of the additional shares of Common Stock shall be not later
      than
      two (2) business days after the closing date of the transaction giving rise
      to
      the requirement to issue additional shares of Common Stock. The Subscriber
      is
      granted the registration rights described in Section 11 hereof in relation
      to
      such additional shares of Common Stock except that the Filing Date and Effective
      Date vis-à-vis such additional common shares shall be, respectively, the
      thirtieth (30th)
      and
      ninetieth (90th)
      date
      after the closing date giving rise to the requirement to issue the additional
      shares of Common Stock. For purposes of the issuance and adjustment described
      in
      this paragraph, the issuance of any security of the Company carrying the right
      to convert such security into shares of Common Stock or of any warrant, right
      or
      option to purchase Common Stock shall result in the issuance of the additional
      shares of Common Stock upon the sooner of the agreement to or actual issuance
      of
      such convertible security, warrant, right or option and again at any time upon
      any subsequent issuances of shares of Common Stock upon exercise of such
      conversion or purchase rights if such issuance is at a price lower than the
      Conversion Price in effect upon such issuance. The rights of the Subscriber
      set
      forth in this Section 12 are in addition to any other rights the Subscriber
      has
      pursuant to this Agreement, the Note, any Transaction Document, and any other
      agreement referred to or entered into in connection herewith. The Subscriber
      is
      also given the right to elect to substitute any term or terms of any other
      offering in connection with which the Subscriber has rights as described in
      Section 12(a), for any term or terms of the Offering in connection with
      Securities owned by Subscriber as of the date the notice described in Section
      12(a) is required to be given to Subscriber.

     

    (b) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Section 12(a) would
      result in the issuance of an amount of common stock of the Company that would
      exceed the maximum amount that may be issued to a Subscriber calculated in
      the
      manner described in Section 7.3 of this Agreement, then the issuance of such
      additional shares of common stock of the Company to such Subscriber will be
      deferred in whole or in part until such time as such Subscriber is able to
      beneficially own such common stock without exceeding the maximum amount set
      forth calculated in the manner described in Section 7.3 of this Agreement.
      The
      determination of when such common stock may be issued shall be made by each
      Subscriber as to only such Subscriber.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    13. Security
      Interest.
      On or
      about August 31, 2004 and January 31, 2005, the Subscribers were granted a
      security interest in assets of the Company, as amended pursuant to the Amendment
      and Security Interest Agreements on August 5, 2005 and August 11, 2006. The
      security interest was memorialized in Security Agreements. The Company will
      execute such other agreements, documents and financing statements reasonably
      requested by Subscribers to affirm such security agreement, which will be filed
      at the Company’s expense with such jurisdictions, states and counties designated
      by the Subscribers. The
      Company will also execute all such documents reasonably necessary in the opinion
      of Subscribers to memorialize and further protect the security interest
      described herein. The Subscribers appointed a Collateral Agent to represent
      them
      collectively in connection with the security interest. The appointment was
      pursuant to a Collateral Agent Agreement. The Notes and all sums due under
      the
      Notes and the Transaction Documents are included in the term “Obligations”
as
      defined in the Security Agreements and are secured by the Collateral (as defined
      in the Security Agreements) in the same manner and having the same priority
      as
      granted to the Subscribers pursuant to the Security Agreements.

     

    14. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: Conspiracy
      Entertainment Holdings, Inc., 612 Santa Monica Boulevard, Santa Monica, CA
      90401, Attn: Keith Tanaka, CFO, telecopier: (310) 260-1450, with a copy by
      telecopier only to: Sichenzia
      Ross Friedman Ference LLP, 1065 Avenue of Americas, 18th
      Floor,
      New York, NY 10018, Attn: Marc J. Ross, Esq., telecopier:
      (212) 930-9725, and (ii) if to the Subscriber, to: the one or more addresses
      and
      telecopier numbers indicated on the signature pages hereto, with an additional
      copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
      1601, New York, New York 10176, telecopier: (212) 697-3575.

     

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

     

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

     

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      To the
      extent permitted by law, the Company and Subscriber acknowledge and agree that
      irreparable damage would occur in the event that any of the provisions of this
      Agreement were not performed in accordance with their specific terms or were
      otherwise breached. It is accordingly agreed that the parties shall be entitled
      to one or more preliminary and final injunctions to prevent or cure breaches
      of
      the provisions of this Agreement and to enforce specifically the terms and
      provisions hereof, this being in addition to any other remedy to which any
      of
      them may be entitled by law or equity. Subject to Section 14(d) hereof, each
      of
      the Company, Subscriber and any signator hereto in his personal capacity hereby
      waives, and agrees not to assert in any such suit, action or proceeding, any
      claim that it is not personally subject to the jurisdiction in New York of
      such
      court, that the suit, action or proceeding is brought in an inconvenient forum
      or that the venue of the suit, action or proceeding is improper. Nothing in
      this
      Section shall affect or limit any right to serve process in any other manner
      permitted by law.

     

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

     

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

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 75% of the total of the Shares issued and
      issuable upon conversion of outstanding Notes owned by Subscribers on the date
      consent is requested.

     

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

     

    

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    

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

    

    
      	 	 	 
	 	
              CONSPIRACY
                ENTERTAINMENT HOLDINGS, INC.

              a
                Utah corporation

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:
                

              

              Dated:
                March ____, 2007

            

    

    
 

    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL AND 

              PURCHASE
                PRICE

            
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

              ________________________________________

              (Signature)

              By:
                

               

            	
              $40,000.00

            

    

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    

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

     

    
      
        	 	 	 
	 	
                
                  CONSPIRACY
                    ENTERTAINMENT HOLDINGS, INC.

                  a
                    Utah corporation

                

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:
                  

                Title:
                  

                

                Dated:
                  March ____, 2007

              

      

       

    

    
      	
              SUBSCRIBER

            	
              NOTE
                PRINCIPAL AND 

              PURCHASE
                PRICE

            
	
              WHALEHAVEN
                CAPITAL FUND LIMITED

              3rd
                Floor, 14 Par-Laville Road

              Hamilton,
                Bermuda HM08

              Fax:
                (441) 292-1373

               

               

               

               

              ________________________________________

              (Signature)

              By:
                

               

            	
              $40,000.00

            

    

    

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

     

     

    
      
        	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	 
	
                Exhibit
                  B

              	
                Escrow
                  Agreement

              
	 	 
	
                Exhibit
                  C

              	
                Form
                  of Legal Opinion

              
	 	 
	
                Exhibit
                  D

              	
                Form
                  of Form 8-K or Public Announcement

              
	 	 
	
                Schedule
                  4(a)

              	
                Subsidiaries

              
	 	 
	
                Schedule
                  4(d)

              	
                Additional
                  Issuances / Capitalization

              
	 	 
	
                Schedule
                  4(q)

              	
                Undisclosed
                  Liabilities

              
	 	 
	
                Schedule
                  4(v)

              	
                Transfer
                  Agent

              
	 	 
	
                Schedule
                  8

              	
                Finder/Due
                  Diligence Fee

              
	 	 
	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	 
	
                Schedule
                  11.1

              	
                Other
                  Registrable Securities

              

      

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULES

     

    
      	Schedule
              4(a)	
              Subsidiaries

            

    

     

    NONE

     

    
      	Schedule
              4(d)	
              Additional
                Issuances / Capitalization

            

    

     

    Capital
      Stock

     

    100,000,000
      shares of common stock authorized, [37,785,509] issued and
      outstanding

     

    Convertible
      Securities

     

    
      	
              Investor

            	 	
              Note
                Amount

            	
               

            	
              A
                Warrants

            	
               

            	
              Exp
                Date

            	
               

            	
              B
                Warrants

            	
               

            	
              Exp
                Date

            	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stonestreet
                Limited Partnership

            	 	 	
              350,000
                

            	 	 	
              7,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              7,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Fund Limited

            	 	 	
              100,000
                

            	 	 	
              2,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              2,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital LP

            	 	 	
              100,000
                

            	 	 	
              2,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              2,000,000
                

            	 	 	
              expired

            	 
	
              Alpha
                Capital LG

            	 	 	
              500,000
                

            	 	 	
              10,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              10,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital LP

            	 	 	
              50,000
                

            	 	 	
              1,000,000
                

            	 	 	
              08/31/2009
                

            	 	 	
              1,000,000
                

            	 	 	
              expired

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Stonestreet
                Limited Partnership

            	 	 	
              150,000
                

            	 	 	
              3,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              3,000,000
                

            	 	 	
              expired

            	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              250,000
                

            	 	 	
              5,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              5,000,000
                

            	 	 	
              expired

            	 
	
              Alpha
                Capital LG

            	 	 	
              250,000
                

            	 	 	
              5,000,000
                

            	 	 	
              02/28/2010
                

            	 	 	
              5,000,000
                

            	 	 	
              expired

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              111,800
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	
              Alpha
                Capital Aktiengselleschaft

            	 	 	
              111,800
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Alpha
                Capital Anstalt

            	 	 	
              123,500
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 
	
              Whalehaven
                Capital Fund Ltd

            	 	 	
              123,500
                

            	 	 	
              none

            	 	 	 	 	 	
              none

            	 	 	 	 

    

     

     

    
      	Schedule
              4(q)	
              Undisclosed
                Liabilities

            

    

     

    NONE

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	Schedule
              4(v)	
              Transfer
                Agent

            

    

     

    Michael
      Ajzenman

     

    Madison
      Stock Transfer, Inc.

     

    PO
      Box
      145-290

     

    Brooklyn,
      NY  11229

     

    P:
      718-627-4453

     

    F:
      718-627-6341

     

    
      	Schedule8	
              Finder/Due
                Diligence Fee

            

    

     

    NONE

     

    
      	Schedule
              9(e)	
              Use
                of Proceeds

            

    

     

    $67,500  Investor
      Relations

     

    
      	Schedule
              11.1	
              Other
                Registrable Securities

            

    

    

    Pursuant
      to the terms under
      certain Securities Purchase Agreements dated as of August 31, 2004,and January
      31, 2005, as amended pursuant to an Amendment, Modification and Consent to
      Transaction Documents Agreement, dated as of August 5,2005 and further amended
      pursuant to the Second Amendment, Modification and Consent to Transaction
      Documents Agreement, dated as of August 11, 2006, the Company has granted
      registration rights to Alpha Capital Anstalt, Whalehaven Fund Limited,
      Whalehaven Capital Fund Ltd., Stonestreet Limited Partnership and Whalehaven
      Capital LP in connection with the issuance of the Company’s securities.

    

    See
      Schedule 4(d) above for a list of such securities.Unassociated Document

    Exhibit
      10.41

     

    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of April 4, 2007, by and among American Real Estate Partners, L.P., a
      Delaware limited partnership with headquarters located at 767 Fifth Avenue,
      Suite 4700, New York, New York 10153 (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto, as such Schedule
      of Buyers may be amended to add additional investors upon executing any Joinder
      Agreements (as defined herein) pursuant to Section 1(b) hereof (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A.    The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Rule 144A and
      Section 4(2) of the Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B.    The
      Company has authorized the issuance of up to $600,000,000 of Senior Convertible
      Notes due 2013 (the "Notes"),
      which
      shall be issued pursuant to and by the provisions of an Indenture dated as
      of
      the Initial Closing Date (as defined below) between the Company and Wilmington
      Trust Company, as trustee (the "Trustee"),
      in
      substantially the form attached hereto as Exhibit
      A
      (the
      "Indenture").
      The
      Notes will be in the form attached to the Indenture as Exhibit A attached
      thereto and shall be convertible into the depositary units representing limited
      partnership units of the Company (the "Units"
      and as
      issued upon conversion of the Notes, the "Conversion
      Units")
      in
      accordance with the terms thereof and of the Indenture.

     

    C.    Each
      Buyer listed as an Initial Buyer on the Schedule of Buyers attached hereto
      (individually, an "Initial
      Buyer"
      and
      collectively, the "Initial
      Buyers")
      wishes
      to purchase, and the Company wishes to sell, upon the terms and conditions
      stated in this Agreement, at the Initial Closing (as defined below) $100,000,000
      principal amount of Notes (which aggregate amount for both Initial Buyers shall
      be $200,000,000 in the aggregate) (collectively, the "Initial Notes").

     

    D.    Subject
      to the terms and conditions set forth in this Agreement, each Initial Buyer
      shall have the right, from the Initial Closing Date until 5:00 p.m. New York
      City time on April 13, 2007 (the "First
      Option Period"),
      to
      purchase, and require the Company to sell, up to $200,000,000 principal amount
      of Notes (which aggregate amount for both Initial Buyers shall not exceed
      $400,000,000) (collectively, the "Additional
      Notes").
      

     

    E.    Subject
      to the terms and conditions set forth in this Agreement, to the extent an
      Initial Buyer’s portion of the First Option was not exercised in full by such
      Initial Buyer, each Initial Buyer shall have the right from and after the
      expiration of the First Option Period until 5:00 p.m. New York City time on
      April 25, 2007 (the "Second
      Option Period"),
      to
      purchase, and require the Company to sell, up to a principal amount of
      Additional Notes equal to the lesser of (i) $50,000,000 and (ii) the difference
      calculated by subtracting (A) the aggregate principal amount of Additional
      Notes
      purchased by such Initial Buyer at the First Additional Closing from
      (B)

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    $200,000,000
      (which aggregate amount, for both Initial Buyers, when combined with the
      principal amount of Additional Notes purchased by both Initial Buyers at the
      First Additional Closing shall not exceed $400,000,000). 

     

    F.    Subject
      to the terms and conditions set forth in this Agreement, after the expiration
      of
      the First Additional Closing Date until 5:00 p.m. New York City time on May
      5,
      2007 (the "Third
      Option Period"),
      the
      Company shall have the right to permit one or more additional parties (each
      of
      which shall become a party to this Agreement as a Buyer by executing a Joinder
      Agreement) to purchase, and require the Company to sell any Additional Notes
      not
      previously purchased hereunder by the Initial Buyers, up to a maximum aggregate
      principal amount of Additional Notes equal to $400,000,000, provided,
      that,
      until the expiration of the Second Option Period, the Company may not sell
      any
      Additional Notes for which the Initial Buyers have an option to purchase
      pursuant to the Second Option.

     

    G.    Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, substantially in
      the
      form attached hereto as Exhibit
      B
      (as
      amended or modified from time to time, the "Registration
      Rights Agreement"),
      pursuant to which the Company has agreed to provide certain registration rights
      with respect to the Conversion Units under the 1933 Act and the rules and
      regulations promulgated thereunder, and applicable state securities
      laws.

     

    H.    The
      Notes
      and the Conversion Units collectively are referred to herein as the
      "Securities".

     

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

     

    1.    PURCHASE
      AND SALE OF NOTES.

     

    (a)    Purchase
      of Initial Notes. Subject to the satisfaction (or waiver) of the conditions
      set
      forth in Sections 5(a) and 6(a) below, the Company shall issue and sell to
      each
      Initial Buyer, and each Initial Buyer severally, but not jointly, agrees to
      purchase from the Company on the Initial Closing Date (as defined below)
      $100,000,000 principal amount of Notes (the "Initial
      Closing").

     

    (b)    Purchase
      of Additional Notes. 

     

    (i)    Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 5(b)
      and
      6(b) below, the Company agrees to sell to each Initial Buyer, and each Initial
      Buyer shall have the right to purchase (the "First
      Option")
      on the
      First Additional Closing Date (as defined below), up to an aggregate of
      $200,000,000 principal amount of Additional Notes (the "First
      Additional Closing").
      To
      exercise the First Option, an Initial Buyer must so notify the Company in
      writing (the "First
      Option Exercise Notice"),
      prior
      to 5:00 p.m. New York City time on April 13, 2007, which First Option Exercise
      Notice shall specify the principal amount of Additional Notes such Initial
      Buyer
      elects to purchase pursuant to the First Option.

     

    (ii)    Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 5(b)
      and
      6(b) below, the Company agrees to sell to each Initial Buyer, and each Initial
      Buyer shall have the right to purchase (the "Second
      Option")
      on the
      Second

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

       

    

    Additional
      Closing Date (as defined below), up to a principal amount of Additional Notes
      equal to the lesser of (i) $50,000,000 and (ii) the difference calculated
      by subtracting (A) the aggregate principal amount of Additional Notes purchased
      by such Initial Buyer at the First Additional Closing from (B) $200,000,000
      (the
      "Second
      Additional Closing").
      To
      exercise the Second Option, an Initial Buyer must so notify the Company in
      writing (the "Second
      Option Exercise Notice")
      on or
      before the expiration of the Second Option Period, which Second Option Exercise
      Notice shall specify the principal amount of Additional Notes such Initial
      Buyer
      elects to purchase pursuant to the Second Option.

     

    (iii)    From
      and
      after the expiration of the First Option Period, until the expiration of the
      Third Option Period, to the extent that the Initial Buyers have not elected
      to
      purchase the entire $400,000,000 aggregate principal amount of Additional Notes
      pursuant to the First Option and the Second Option, the Company, directly or
      through a placement agent, shall be entitled to place (the "Third
      Additional Closing,"
      and
      when referred to with the First Additional Closing and the Second Additional
      Closing, each an "Additional
      Closing"
      and
      together, the "Additional
      Closings")
      with
      other investors (such investors, "Other
      Buyers"),
      such
      amount of the Additional Notes not previously purchased by the Initial Buyers
      on
      the same terms and conditions as the Initial Buyers received at the Initial
      Closing, the First Additional Closing and the Second Additional Closing;
provided,
      that
      until the expiration of the Second Option Period, the Company may not sell
      any
      Additional Notes for which the Initial Buyers have an option to purchase
      pursuant to the Second Option. Subject to the satisfaction (or waiver) of the
      conditions set forth in Sections 5(b) and 6(b) below, the Company agrees to
      sell
      to each Other Buyer, and each Other Buyer shall purchase, such amount of
      Additional Notes as such Other Buyer has elected to purchase. At or prior to
      the
      end of the Third Option Period, each Other Buyer shall execute and deliver
      to
      the Company a joinder agreement in the form attached hereto as Exhibit
      C
      indicating the principal amount of Additional Notes to be purchased by such
      Other Buyer, which the Company shall acknowledge and agree to in writing (each,
      a "Joinder
      Agreement").
      

     

    (iv)    Upon
      the
      execution and delivery of a Joinder Agreement by an Other Buyer and the Company,
      (A) the Company shall become obligated to sell to such Other Buyer, and such
      Other Buyer shall become obligated to purchase from the Company, such principal
      amount of Additional Notes specified in the Joinder Agreement on the Third
      Additional Closing Date and (ii) each such Other Buyer shall be deemed to be
      a
      "Buyer" hereunder, entitled to all rights, and subject to all obligations,
      of a
      Buyer. Upon consummation of each Additional Closing, the parties agree that
      the
      Schedule of Buyers shall be amended to reflect additional Buyers and/or the
      Additional Notes purchased at each such Additional Closing. Each Other Buyer
      and
      each Initial Buyer that delivers an Option Exercise Notice is referred to herein
      as an "Additional
      Buyer"
      and,
      collectively, the "Additional
      Buyers."
      As
      used herein "Business
      Day"
      means
      any day other than a Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (c)    Closing.
      The Initial Closing and the Additional Closing are each referred to in this
      Agreement as a "Closing."
      Each
      Closing shall occur on the applicable Closing Date (as defined

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

    below)
      at
      the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
      York 10022. Subject to the satisfaction (or waiver by the Initial Buyers and
      the
      Company, as applicable) of the conditions set forth in Sections 5(a) and 6(a)
      below, the date and time of the Initial Closing (the "Initial Closing
      Date")
      shall
      be 10:00 a.m., New York City time, on April 5, 2007 (or such other date as
      is
      mutually agreed to by the Company and each Buyer). Subject to the satisfaction
      (or waiver by the applicable Buyers and the Company, as applicable) of the
      conditions to the First Additional Closing set forth in Section 5(b) and 6(b),
      the date and time of the First Additional Closing (the "First
      Additional Closing Date")
      shall
      be 10:00 a.m., New York City time, on April 16, 2007 (or such other date(s)
      as
      is mutually agreed to by the Company and the applicable Buyers). Subject to
      the
      satisfaction (or waiver by the applicable Buyers and the Company, as applicable)
      of the conditions to the Second Additional Closing set forth in Section 5(b)
      and
      6(b), the date and time of the Second Additional Closing (the "Second
      Additional Closing Date"),
      shall
      be 10:00 a.m., New York City time, on April 26, 2007 (or such other date(s)
      as
      is mutually agreed to by the Company and the applicable Buyers). Subject to
      the
      satisfaction (or waiver by the applicable Buyers and the Company, as applicable)
      of the conditions to the Third Additional Closing set forth in Section 5(b)
      and
      6(b), the date and time of the Third Additional Closing (the "Third
      Additional Closing Date,"
      and
      when referred to with the First Additional Closing Date and the Second
      Additional Closing Date, each, an "Additional
      Closing Date"
      and
      together, the "Additional
      Closing Dates")
      shall
      be 10:00 am New York City time, on May 7, 2007 (or such other date(s) as is
      mutually agreed to by the Company and the applicable Buyers). 

     

    (d)    Purchase
      Price. The purchase price for the Initial Notes to be purchased by each Initial
      Buyer at the Initial Closing (the "Initial
      Notes Purchase
      Price")
      shall
      be $100,000,000. If purchased by an Additional Buyer at an Additional Closing,
      Additional Notes shall be sold at a purchase price of $1.00 for each $1.00
      of
      principal amount of Additional Notes to be purchased by such Additional Buyer
      at
      such Additional Closing Date, plus, in each case, accrued interest on such
      Additional Notes from the preceding interest payment date, or if no interest
      has
      been paid on the Additional Notes, from the Initial Closing Date. 

     

    (e)    Form
      of
      Payment. On each Closing Date, (i) each Buyer shall pay its applicable purchase
      price contemplated pursuant to Section 1(d) above to the Company for the Notes
      to be issued and sold to such Buyer at such Closing, by wire transfer of
      immediately available funds in accordance with the Company's written wire
      instructions, and (ii) the Company shall deliver or caused to be delivered
      to each Buyer the Notes (for the account of such Buyer as such Buyer shall
      instruct) which such Buyer is then purchasing, duly executed on behalf of the
      Company and registered in the name of such Buyer or its designee.

     

    2.    BUYER'S
      REPRESENTATIONS AND WARRANTIES.

     

    Each
      Buyer, severally and not jointly, represents and warrants, as of the date hereof
      and as of the Initial Closing Date with respect to each Initial Buyer, and
      as of
      the date of each Additional Closing Date with respect to each Additional Buyer
      purchasing Additional Notes on such Additional Closing Date, that: 

     

    (a)    No
      Public
      Sale or Distribution. Such Buyer is (i) acquiring the Notes and (ii) upon
      conversion of the Notes, will acquire the Conversion Units issuable upon
      conversion of the Notes, in each case, for its own account and not with a view
      towards, or for resale in connection with, the public sale or distribution
      thereof, except pursuant to sales registered or exempted under the 1933
      Act;

    
      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

    

     

    provided,
      however, that by making the representations herein, such Buyer does not agree
      to
      hold any of the Securities for any minimum or other specific term and reserves
      the right to dispose of the Securities at any time in accordance with or
      pursuant to a registration statement or an exemption under the 1933 Act. Such
      Buyer acknowledges that it is not purchasing the Notes as a result of any
      advertisements, articles, notices or other communications published in any
      newspaper, magazine or similar media or broadcast over radio or television,
      or
      any seminar or meeting whose attendees have been invited by general solicitation
      or general advertising. Such Buyer further acknowledges, to its knowledge,
      that
      it is not purchasing the Notes as a result of any general solicitation or
      general advertising, as such terms are used in Regulation D under the 1933
      Act.
      Such Buyer is acquiring the Securities hereunder in the ordinary course of
      its
      business. Such Buyer does not presently have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the Securities.
      As
      used in this Agreement, "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    (b)    Accredited
      Investor Status. Such Buyer is an "accredited investor" as that term is defined
      in Rule 501(a) of Regulation D and a "qualified institutional buyer" within
      the
      meaning of Rule 144A under the 1933 Act.

     

    (c)    Reliance
      on Exemptions. Such Buyer understands that the Securities are being offered
      and
      sold to it in reliance on specific exemptions from the registration requirements
      of United States federal and state securities laws and that the Company is
      relying in part upon the truth and accuracy of, and such Buyer's compliance
      with, the representations, warranties, agreements, acknowledgments and
      understandings of such Buyer set forth herein in order to determine the
      availability of such exemptions and the eligibility of such Buyer to acquire
      the
      Securities.

     

    (d)    Information.
      Such Buyer and its advisors, if any, have been furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Securities which have been requested
      by
      such Buyer. Such Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company. Neither such inquiries nor any
      other due diligence investigations conducted by such Buyer or its advisors,
      if
      any, or its representatives shall modify, amend or affect such Buyer's right
      to
      rely on the Company's representations and warranties contained herein. Such
      Buyer understands that its investment in the Securities involves a high degree
      of risk. Such Buyer has sought such accounting, legal and tax advice as it
      has
      considered necessary to make an informed investment decision with respect to
      its
      acquisition of the Securities.

     

    (e)    No
      Governmental Review. Such Buyer understands that no United States federal or
      state agency or any other government or governmental agency has passed on or
      made any recommendation or endorsement of the Securities or the fairness or
      suitability of the investment in the Securities nor have such authorities passed
      upon or endorsed the merits of the offering of the Securities.

     

    (f)    Validity;
      Enforcement. This Agreement and the Registration Rights Agreement have been
      duly
      and validly authorized, executed and delivered on behalf of such Buyer and
      shall
      constitute the legal, valid and binding obligations of such Buyer enforceable
      against such Buyer in accordance with their respective terms, except as such
      enforceability may be limited by general principles of equity or to applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation and

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

other
      similar laws relating to, or affecting generally, the enforcement of applicable
      creditors' rights and remedies.

     

    (g)    No
      Conflicts. The execution, delivery and performance by such Buyer of this
      Agreement and the Registration Rights Agreement and the consummation by such
      Buyer of the transactions contemplated hereby and thereby will not (i) result
      in
      a violation of the organizational documents of such Buyer or (ii) conflict
      with,
      or constitute a default (or an event which with notice or lapse of time or
      both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which such Buyer is a party, or (iii) result in a violation of
      any
      law, rule, regulation, order, judgment or decree (including federal and state
      securities laws) applicable to such Buyer, except in the case of clauses (ii)
      and (iii) above, for such conflicts, defaults, rights or violations which would
      not, individually or in the aggregate, reasonably be expected to have a material
      adverse effect on the enforceability of this Agreement or the Registration
      Rights Agreement or ability of such Buyer to perform its obligations hereunder
      or thereunder.

     

    (h)    Residency.
      Such Buyer is a resident of that jurisdiction specified below its address on
      the
      Schedule of Buyers.

     

    (i)    No
      Short
      Positions. No Initial Buyer purchasing Initial Notes, and no Additional Buyer
      purchasing Additional Notes, has any direct or indirect short position in the
      Units or any type of direct or indirect forward contracts, options, puts, swaps,
      "put equivalent positions" (as such term is defined in Rule 16a-1(h) of the
      1934
      Act) or similar arrangements with respect to the Units.

     

    (j)    Manipulation
      of Price. No Initial Buyer purchasing Initial Notes, and no Additional Buyer
      purchasing Additional Notes, has, and to its knowledge no one acting on its
      behalf has, 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 in connection with the purchase or any resale of any of the Securities
      by such Buyer.

     

    3.    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

     

    The
      Company represents and warrants to each of the Initial Buyers, as of the date
      hereof and as of the Initial Closing Date, and to each Additional Buyer as
      of
      the date of each Additional Closing Date on which such Additional Buyer is
      purchasing Additional Notes, that:

     

    (a)    Organization
      and Qualification. The Company is duly organized and validly existing and in
      good standing under the laws of the State of Delaware, and has the requisite
      power and authorization to own its properties and to carry on its business
      as
      now being conducted. The Company is duly qualified as a foreign entity to do
      business and is in good standing in every jurisdiction in which its ownership
      of
      property or the nature of the business conducted by it makes such qualification
      necessary, except to the extent that the failure to be so qualified or be in
      good standing would not reasonably be expected to have a Material Adverse
      Effect. As used in this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations or condition (financial or otherwise) of the Company
      and
      its subsidiaries, taken as a whole, or on the transactions contemplated hereby
      or in the other Transaction Documents (as defined

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

    below)
      or
      by the agreements and instruments to be entered into in connection herewith
      or
      therewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents.

     

    (b)    Authorization;
      Enforcement; Validity. The Company has the requisite power and authority to
      enter into and perform its obligations under this Agreement, the Indenture,
      the
      Notes and the Registration Rights Agreement (collectively, the "Transaction
      Documents")
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Notes and the reservation
      for
      issuance and the issuance of the Conversion Units issuable
      upon conversion of the Notes have been duly authorized by its general partner
      and (other than the filing with the SEC of one or more Registration Statements
      in accordance with the requirements of the Registration Rights Agreement) no
      further authorization is required by the Company, its general partner or its
      equityholders. This Agreement and the other Transaction Documents of even date
      herewith have been duly executed and delivered by the Company, and constitute
      the legal, valid and binding obligations of the Company, enforceable against
      the
      Company in accordance with their respective terms, except as such enforceability
      may be limited by general principles of equity or applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation or similar laws relating
      to,
      or affecting generally, the enforcement of applicable creditors' rights and
      remedies. 

     

    (c)    Issuance
      of Securities. As of each Closing, a number of Units shall have been duly
      authorized and reserved for issuance, free of pre-emptive rights, sufficient
      for the purpose of enabling the
      Company
      to satisfy all obligations to issue the Conversion Units upon
      conversion of all of the Notes. Upon conversion in accordance with the
      Indenture, the Conversion Units will be validly issued and free from all
      preemptive or similar rights, taxes, liens and charges with respect to the
      issue
      thereof, with the holders being entitled to all rights accorded to a holder
      of
      Units. Assuming the accuracy of the representations of the Buyers contained
      in
      Section 2 hereof and their compliance with the agreements set forth therein,
      the
      issuance by the Company of the Notes pursuant to this Agreement, and the
      issuance by the Company of the Conversion Units upon conversion of the Notes
      in
      accordance with the terms of the Notes and the Indenture, are exempt from
      registration under the 1933 Act.

     

    (d)    No
      Conflicts. The execution, delivery and performance of the Transaction Documents
      by the Company and the consummation by the Company of the transactions
      contemplated hereby and thereby (including, without limitation, the issuance
      of
      the Notes and reservation for issuance and issuance of the Conversion Units)
      will not (i) result in a violation of the Certificate of Limited Partnership
      or
      the Company's Limited Partnership Agreement (each as defined in Section 3(x))
      or
      any equity securities of the Company or (ii) conflict with, or constitute a
      default (or an event which with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture or instrument to
      which
      the Company or any of its Subsidiaries is a party, or (iii) result in a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws and regulations and the rules and regulations
      of the New York Stock Exchange (the "Principal
      Market"))
      applicable to the Company or by which any property or asset of the Company
      is
      bound or affected, except, in the case of clauses (ii) and (iii), as would
      not
      reasonably be expected to have a Material Adverse Effect.

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

    

     

    (e)    Consents.
      The Company is not required to obtain any consent, authorization or order of,
      or
      make any filing or registration with, any court, governmental agency or any
      regulatory or self-regulatory agency or any other Person in order for it to
      execute, deliver or perform any of its obligations under or contemplated by
      the
      Transaction Documents, in each case in accordance with the terms hereof or
      thereof, except for any such consent, authorization, order, filing or
      registration the failure to obtain or make would not reasonably be expected
      to
      have a Material Adverse Effect. All consents, authorizations, orders, filings
      and registrations which the Company is required to obtain pursuant to the
      preceding sentence have been obtained or effected on or prior to each Closing
      Date, and the Company and its Subsidiaries are unaware of any facts or
      circumstances which might prevent the Company from obtaining or effecting any
      of
      the registration, application or filings pursuant to the preceding
      sentence.

     

    (f)    Acknowledgment
      Regarding Buyer's Purchase of Securities. The Company acknowledges that no
      Buyer
      is acting as a financial advisor or fiduciary of the Company or any of its
      subsidiaries (or in any similar capacity) with respect to the Transaction
      Documents and the transactions contemplated hereby and thereby, and any advice
      given by a Buyer or any of its representatives or agents in connection with
      the
      Transaction Documents and the transactions contemplated hereby and thereby
      is
      merely incidental to such Buyer's purchase of the Securities. The Company
      further represents to each Buyer that the Company's decision to enter into
      the
      Transaction Documents has been based solely on the independent evaluation by
      the
      Company and its representatives.

     

    (g)    No
      General Solicitation. Neither the Company nor any Person acting on its behalf,
      has engaged in any form of general solicitation or general advertising (within
      the meaning of Regulation D) in connection with the offer or sale of the
      Securities. 

     

    (h)    No
      Integrated Offering. Neither the Company nor any Person acting on its 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 require
      registration of any of the Securities under the 1933 Act or cause this offering
      of the Securities to be integrated with prior offerings by the Company for
      purposes of the 1933 Act or any applicable equityholder approval provisions,
      including, without limitation, under the rules and regulations of any exchange
      or automated quotation system on which any of the securities of the Company
      are
      listed or designated.

     

    (i)    Form
      S-3
      Eligibility. The Company is eligible to register the Conversion Units for resale
      by the Buyers using Form S-3 promulgated under the 1933 Act.

     

    (j)    Rule
      144A. The Notes satisfy the requirements set forth in Rule l44A(d)(3) under
      the
      1933 Act.

     

    (k)    Trust
      Indenture Act. Assuming the accuracy of the representations of the Buyers
      contained in Section 2 hereof and their compliance with the agreements set
      forth
      therein, it is not necessary in connection with the offer, sale and delivery
      of
      the Securities in the manner contemplated by this Agreement to qualify the
      Indenture under the Trust Indenture Act of 1939, as amended (the "TIA").

     

    (l)    Dilutive
      Effect. The Company understands and acknowledges that the number of Conversion
      Units issuable upon conversion of the Notes will increase in certain
      circumstances. The Company further acknowledges that its obligation to issue
      Conversion Units upon

    
      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

    

     

    conversion
      of the Notes in accordance with this Agreement, the Indenture and the Notes,
      absolute and unconditional regardless of the dilutive effect that such issuance
      may have on the ownership interests of other equityholders of the
      Company.

     

    (m)    Application
      of Takeover Protections; Poison Pill. The Company and its general partner 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
      Certificate of Limited Partnership, the Company's Limited Partnership Agreement
      or the laws of the State of Delaware which is or could become applicable to
      any
      Buyer as a result of the transactions contemplated by this Agreement, including,
      without limitation, the Company's issuance of the Securities and any Buyer's
      ownership of the Securities. The Company has not adopted a poison pill or
      similar arrangement relating to accumulations of beneficial ownership of Units
      or a change in control of the Company.

     

    (n)    SEC
      Documents; Financial Statements. During the two (2) years up to and including
      the date hereof, the Company has timely filed all reports, schedules, forms,
      statements and other documents required to be filed by it with the SEC pursuant
      to the reporting requirements of the 1934 Act (all of the foregoing filed during
      the 12 months prior to the applicable Closing Date, including all documents
      incorporated by reference therein being hereinafter referred to as the
      "SEC
      Documents").
      As of
      their respective dates, the SEC Documents complied in all material respects
      with
      the requirements of the 1934 Act and the rules and regulations of the SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading. As of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements have been prepared in accordance
      with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments).

     

    (o)    Absence
      of Certain Changes. Except as disclosed in the SEC Documents or in Schedule
      3(o), since December 31, 2006, there has been no material adverse change and
      no
      material adverse development in the business, assets, properties, operations,
      condition (financial or otherwise) or results of operations of the Company
      or
      its subsidiaries, taken as a whole. The Company has not has taken any steps
      to
      seek protection pursuant to any bankruptcy law nor does the Company have any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings or any actual knowledge of any fact which would
      reasonably lead a creditor to do so. The Company and its subsidiaries, on a
      consolidated basis, are not as of the date hereof, and after giving effect
      to
      the transactions contemplated hereby to occur at each Closing, will not be
      Insolvent (as defined below). For purposes of this Section 3(o), "Insolvent"
      means,
      with respect to any Person (i) the present fair saleable value of the such
      Person's assets is less than the amount required to pay such Person's total
      Indebtedness (as defined in Section 3(v)), (ii) such Person is unable to pay
      its
      debts and liabilities, subordinated,

    
      
        
          
          

        

        
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    contingent
      or otherwise, as such debts and liabilities become absolute and matured, (iii)
      such Person intends to incur or believes that it will incur debts that would
      be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    (p)    Conduct
      of Business; Regulatory Permits. The Company is not in violation of any term
      of
      or in default under its Certificate of Limited Partnership or Limited
      Partnership Agreement. The Company is not in violation of any judgment, decree
      or order or any statute, ordinance, rule or regulation applicable to the
      Company, except for possible violations which would not, individually or in
      the
      aggregate, reasonably be expected to have a Material Adverse Effect. Without
      limiting the generality of the foregoing, the Company is not in violation of
      any
      of the rules, regulations or requirements of the Principal Market except for
      violations which could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect. Since December 31, 2004 (i) the
      Units has been designated for quotation on the Principal Market, (ii) trading
      in
      the Units has not been suspended by the SEC or the Principal Market and (iii)
      the Company has received no written communication from the SEC or the Principal
      Market regarding the suspension or delisting of the Units from the Principal
      Market.

     

    (q)    Foreign
      Corrupt Practices. Neither the Company, nor any director, officer, agent,
      employee or other Person acting on behalf of the Company, in the course of
      its
      actions for, or on behalf of, the Company, has (i) used any partnership funds
      for any unlawful contribution, gift, entertainment or other unlawful expenses
      relating to political activity; (ii) made any direct or indirect unlawful
      payment to any foreign or domestic government official or employee from
      partnership funds; (iii) violated or is in violation of any provision of the
      U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
      unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
      payment to any foreign or domestic government official or employee.

     

    (r)    Money
      Laundering. The operations of the Company are and have been conducted at all
      times in compliance with applicable financial record-keeping and reporting
      requirements of the Currency and Foreign Transactions Reporting Act of 1970,
      as
      amended, applicable money laundering statutes and applicable rules and
      regulations thereunder (collectively, the "Money
      Laundering Laws"),
      and
      no action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving the Company with respect to the
      Money Laundering Laws is pending or, to the knowledge of the Company,
      threatened. 

     

    (s)    OFAC.
      Neither the Company nor, to the knowledge of the Company, any director, officer,
      agent or employee of the Company is currently subject to any U.S. sanctions
      administered by the Office of Foreign Assets Control of the U.S. Treasury
      Department ("OFAC");
      and
      the Company will not, directly or indirectly, use the proceeds of the offering,
      or lend, contribute or otherwise make available such proceeds to any subsidiary,
      joint venture partner or other Person, for the purpose of financing the
      activities of any person currently subject to any U.S. sanctions administered
      by
      OFAC.

     

    (t)    Sarbanes-Oxley
      Act. There is and has been no failure on the part of the Company, the Company's
      general partner or any of the Company's directors or officers, in their
      capacities as such, to comply in all material respects with any provision of
      the
      Sarbanes-Oxley Act of

    
      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

    

     

    2002,
      as
      in effect at the applicable time, and the rules and regulations promulgated
      in
      connection therewith (the "Sarbanes-Oxley
      Act"),
      including Section 402 related to loans and Sections 302 and 906 related to
      certifications.

     

    (u)    Internal
      Accounting and Disclosure Controls. The Company maintains a system of internal
      accounting controls sufficient to provide reasonable assurance that (i)
      transactions are executed in accordance with management's general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset and liability accountability, (iii)
      access to assets or incurrence of liabilities is permitted only in accordance
      with management's general or specific authorization and (iv) the recorded
      accountability for assets and liabilities is compared with the existing assets
      and liabilities at reasonable intervals and appropriate action is taken with
      respect to any difference. The Company maintains disclosure controls and
      procedures (as such term is defined in Rule 13a-14 under the 1934 Act) that
      are
      effective in ensuring that information required to be disclosed by the Company
      in the reports that it files or submits under the 1934 Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      rules and forms of the SEC, including, without limitation, controls and
      procedures designed in to ensure that information required to be disclosed
      by
      the Company in the reports that it files or submits under the 1934 Act is
      accumulated and communicated to the Company's management, including its
      principal executive officer or officers and its principal financial officer
      or
      officers, as appropriate, to allow timely decisions regarding required
      disclosure. Except as set forth on Schedule 3(u), during the twelve months
      prior
      to the date hereof, the Company has not received any notice or correspondence
      from its independent accountant relating to any potential material weakness
      in
      any part of the system of internal accounting controls of the
      Company.

     

    (v)    Equity
      Capitalization. As of the date hereof, the authorized equity securities of
      the
      Company consists of (i) 69,358,353 Units, of which as of the date hereof,
      61,856,830 are issued and outstanding, 1,137,200 Units are issued and held
      as
      treasury units, no Units are reserved for issuance pursuant to the Company's
      option and purchase plans and no Units are reserved for issuance pursuant to
      securities (other than the Notes) exercisable or exchangeable for, or
      convertible into, Units and (ii) 12,100,000 preferred units, of which as of
      the
      date hereof, 11,907,073 of which is issued and outstanding or reserved for
      issuance. The Conversion Units shall have those rights, preferences, privileges
      and restrictions governing the Units as set forth in the Limited Partnership
      Agreement. All of such outstanding Units have been validly issued. Except as
      disclosed in Schedule 3(v): (i) none of the Company's equity securities is
      subject to preemptive rights or any other similar rights or any liens or
      encumbrances suffered or permitted by the Company; (ii) there are no outstanding
      options, warrants, scrip, rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities or rights convertible into,
      or
      exercisable or exchangeable for, any equity securities of the Company, or
      contracts, commitments, understandings or arrangements by which the Company
      is
      or may become bound to issue additional equity securities of the Company or
      options, warrants, scrip, rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities or rights convertible into,
      or
      exercisable or exchangeable for, any equity securities of the Company; (iii)
      there are no agreements or arrangements under which the Company is obligated
      to
      register the sale of any of its equity securities under the 1933 Act (except
      pursuant to the Registration Rights Agreement); (iv) there are no outstanding
      equity securities of the Company which contain any redemption or similar
      provisions, and there are no contracts, commitments, understandings or
      arrangements by which the Company is or may become bound to redeem an equity
      security of the Company; (v) there are no equity securities containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; and (vi) the

    
      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

    

     

    Company
      does not have any stock appreciation rights or "phantom stock" or "phantom
      equity" plans or agreements or any similar plan or agreement.

     

    (w)    Absence
      of Litigation. Except as set forth in Schedule 3(w) and as set forth in the
      "Risk Factors" and "Legal Proceedings" sections of the Company's Annual Report
      on Form 10-K/A for the fiscal year ended December 31, 2006, there is no action,
      suit, proceeding, inquiry or investigation before or by the Principal Market,
      any court, public board, government agency, self-regulatory organization or
      body
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, the Units or any of the Company's officers or directors in their
      capacities as such, whether of a civil or criminal nature of otherwise which
      could reasonably be expected to have a Material Adverse Effect.

     

    (x)    Tax
      Status. The Company (i) has made or filed all foreign, federal and state income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject except where the failure to so file could not reasonably
      be expected to have a Material Adverse Effect, (ii) has paid all taxes and
      other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith except where failure to pay such taxes could
      not
      reasonably be expected to have a Material Adverse Effect and (iii) to the extent
      required by GAAP, has set aside on its books provision reasonably adequate
      for
      the payment of all taxes for periods subsequent to the periods to which such
      returns, reports or declarations apply. There are no unpaid taxes in any
      material amount claimed to be due by the taxing authority of any jurisdiction,
      and the officers of the Company have not received written notice of any such
      claim.

     

    (y)    Ranking
      of Notes. Except as set forth on Schedule 3(y), no Indebtedness of the Company
      is expressly senior to the Notes in right of payment, whether with respect
      of
      payment of redemptions, interest, damages or upon liquidation or dissolution
      or
      otherwise.

     

    (z)    Independent
      Accountants. Grant Thornton LLP, who have certified the consolidated financial
      statements of the Company as of December 31, 2006, are independent public
      accountants within the meaning of the 1933 Act.

     

    (aa)    Off
      Balance Sheet Arrangements. There is no transaction, arrangement, or other
      relationship between the Company and an unconsolidated or other off balance
      sheet entity that is required to be disclosed by the Company in its 1934 Act
      filings and is not so disclosed or that otherwise would be reasonably likely
      to
      have a Material Adverse Effect.

     

    (bb)    Investment
      Company. The Company is not and, after giving effect to the offering and sale
      of
      the Securities and the application of the proceeds thereof, will not become
      an
      "investment company" or an "affiliated person" of, or "promoter" or "principal
      underwriter" for an investment company, within the meaning of the Investment
      Company Act of 1940, as amended.

     

    (cc)    Manipulation
      of Price. The Company has not, and to its knowledge no one acting on its behalf
      has, 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.

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

    

     

    (dd)    Transfer
      Taxes. On each applicable Closing Date, all stock transfer or other taxes (other
      than income or similar taxes) which are required to be paid in connection with
      the sale and transfer of the Securities to be sold to each Buyer hereunder
      will
      be, or will have been, fully paid or provided for by the Company, and all laws
      imposing such taxes will be or will have been complied with.

     

    (ee)    Disclosure.
      All disclosure provided to the Buyers regarding the Company and its
      Subsidiaries, their business and the transactions contemplated hereby,
      considered as a whole, including the Schedules to this Agreement, furnished
      by
      or on behalf of the Company 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 the light of the circumstances
      under which they were made, not misleading. No event or circumstance has
      occurred or information exists with respect to the Company or its business,
      properties, operations or financial conditions, which, under applicable law,
      rule or regulation, requires public disclosure or announcement by the Company
      but which has not been so publicly announced or disclosed. 

     

    (ff)    MLP
      Status. The Company met for the taxable year ended December 31, 2005, and the
      Company expects to meet for the taxable years ending December 31, 2006 and
      December 31, 2007, the gross income requirements of Section 7704(c)(2) of the
      Code, and accordingly the Company does not reasonably expect to be, taxed as
      a
      corporation for U.S. federal income tax purposes or for applicable tax purposes.
      The Company indicated in the Form K-1 for the year ended December 31, 2006,
      that
      its equityholders may be subject to state income taxes in the jurisdictions
      set
      forth on Schedule 3(ff) attached hereto. 

     

    4.    COVENANTS.

     

    (a)    Best
      Efforts. Each party shall use its best efforts timely to satisfy each of the
      conditions to be satisfied by it as provided in Sections 5 and 6 of this
      Agreement.

     

    (b)    Form
      D
      and Blue Sky. The Company agrees to file a Form D with respect to the Securities
      as required under Regulation D. The Company shall, on or before each Closing
      Date, 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
      Buyers at such Closing pursuant to this Agreement under applicable securities
      or
      "Blue Sky" laws of the states of the United States (or to obtain an exemption
      from such qualification). The Company shall make all filings and reports
      relating to the offer and sale of the Securities required under applicable
      securities or "Blue Sky" laws of the states of the United States following
      the
      applicable Closing Date. 

     

    (c)    Financial
      Information. For so long as any Securities remain outstanding and are
      "restricted securities" within the meaning of Rule 144(a)(3) under the 1933
      Act,
      the Company will, during any period in which it is not subject to Section 13
      or
      15(d) under the 1934 Act, make available to each Buyer and any holder of
      Securities in connection with any sale thereof and any prospective purchaser
      of
      Securities and securities analysts, in each case upon request, the information
      specified in, and meeting the requirements of, Rule 144A(d)(4) under the 1933
      Act (or any successor thereto).

     

    (d)    Fees
      and
      Expenses. 

     

    (i)    The
      Company shall be responsible for the payment of any placement agent's fees
      or
      commissions, financial advisory fees, or broker's commissions

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

       

    

    (other
      than for Persons engaged by any Buyer) relating to or arising out of the
      transactions contemplated hereby. The Company shall pay, and hold each Buyer
      harmless against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any claim relating to any such payment. In addition to the foregoing (and
      without duplication), the Company agrees to pay Portside Growth &
Opportunity Fund (an Initial Buyer) ("Portside") or
      its
      designee(s) for all reasonable costs and expenses, not to exceed $275,000,
      incurred in connection with the transactions contemplated by the Transaction
      Documents (including all reasonable legal fees and disbursements in connection
      therewith, documentation and implementation of the transactions contemplated
      by
      the Transaction Documents and due diligence in connection therewith), which
      amount may be withheld by Portside from its Initial Notes Purchase Price at
      the
      Initial Closing. Except as otherwise set forth in the Transaction Documents,
      each party to this Agreement shall bear its own expenses in connection with
      the
      sale of the Securities to the Buyers.

     

    (ii)    Whether
      or not the transactions contemplated in this Agreement are consummated or this
      Agreement is terminated, the Company shall pay or cause to be paid all costs
      and
      expenses incident to the performance of its obligations hereunder, including
      without limitation, all fees, costs and expenses (A) incident to the
      preparation, issuance, execution, authentication and delivery of the Securities,
      including any expenses of the Trustee, (B) incurred in connection with the
      registration or qualification and determination of eligibility for investment
      of
      the Securities under the laws of such jurisdictions as the Buyers may reasonably
      designate, (C) in connection with the admission for trading of the Notes on
      any
      securities exchange or inter-dealer quotation system (as well as in connection
      with the admission of the Notes for trading in the Private Offerings, Resales
      and Trading through Automatic Linkages ("PORTAL")
      system
      of the National Association of Securities Dealers, Inc. ("NASD") or
      any
      appropriate market system) and (D) in connection with satisfying its obligations
      under Section 4(b).

     

    (e)    Pledge
      of
      Securities. The Company acknowledges and agrees that the Securities may be
      pledged by a Holder (as defined in the Registration Rights Agreement) in
      connection with a bona fide margin agreement or other loan or financing
      arrangement that is secured by the Securities. The pledge of Securities shall
      not be deemed to be a transfer, sale or assignment of the Securities hereunder,
      and no Buyer effecting a pledge of Securities shall be required to provide
      the
      Company with any notice thereof or otherwise make any delivery to the Company
      pursuant to this Agreement or any other Transaction Document. The Company hereby
      agrees to execute and deliver such documentation as a pledgee of the Securities
      may reasonably request in connection with a pledge of the Securities to such
      pledgee by a Buyer.

     

    (f)    Disclosure
      of Transactions and Other Material Information. On or before 8:30 a.m., New
      York
      Time, on April
      5,
      2007, the Company shall issue a press release (the "Initial
      Press Release")
      and
      file a Current Report on Form 8-K describing the terms of the transactions
      contemplated by the Transaction Documents in the form required by the 1934
      Act
      and attaching the Transaction Documents as exhibits to such filing (including
      all attachments, the "Initial
      8-K Filing").
      On or
      before 8:30 a.m., New York City Time, on the first Business Day following each
      Additional Closing Date, the Company shall issue a press release (each an
      "Additional
      Press Release",
      and
      together with the Initial Press Release the "Press
      Releases")
      and
      file a Current Report on Form 8-K with the SEC describing the

    
      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

    

     

    transactions
      to be consummated pursuant thereto (the "Additional
      8-K Filing,"
      and
      together with the Initial 8-K Filing, the "8-K
      Filings").
      The
      Company shall not, and shall cause its officers, directors, employees and
      agents, not to, provide any Buyer with any material, nonpublic information
      regarding the Company or any of its subsidiaries from and after the filing
      of
      the Initial 8-K Filing with the SEC without the express written consent of
      such
      Buyer. Subject to the foregoing, neither the Company, its Subsidiaries nor
      any
      Buyer shall issue any press releases or any other public statements with respect
      to the transactions contemplated hereby; provided, however, that the Company
      shall be entitled, without the prior approval of any Buyer, to make any press
      release or other public disclosure with respect to such transactions (i) in
      substantial conformity with the 8-K Filings and contemporaneously therewith
      and
      (ii) as is required by applicable law and regulations (provided that in the
      case
      of clause (i) each Buyer shall be consulted by the Company in connection with
      any such press release or other public disclosure prior to its release). Without
      the prior written consent of any applicable Buyer, other than in the 8-K Filings
      and the Press Releases (which shall be subject to the reasonable approval of
      the
      Initial Buyers), neither the Company nor any of its subsidiaries or affiliates
      shall disclose the name of such Buyer in any public filing, public announcement,
      press release or similar public disclosure, unless such disclosure is required
      by law, regulation or the Principal Market.

     

    (g)    Additional
      Notes. For so long as any Notes remain outstanding, the Company will not issue
      any Notes under the Indenture other than as contemplated hereby and
      thereby.

     

    (h)    Reservation
      of Units. The Company shall take all action necessary to at all times have
      authorized, and reserved for the purpose of issuance, free of pre-emptive
      rights, after the Initial Closing Date, a number of
      Units
      sufficient for the purpose of enabling the Company to satisfy all obligations
      to
      issue the Conversion Units upon
      conversion of all of the outstanding Notes.

     

    (i)    Regulation
      M. The Company will not take any action prohibited by Regulation M under the
      1934 Act, in connection with the distribution of the Securities contemplated
      hereby.

     

    (j)    General
      Solicitation. Neither the Company nor any person acting on behalf of the Company
      will solicit any offer to buy or offer or sell the Securities by means of any
      form of general solicitation or general advertising within the meaning of
      Regulation D, including: (i)
      any
      advertisement, article, notice or other communication published in any
      newspaper, magazine or similar medium or broadcast over television or radio;
      and
      (ii)
      any
      seminar or meeting whose attendees have been invited by any general solicitation
      or general advertising.

     

    (k)    Integration.
      Neither the Company nor any person acting on behalf of the Company will sell,
      offer for sale or solicit offers to buy or otherwise negotiate in respect of
      any
      security (as defined in the 1933 Act) which will be integrated with the sale
      of
      the Securities or the Conversion Units in a manner which would require the
      registration under the 1933 Act of the Securities or
      require equityholder approval under the rules and regulations of the
Principal
      Market.

     

    (l)    Lock-Up.

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

       

    

    (i)    For
      purposes of this Section 4(l), the following definitions shall
      apply.

     

    (1)    "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for Units or other equity securities of the Company.

     

    (2)    "Options"
      means
      any rights, warrants or options to subscribe for or purchase Units, other equity
      securities of the Company or Convertible Securities.

     

    (3)    "Unit
      Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    (4)    From
      the
      date hereof until the date that is ninety (90) days following the Initial
      Closing Date, the Company hereby agrees that, it will not sell, agree to sell,
      or contract to sell, any Units or any Unit Equivalents. The foregoing sentence
      shall not apply to (A) the sale of the Notes as contemplated by this Agreement
      or the issuance of the Conversion Units, (B) in connection with any employee
      benefit plan which has been approved by the Board of Directors of the general
      partner of the Company, pursuant to which the Company's securities may be issued
      to any employee, officer or director for services provided to the Company,
      (C)
      the issuance by the Company of any Units upon the exercise of an option or
      warrant or the conversion of a security outstanding on the date hereof (provided
      that the terms relating to pricing or the number of Units issuable upon exercise
      of such options or warrants are not amended or modified in any manner after
      the
      date hereof) or an option or warrant issued or granted in compliance with this
      paragraph, (D) the sale of Units in a bona fide firm commitment
      underwritten offering with a nationally recognized underwriter if the price
      per
      share in such offering exceeds 115% of the Conversion Price (other than an
      "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act and
      "equity lines"); (E) the entry into an agreement to issue and the issuance
      of, Units, other equity securities of the Company or Unit Equivalents in
      exchange for assets or equity securities of another entity to be acquired by
      the
      Company, the
      primary purpose of which is not to raise equity capital
      and (F)
      the issuance of preferred units distributed as dividends on preferred units
      which are currently outstanding. In addition, the Company agrees to obtain
      lock-up agreements with each of its executive officers and directors who own
      equity securities of the Company in substantially the form attached hereto
      as
Exhibit
      G.
      

     

    5.    CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL. 

     

    (a)    Initial
      Closing Date. The obligation of the Company hereunder to issue and sell the
      Initial Notes to each Initial Buyer at the Initial Closing is subject to the
      satisfaction, at or before the Initial Closing Date, of each of the following
      conditions, provided that these conditions are for the Company's sole benefit
      and may be waived by the Company at any time in its sole discretion by providing
      each Initial Buyer with prior written notice thereof:

     

    (i)    Such
      Initial Buyer shall have executed each of the Transaction Documents to which
      it
      is a party and delivered the same to the Company.

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

       

    

    (ii)    Such
      Initial Buyer and each other Initial Buyer shall have delivered to the Company
      the Initial Notes Purchase Price (less any amounts withheld pursuant to Section
      4(d)) for the Initial Notes being purchased by such Initial Buyer at the Initial
      Closing by wire transfer of immediately available funds pursuant to the wire
      instructions provided by the Company.

     

    (iii)    The
      representations and warranties of such Initial Buyer shall be true and correct
      in all material respects as of the date when made and as of the Initial Closing
      Date as though made at that time (except for representations and warranties
      that
      speak as of a specific date), and such Initial Buyer shall have performed,
      satisfied and complied in all material respects with the covenants, agreements
      and conditions required by this Agreement to be performed, satisfied or complied
      with by such Initial Buyer at or prior to the Initial Closing Date.

     

    (b)    Additional
      Closing Dates. The obligation of the Company hereunder to issue and sell
      Additional Notes to each of the applicable Additional Buyers at each Additional
      Closing is subject to the satisfaction, at or before the applicable Additional
      Closing Date, of each of the following conditions, provided that these
      conditions are for the Company's sole benefit and may be waived by the Company
      at any time in its sole discretion by providing each Additional Buyer with
      prior
      written notice thereof:

     

    (i)    Such
      Additional Buyer and each other applicable Additional Buyer shall have delivered
      to the Company the purchase price contemplated pursuant to Section 1(d) for
      the
      Additional Notes being purchased by such Additional Buyer at such Additional
      Closing by wire transfer of immediately available funds pursuant to the wire
      instructions provided by the Company.

     

    (ii)    The
      representations and warranties of such Additional Buyer shall be true and
      correct in all material respects as of the date when made and as of such
      Additional Closing Date as though made at that time (except for representations
      and warranties that speak as of a specific date), and such Additional Buyer
      shall have performed, satisfied and complied in all material respects with
      the
      covenants, agreements and conditions required by this Agreement to be performed,
      satisfied or complied with by such Additional Buyer at or prior to such
      Additional Closing Date.

     

    6.    CONDITIONS
      TO EACH BUYER'S OBLIGATION TO PURCHASE.

     

    (a)    Initial
      Closing Date. The obligation of each Initial Buyer hereunder to purchase the
      Initial Notes at
      the
      Initial Closing is subject to the satisfaction, at or before the Initial Closing
      Date, of each of the following conditions, provided that these conditions are
      for each Initial Buyer's sole benefit and may be waived by such Initial Buyer
      at
      any time in its sole discretion by providing the Company with prior written
      notice thereof: 

     

    (i)    The
      Company shall have executed and delivered to such Initial Buyer (i) each of
      the Transaction Documents and (ii) the Initial Notes (for the

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    account
      of such Initial Buyer as such Initial Buyer shall instruct) being purchased
      by
      such Initial Buyer at the Initial Closing pursuant to this
      Agreement.

     

    (ii)    Such
      Initial Buyer shall have received the opinion of Proskauer Rose LLP, the
      Company's outside counsel, dated as of the Initial Closing Date, in
      substantially the form of Exhibit
      D
      attached
      hereto.

     

    (iii)    The
      Company shall have delivered to such Initial Buyer a certificate evidencing
      the
      formation and good standing of the Company issued by the Secretary of State
      of
      Delaware, as of a date within ten (10) days of the Initial Closing
      Date.

     

    (iv)    The
      Company shall have delivered to such Initial Buyer a certificate evidencing
      the
      Company's qualification as a foreign entity and good standing issued by the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business and is required to so qualify, as of a date within
      ten
      (10) days of the Initial Closing Date. 

     

    (v)    The
      Company shall have delivered to such Initial Buyer a certified copy of the
      Certificate of Limited Partnership as certified by the Secretary of State of
      the
      State of Delaware within ten (10) days of the Initial Closing Date.

     

    (vi)    The
      Company shall have delivered to such Initial Buyer a certificate, executed
      by
      the Secretary of the general partner of the Company and dated as of the Initial
      Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
      by the Company's general partner in a form reasonably acceptable to such Initial
      Buyer, (ii) the Certificate of Limited Partnership and (iii) the Limited
      Partnership Agreement, each as in effect at the Initial Closing, in the form
      attached hereto as Exhibit E.

     

    (vii)    The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Initial Closing
      Date as though made at that time (except for representations and warranties
      that
      speak as of a specific date, which shall be true and correct as of such
      specified date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      the Transaction Documents to be performed, satisfied or complied with by the
      Company at or prior to the Initial Closing Date. Such Initial Buyer shall have
      received a certificate, executed by the President of the general partner of
      the
      Company, dated as of the Initial Closing Date, to the foregoing effect in the
      form attached hereto as Exhibit
      F.

     

    (viii)    The
      Company shall have delivered to such Initial Buyer a letter from the Company's
      transfer agent certifying the number of Units outstanding as of a date within
      five (5) days of the Initial Closing Date.

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

       

    

    (ix)    The
      Units
      (i) shall be designated for quotation or listed on the Principal Market and
      (ii)
      shall not have been suspended, as of the Initial Closing Date, by the SEC or
      the
      Principal Market from trading on the Principal Market nor shall suspension
      by
      the SEC or the Principal Market have been threatened, as of the Initial Closing
      Date, either (1)
      in
      writing by the SEC or the Principal Market or (2)
      by
      falling below the minimum listing maintenance requirements of the Principal
      Market. 

     

    (x)    The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    (xi)    The
      Notes
      shall have been approved for trading on PORTAL, subject only to notice of
      issuance at or prior to the time of purchase.

     

    (xii)    The
      Company shall have delivered to such Initial Buyer lock-up agreements with
      each
      of the Company's executive officers and directors who own equity in the Company
      in substantially the form attached hereto as Exhibit
      G.

     

    (b)    Additional
      Closing Dates. The obligation of each Additional Buyer hereunder to purchase
      the
      Additional Notes at each Additional Closing is subject to the satisfaction,
      at
      or before the applicable Additional Closing Date, of each of the following
      conditions, provided that these conditions are for each applicable Additional
      Buyer's sole benefit and may be waived by such Additional Buyer at any time
      in
      its sole discretion by providing the Company with prior written notice
      thereof:

     

    (i)    The
      Company shall have executed and delivered to such Additional Buyer the
      Additional Notes (for the account of such Additional Buyer as such Additional
      Buyer shall instruct), which are being purchased by such Additional Buyer at
      such Additional Closing pursuant to this Agreement.

     

    (ii)    Such
      Additional Buyer shall have received the opinion of Proskauer Rose LLP, the
      Company's outside counsel, dated as of such Additional Closing Date, in
      substantially the form of Exhibit
      D
      attached
      hereto.

     

    (iii)    The
      Company shall have delivered to such Additional Buyer a certificate evidencing
      the formation and good standing of the Company issued by the Secretary of State
      of Delaware, as of a date within ten (10) days of such Additional Closing
      Date.

     

    (iv)    The
      Company shall have delivered to such Additional Buyer a certificate evidencing
      the Company's qualification as a foreign entity and good standing issued by
      the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business and is required to so qualify, as of a date within
      ten
      (10) days of such Additional Closing Date.

     

    (v)    The
      Company shall have delivered to such Additional Buyer a certified copy of the
      Certificate of Limited Partnership as certified by the Secretary of State of
      the
      State of Delaware within ten (10) days of such Additional Closing
      Date.

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

    (vi)    The
      Company shall have delivered to such Additional Buyer a certificate, executed
      by
      the Secretary of the general partner of the Company and dated as of such
      Additional Closing Date, as to (i) the resolutions consistent with Section
      3(b)
      as adopted by the Company's general partner in a form reasonably acceptable
      to
      such Additional Buyer, (ii) the Certificate of Limited Partnership and (iii)
      the
      Limited Partnership Agreement, each as in effect at such Additional Closing,
      in
      the form attached hereto as Exhibit
      E.

     

    (vii)    The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of such Additional
      Closing Date as though made at that time (except for representations and
      warranties that speak as of a specific date) and the Company shall have
      performed, satisfied and complied in all material respects with the covenants,
      agreements and conditions required by the Transaction Documents to be performed,
      satisfied or complied with by the Company at or prior to such Additional Closing
      Date. Such Additional Buyer shall have received a certificate, executed by
      the
      President of the general partner of the Company, dated as of such Additional
      Closing Date, to the foregoing effect in the form attached hereto as
Exhibit
      F.

     

    (viii)    The
      Company shall have delivered to such Additional Buyer a letter from the
      Company's transfer agent certifying the number of Units outstanding as of a
      date
      within five days of such Additional Closing Date.

     

    (ix)    The
      Units
      (I) shall be designated for quotation or listed on the Principal Market and
      (II)
      shall not have been suspended, as of such Additional Closing Date, by the SEC
      or
      the Principal Market from trading on the Principal Market nor shall suspension
      by the SEC or the Principal Market have been threatened, as of such Additional
      Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
      by
      falling below the minimum maintenance requirements of the Principal
      Market.

     

    (x)    The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    (xi)    No
      Event
      of Default (as defined in the Notes) shall have occurred and be
      continuing.

     

    (xii)    The
      Notes
      to be issued at such Additional Closing shall have been approved for trading
      on
      PORTAL, subject only to notice of issuance at or prior to the time of purchase.
      

     

    7.    TERMINATION.

     

    In
      the
      event that the Initial Closing shall not have occurred with respect to an
      Initial Buyer on or before five (5) Business Days from the date hereof due
      to
      the Company's or such Initial Buyer's failure to satisfy the conditions set
      forth in Sections 5 and 6 above (and the nonbreaching party's failure to waive
      such unsatisfied condition(s)), the nonbreaching party shall have the option
      to
      terminate this Agreement with respect to such breaching party at the close
      of
      business on such date without liability of any party to any other party;
provided,
      however,
      that
      if

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

    this
      Agreement is terminated pursuant to this Section 8, (a) the Company shall remain
      obligated to reimburse the non-breaching Initial Buyers for the expenses
      described in Section 4(d) above, and (b) such termination shall not relieve
      any
      party from any liability it may have resulting from such party's breach of
      this
      Agreement prior to such termination.

     

    8.    MISCELLANEOUS.

     

    (a)    Governing
      Law; Jurisdiction; Jury Trial. All questions concerning the construction,
      validity, enforcement and interpretation of this Agreement shall be governed
      by
      the internal laws of the State of New York, without giving effect to any choice
      of law or conflict of law provision or rule (whether of the State of New York
      or
      any other jurisdictions) that would cause the application of the laws of any
      jurisdictions other than the State 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,
      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 brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. 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 to such party at the address for such 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 manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    (b)    Counterparts.
      This Agreement may be executed in two or more identical counterparts, all of
      which 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; provided that a facsimile signature shall be considered due execution
      and
      shall be binding upon the signatory thereto with the same force and effect
      as if
      the signature were an original, not a facsimile signature.

     

    (c)    Headings.
      The headings of this Agreement are for convenience of reference and shall not
      form part of, or affect the interpretation of, this Agreement.

     

    (d)    Severability.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    (e)    Entire
      Agreement; Amendments. This Agreement and the other Transaction Documents
      supersede all other prior oral or written agreements between the Buyers, the
      Company, their affiliates and Persons acting on their behalf with respect to
      the
      matters contemplated hereby, and this Agreement, the other Transaction Documents
      and the instruments referenced herein and therein contain the entire
      understanding of the parties with respect to the matters covered herein and
      therein and, except as specifically set forth herein or therein, neither the
      Company nor any Buyer makes any representation,

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

    

     

    warranty,
      covenant or undertaking with respect to such matters. No provision of this
      Agreement may be amended other than by an instrument in writing signed by the
      Company and the holders of at least a majority of the aggregate principal amount
      of the Notes issued and issuable hereunder, and any amendment to this Agreement
      made in conformity with the provisions of this Section 9(e) shall be binding
      on
      all Buyers and holders of Notes, as applicable. No provision hereof may be
      waived other than by an instrument in writing signed by the party against whom
      enforcement is sought. No such amendment shall be effective to the extent that
      it applies to less than all of the holders of the applicable Securities then
      outstanding. 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 also is offered to all of the parties
      to
      the Transaction Documents or holders of Notes, as the case may be. The Company
      has not, directly or indirectly, made any agreements with any Buyers relating
      to
      the terms or conditions of the transactions contemplated by the Transaction
      Documents except as set forth in the Transaction Documents. 

     

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

     

    If
      to the
      Company:

     

    American
      Real Estate Partners, L.P.

    767
      Fifth
      Avenue

    New
      York,
      New York 10153

    Telephone: 
      (914)
      614-7077

    Facsimile:
      (646)
      365-2833

    Email: 
      fbuebel@arep.com

    Attention:
      Felicia
      Buebel

     

    Copy
      to:

    

    Proskauer
      Rose LLP

    1585
      Broadway

    New
      York,
      New York 10036-8299

    Telephone:
      (212)
      969-3580

    Facsimile:
      (212)
      969-2900

    Email: 
      iblumenstein@proskauer.com

    Attention:
      Ian
      B.
      Blumenstein

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers, 

    
      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

    

    
       

      with
        a
        copy (for informational purposes only) to:

       

    

    Schulte
      Roth & Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone:
      (212)
      756-2000

    Facsimile:
      (212)
      593-5955

    Email:
      eleazer.klein@srz.com

    Attention:
      Eleazer
      N. Klein, Esq.

    

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g)    Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of
      the parties and their respective successors and assigns, including any
      purchasers of the Notes. The Company shall not assign this Agreement or any
      rights or obligations hereunder without the prior written consent of the holders
      of at least a majority of the aggregate principal amount of the Notes issued
      and
      issuable hereunder. A Buyer may assign some or all of its rights hereunder
      without the consent of the Company (other than any portion of the First Option
      and Second Option to purchase Additional Notes, which may only be assigned
      to
      the investment advisor, or funds managed by the investment advisor or parent
      of
      the investment advisor, of each Initial Buyer), in which event such assignee
      shall be deemed to be a Buyer hereunder with respect to such assigned rights.
      

     

    (h)    No
      Third
      Party Beneficiaries. This Agreement is intended for the benefit of the parties
      hereto and their respective permitted successors and assigns, and is not for
      the
      benefit of, nor may any provision hereof be enforced by, any other
      Person.

     

    (i)    Survival.
      Unless this Agreement is terminated under Section 8, the representations and
      warranties of the Company and the Buyers contained in Sections 2 and 3 and
      the
      agreements and covenants set forth in Sections 4 and 9 shall survive the each
      Closing and delivery and exercise of the Securities, as applicable. Each Buyer
      shall be responsible only for its own representations, warranties, agreements
      and covenants hereunder.

     

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

     

    (k)    Indemnification.
      ii) In
      consideration of each Buyer's execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company's other obligations under the Transaction Documents, the Company shall
      defend, protect,

    
      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

    

     

    indemnify
      and hold harmless each Buyer and each other holder of the Securities and all
      of
      their stockholders, partners, members, officers, directors, employees and direct
      or indirect investors (to the extent the Buyer has transferred Securities to
      such investors) and any of the foregoing Persons' agents or other
      representatives (including, without limitation, those retained in connection
      with the transactions contemplated by this Agreement) (collectively, the
      "Indemnitees"),
      as
      incurred, from and against any and all actions, causes of action, suits, claims,
      losses, costs, penalties, fees, liabilities and damages, and expenses in
      connection therewith (irrespective of whether any such Indemnitee is a party
      to
      the action for which indemnification hereunder is sought), and including
      reasonable attorneys' fees and disbursements (the "Indemnified
      Liabilities"),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents, (b) any breach of any covenant, agreement
      or obligation of the Company contained in the Transaction Documents or (c)
      any
      cause of action, suit or claim brought or made against such Indemnitee by a
      third party (including for these purposes a derivative action brought on behalf
      of the Company) and arising out of or resulting from the execution, delivery,
      performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby. To the
      extent that the foregoing undertaking by the Company may be unenforceable for
      any reason, the Company shall make the maximum contribution to the payment
      and
      satisfaction of each of the Indemnified Liabilities which is permissible under
      applicable law. 

     

    (ii)    Promptly
      after receipt by an Indemnitee under this Section 9(k) of notice of the
      commencement of any action or proceeding (including any governmental action
      or
      proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
      claim for indemnification in respect thereof is to be made against any
      indemnifying party under this Section 9(k), deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, to assume control of the defense thereof with counsel reasonably
      satisfactory to such indemnified party; provided, however, that an Indemnitee
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one counsel for all Indemnitees to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel to the Indemnitee, the representation
      by such counsel of the Indemnitee and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnitee and any other party represented by such counsel in such proceeding.
      Legal counsel referred to in the immediately preceding sentence shall be
      selected by the Buyers holding at least a majority of the aggregate principal
      amount of the Notes issued and issuable hereunder. The Indemnitee shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or Indemnified Liabilities by the indemnifying
      party and shall furnish to the indemnifying party all information reasonably
      available to the Indemnitee that relates to such action or Indemnified
      Liabilities. The indemnifying party shall keep the Indemnitee fully apprised
      at
      all times as to the status of the defense or any settlement negotiations with
      respect thereto. No indemnifying party shall be liable for any settlement of
      any
      action, claim or proceeding effected without its prior written consent,
      provided, however, that the indemnifying party shall not unreasonably withhold,
      delay or condition its consent. No indemnifying party shall, without the prior
      written consent of the Indemnitee, which consent shall not be unreasonably
      withheld conditioned or delayed, consent to entry of any judgment or enter
      into
      any settlement or other

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    compromise
      which does not include as an unconditional term thereof the giving by the
      claimant or plaintiff to such Indemnitee of a release from all liability in
      respect to such Indemnified Liabilities or litigation. Following indemnification
      as provided for hereunder, the indemnifying party shall be subrogated to all
      rights of the Indemnitee with respect to all third parties, firms or
      corporations relating to the matter for which indemnification has been made.
      The
      failure to deliver written notice to the indemnifying party within a reasonable
      time of the commencement of any such action shall not relieve such indemnifying
      party of any liability to the Indemnitee under this Section 9(k), except to
      the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    (iii)    The
      indemnification required by this Section 9(k) shall be made by periodic payments
      of the amount thereof during the course of the investigation or defense, as
      and
      when bills are received or Indemnified Liabilities are incurred.

     

    (iv)    The
      indemnity agreements contained herein shall be in addition to (x) any cause
      of
      action or similar right of the Indemnitee against the indemnifying party or
      others, and (y) any liabilities the indemnifying party may be subject to
      pursuant to the law.

     

    (v)    Notwithstanding
      the foregoing, in no event shall the Company be liable to any Indemnitee for
      any
      consequential, special, punitive or other indirect damages.

     

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

     

    (m)    Independent
      Nature of Buyers' Obligations and Rights. The obligations of each Buyer under
      any Transaction Document are several and not joint with the obligations of
      any
      other Buyer, and no Buyer shall be responsible in any way for the performance
      of
      the obligations of any other Buyer under any Transaction Document. Nothing
      contained herein or in any other Transaction Document, and no action taken
      by
      any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers
      as a partnership, an association, a joint venture or any other kind of entity,
      or create a presumption that the Buyers are in any way acting in concert or
      as a
      group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents and the Company acknowledges that the Buyers are not
      acting in concert or as a group, and the Company will not assert any such claim,
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Buyer confirms that it has independently
      participated in the negotiation of the transaction contemplated hereby with the
      advice of its own counsel and advisors. Except to the extent otherwise
      specifically set forth in the Transaction Documents, each Buyer shall be
      entitled to independently protect and enforce its rights, including, without
      limitation, the rights arising out of this Agreement or out of any other
      Transaction Documents, and it shall not be necessary for any other Buyer to
      be
      joined as an additional party in any proceeding for such purpose.

     

    [Signature
      Page Follows]

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
              COMPANY:

            
	 
	
              AMERICAN
                REAL ESTATE PARTNERS, L.P.

               

              By:
                American Property Investors, Inc.,

              its
                general partner

               

              By: 
                ______________________________

              Name:

              Title:

            
	
            

    

    

    

     

     

     

     

    [Signature
      Page to Securities Purchase Agreement]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
              BUYERS:

            
	   
	
              PORTSIDE
                GROWTH AND OPPORTUNITY FUND 

               

              By: 
                ______________________________

              Name:

              Title:

            
	
            

    

    

     

     

    
 

     

    [Signature
      Page to Securities Purchase Agreement]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
              BUYERS:

            
	 
	
              HIGHBRIDGE
                INTERNATIONAL LLC

               

              By:
                HIGHBRIDGE CAPITAL MANAGEMENT, LLC

               

              By: 
                ______________________________

              Name:
                Adam J. Chill

              Title:
                Managing Director

            
	 

    

    

     

    

     

     

    [Signature
      Page to Securities Purchase Agreement]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      OF BUYERS

     

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            	 	
              (5)

            
	
              Buyer

            	 	
              Address
                and

              Facsimile
                Number

            	 	
              Aggregate
                Principal Amount of

              Initial
                Notes

            	 	
              Purchase

              Price

            	 	
              Aggregate
                Principal Amount of Additional Notes

            	 	
              Legal
                Representative's 

              Address
                and Facsimile Number

            
	
              Initial
                Buyers

            	 	 	 	 	 	 	 	 	 	 
	
              Portside
                Growth and Opportunity Fund

            	 	
              c/o
                Ramius Capital Group, LLC 

              666
                Third Avenue, 26th Floor

              New
                York, New York 10017

              Attention: 
                Jeffrey Smith

              Owen
                Littman

              Facsimile:    (212)
                845-7999

              Telephone: 
                (212) 845-7955

              Email: 
                jsmith@ramius.com

              olittman@ramius.com

              Residence: 
                Cayman
                Islands

            	 	
              $100,000,000

            	 	
              $100,000,000

            	 	 	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            
	 	 	 	 	 	 	 	 	 	 	 
	
              Highbridge
                International LLC

            	 	
              c/o
                Highbridge Capital

              Management,
                LLC 

              9
                West 57th
                Street, 27th
                Floor

              New
                York, New York 10019

              Attention: 
                Ari J. Storch

              Adam
                J. Chill

              Facsimile:   
                (212) 751-0755

              Telephone:
                (212) 287-4720

              Email: 
                ari.storch@hcmny.com

              adam.chill@hcmny.com

              Residence: 
                Cayman Islands

            	 	
              $100,000,000

            	 	
              $100,000,000

            	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	
              Other
                Buyers

            	 	 	 	 	 	 	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBITS

     

    
      	ExhibitA	
              Indenture

            

    

    
      	ExhibitB	
              Registration
                Rights Agreement

            

    

    
      	ExhibitC	
              Form
                of Joinder Agreement

            

    

    
      	ExhibitD	
              Form
                of Outside Company Counsel Opinion

            

    

    
      	ExhibitE	
              Form
                of Secretary's Certificate

            

    

    
      	ExhibitF	
              Form
                of Officer's Certificate

            

    

    
      	ExhibitG	
              Form
                of Lock-Up Agreement

            

    

     

    SCHEDULES

     

    
      	Schedule3(o)	
              Absence
                of Certain Changes

            

    

    
      	Schedule3(u)	
              Internal
                Accounting and Disclosure Controls

            

    

    
      	Schedule3(v)	
              Capitalization

            

    

    
      	Schedule3(w)	
              Litigation

            

    

    
      	Schedule3(y)	
              Ranking

            

    

    
      	Schedule3(ff)	
              MLP
                Status

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}]]