Document:

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Exhibit 4.19

                          SECURITIES PURCHASE AGREEMENT

                  THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between ADVANCED TECHNOLOGY
INDUSTRIES, INC., a Delaware corporation, with headquarters located at 211
Madison Avenue, #28B, New York, New York 10016 (the "Company"), and each
individual or entity (other than the Company) named on a signature page hereto
(as used herein, each such signatory is referred to as the "Lender" or a
"Lender") under such agreement and the Transaction Agreements, as defined below,
referred to therein).

                              W I T N E S S E T H:

                  WHEREAS, the Company and the Lender are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales under Regulation D as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and

                  WHEREAS, the Lender wishes to lend funds to the Company,
subject to and upon the terms and conditions of this Agreement and acceptance of
this Agreement by the Company, the repayment of which will be represented by 9%
Convertible Debentures of the Company (the "Convertible Debentures"), which
Convertible Debentures will be convertible into shares of Common Stock of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Convertible Debentures, together with the Warrants (as defined below)
exercisable for the purchase of shares of Common Stock;

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

         1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

                  a.       PURCHASE.

                  (i) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements, the undersigned hereby agrees to loan to the
Company the principal amount set forth on the Lender's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Lenders of One Hundred Thousand Dollars ($100,000.00). The obligation to
repay the loan from the Lender shall be evidenced by the Company's issuance of
one or more Convertible Debentures to the Lender in such principal amount (the
"Debentures"). Each Debenture (i) shall provide for a conversion price (the
"Conversion Price"), which price may be adjusted from time to as provided in the
Debenture or in the other Transaction Agreements, (ii) shall have the terms and
conditions of, and be substantially in the form attached hereto as ANNEX I and
(iii) shall have such number of Warrants attached as provided in Section 4(f)
below. The loan to be made by the Lender and the issuance of the Debentures and
Warrants to the Lender are sometimes referred to herein and in the other
Transaction Agreements as the purchase and sale of the Debentures and Warrants.

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                  (ii) The Purchase Price to be paid by the Lender shall be
equal to the face amount of the Debentures being purchased on the relevant
Closing Date (as defined below) and shall be payable in United States Dollars.

                  b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:

                  (i) "Affiliate" means, with respect to a specific Person
referred to in the erelevant provision, another Person who or which controls or
is controlled by or is under common control with such specified Person.

                  (ii) "Certificate of Incorporation Amendment" means an
amendment to the Company's Certificate of Incorporation to increase the
authorized capital stock of the Company in an amount sufficient such that all of
the Debentures can be converted into shares of Common Stock and all shares of
Common Stock subject to the Warrants can be issued upon exercise of the
Warrants.

                  (iii) "Certificate of Incorporation Amendment Filing Date"
means the date the Company files with the Secretary of State of the State of
Delaware the Certificate of Incorporation Amendment.

                  (iv) "Certificates" means the Debentures and the Warrants,
each duly executed by the Company and issued on the Closing Date (as defined
below) in the name of the Lender.

                  (v) "Closing Date" means as defined in Section 6 herein.

                  (vi) "Closing Price" means the closing bid price during
regular trading hours of the Common Stock (in U.S. Dollars) on the Principal
Trading Market, as reported by the Reporting Service.

                  (vii) "Company Control Person" means each current director,
executive officer, promoter, and such other Persons as may be deemed in control
of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934
Act (as defined below).

                  (viii) "Company Securities" means shares of Common Stock or
securities convertible into and/or rights exercisable for the issuance of shares
of Common Stock.

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                  (ix) "Conversion Shares" means the shares of Common Stock
issuable upon conversion of the Debentures (including, if relevant, accrued
interest on the Debentures so converted).

                  (x) "Disclosure Letter" means a letter dated the date hereof
from the Company to the Lender arranged in sections corresponding to the
identified Sections of this Agreement; provided that any matter set forth in any
section of the Disclosure Letter shall, unless the context otherwise requires,
be deemed set forth for all purposes of the Disclosure Letter.

                  (xi) "Effective Date" means the effective date of the
Registration Statement.

                  (xi) "Escrow Agent" means the escrow agent identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").

                  (xiii) "Escrow Funds" means the Purchase Price delivered to
the Escrow Agent as contemplated by Sections 1(c) and (d) hereof.

                  (xiv) "Escrow Property" means the Escrow Funds and the
Certificates delivered to the Escrow Agent as contemplated by Section 1(c)
hereof.

                  (xv) "Fixed Conversion Price" shall have the meaning ascribed
to it in the Debenture.

                  (xvi) "Holder" means the Person owning or having the right to
acquire Registrable Securities or any permitted transferee of a Holder.

                  (xvii) "Last Audited Date" means December 31, 2003.

                  (xviii) "Lender Control Person" means each current director,
executive officer, promoter, and such other Persons as may be deemed in control
of the Lender pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934
Act (as defined below).

                  (xix) "Material Adverse Effect" means an event or combination
of events, which individually or in the aggregate, would reasonably be expected
to (w) adversely affect the legality, validity or enforceability of the
Securities or any of the Transaction Agreements, (x) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (y)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Agreements or the transactions
contemplated thereby.

                  (xx) "New Transaction" means the sale by the Company of
Securities consummated after the date hereof; provided that a New Transaction
shall not include (1) the issuance of Company Securities upon the exercise or
conversion of options, warrants or convertible securities outstanding on the
date hereof, (2) the sale of the Securities to the Lender , (3) the issuance of
Company Securities to employees or consultants of the Company or its
subsidiaries or (4) the sale of Company Securities set forth on Schedule 1
hereto.

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                  (xxi) "Person" means any living person or any entity, such as,
but not necessarily limited to, a corporation, partnership or trust.

                  (xxii) "Principal Trading Market" means the OTC Electronic
Bulletin Board .

                  (xxiii) "Registrable Securities" shall have the meaning
ascribed to it in the Registration Rights Agreement.

                  (xxiv) "Registration Statement" means a registration statement
of the Company under the Securities Act covering Registrable Securities.

                  (xxv) "Reporting Service" means Bloomberg LP or if that
service is not then reporting the relevant information regarding the Common
Stock, a comparable reporting service of national reputation selected by the
Holders of more than 50% of the outstanding Debentures at such time and
reasonably acceptable to the Company.

                  (xxvi) "Securities" means the Debentures, the Warrants, and
the Shares.

                  (xxvii) "Shares" means the shares of Common Stock representing
any or all of the Conversion Shares and the Warrant Shares.

                  (xxviii) "State of Incorporation" means Delaware.

                  (xxix) "Trading Day" means any day during which the Principal
Trading Market shall be open for business.

                  (xxx) "Transaction Agreements" means the Securities Purchase
Agreement, the Debentures, the Joint Escrow Instructions, the Registration
Rights Agreement, and the Warrants and includes all ancillary documents referred
to in those agreements.

                  (xxxi) "Variable Conversion Rate" shall have the meaning
ascribed to it in the Debenture. (xxxii) "Warrant Shares" means the shares of
Common Stock issuable upon exercise of the Warrants.

                  c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.

                  (i) The Lender shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.

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                  (ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates, each duly executed on behalf of the
Company and issued in the name of the Lender, to the Escrow Agent.

                  (iii) By signing this Agreement, each of the Lender and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.

                  D. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:

                           Bank of New York
                           350 Fifth Avenue
                           New York, New York 10001

                           ABA# 021000018
                           For credit to the account of Krieger & Prager LLP
                           Account No.:   637-2288475
                           Re:      AVDI Transaction

                  2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.

                  The Lender represents and warrants to, and covenants and
agrees with, the Company as follows:

                  a. Without limiting Lender's right to sell the Shares pursuant
to a Registration Statement or otherwise to sell any of the Securities in
compliance with the 1933 Act, the Lender is purchasing the Securities and will
be acquiring the Shares for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.

                  b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the loss of the entire Purchase
Price.

<PAGE>

                  c. All subsequent offers and sales of the Securities by the
Lender shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to an exemption from registration.

                  d. The Lender understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.

                  e. The Lender and its advisors, if any, have been furnished
with or have been given access to all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Securities and the offer of the Shares which have been requested by
the Lender, including those set forth on ANNEX V hereto. The Lender and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Lender has also
had the opportunity to obtain and to review the Company's filings on EDGAR
listed on ANNEX VII hereto (the documents listed on such Annex VII, to the
extent available on EDGAR or otherwise provided to the Lender as indicated on
said Annex VII, collectively, the "Company's SEC Documents").

                  f. The Lender understands that its investment in the
Securities involves a high degree of risk. In addition, the Lender understands
that the Debenture is not convertible into, and the Warrants are not exercisable
for, shares of Common Stock unless and until the shareholders of the company
holding a majority of the outstanding shares of Common Stock on the relevant
record date approve the Certificate of Incorporation Amendment and that such
shareholders have no obligation to effect such approval.

                  g. The Lender hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or any of their respective officers, directors and employees or
any of their respective attorneys or agents, except as specifically set forth
herein.

                  h. The Lender 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.

                  i. This Agreement and the other Transaction Agreements to
which the Lender is a party, and the transactions contemplated thereby, have
been duly and validly authorized, executed and delivered on behalf of the Lender
and are valid and binding agreements of the Lender enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.

<PAGE>

                  j. The Lender has taken no action which would give rise to any
claim by any Person for brokerage commission, finder's fees or similar payments
by the Company relating to this Agreement or the transactions contemplated
hereby. The Company shall have no obligation with respect to such fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Lender shall indemnify and hold harmless
each of the Company, its employees, officers, directors, agents, and partners,
and their respective Affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees, as and when incurred.

                  3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Lender as of the date hereof and as of the Closing Date that,
except as otherwise provided in the Disclosure Letter hereto or in the Company's
SEC Documents:

                  a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares. No party other than a Lender has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.

                  b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. 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 or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Common Stock is quoted on the Principal Trading Market. The Company
has received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for such quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the
continuation of such quotation.

                  c. AUTHORIZED SHARES. The authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock, $0.0001 par value
per share, of which approximately 82,328,223 shares are outstanding as of March
1, 2005, and (ii) 1,000,000 shares of Preferred Stock. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid. After the Certificate of Incorporation Amendment Filing Date
the Company will have sufficient authorized and unissued shares of Common Stock
as may be necessary to effect the issuance of the Shares on such date. Except as
set forth on Schedule 3 (c ), there were 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. 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. On
the Certificate of Incorporation Amendment Filing Date the Shares will be duly
authorized and, when issued upon conversion of, or as interest on, the
Debentures or upon exercise of the Warrants, each in accordance with its
respective terms, will be duly and validly issued, fully paid and non-assessable
and, except to the extent, if any, provided by the law of the State of
Incorporation, will not subject the Holder thereof to personal liability by
reason of being such Holder.

<PAGE>

                  d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the
Debentures, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.

                  e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Debentures and the Warrants, and the consummation by the Company
of the other transactions contemplated by this Agreement, the Debentures, the
Warrants and the other Transaction Agreements do not and will not conflict with
or result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the certificate of incorporation or by-laws of
the Company, each as currently in effect, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, or (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.

                  f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Lender as contemplated by this Agreement, except for approval by the
shareholders of the Company holding a majority of the outstanding shares of
Common Stock on the relevant record date of the Certificate of Incorporation
Amendment and such authorizations, approvals and consents that have been
obtained.

                  g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading

<PAGE>

                  h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect, except
as disclosed in the Company's SEC Documents. Since the Last Audited Date, except
as provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any material debts owed to the Company by any third party or material
claims of the Company against a third party, except in the ordinary course of
business consistent with past practices; (v) suffered any substantial losses or
waived any rights of material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of existing business; (vi)
made any increases in employee compensation, except in the ordinary course of
business consistent with past practices; or (vii) experienced any material
problems with labor or management in connection with the terms and conditions of
their employment.

                  i. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions and other facts known to the public
generally or as disclosed in the Company's SEC Documents) that has not been
disclosed in writing to the Lender that would reasonably be expected to have or
result in a Material Adverse Effect.

                  j. ABSENCE OF LITIGATION. Except as disclosed in the Company's
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company before or by any
governmental authority or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other person, wherein an unfavorable decision,
ruling or finding would have a Material Adverse Effect or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Agreements. The
Company is not aware of any valid basis for any such claim that (either
individually or in the aggregate with all other such events and circumstances)
could reasonably be expected to have a Material Adverse Effect. Except as
disclosed in the Company's SEC Documents, there are no outstanding or
unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to
which the Company is a party or by which it or any of its properties is bound,
that involve the transaction contemplated herein or that, alone or in the
aggregate, could reasonably be expect to have a Material Adverse Effect.

                  k. ABSENCE OF EVENTS OF DEFAULT. Except as disclosed in the
Company's SEC Documents, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.

<PAGE>

                  l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. To the knowledge of the Company, none of the following has occurred
during the past five (5) years with respect to a Company Control Person:

                  (1) A petition under the federal bankruptcy laws or any state
         insolvency law was filed by or against, or a receiver, fiscal agent or
         similar officer was appointed by a court for the business or property
         of such Company Control Person, or any partnership in which he was a
         general partner at or within two years before the time of such filing,
         or any corporation or business association of which he was an executive
         officer at or within two years before the time of such filing;

                  (2) Such Company Control Person was convicted in a criminal
         proceeding or is a named subject of a pending criminal proceeding
         (excluding traffic violations and other minor offenses);

                  (3) Such Company Control Person was the subject of any order,
         judgment or decree, not subsequently reversed, suspended or vacated, of
         any court of competent jurisdiction, permanently or temporarily
         enjoining him from, or otherwise limiting, the following activities:

                           (i)      acting, as an investment advisor,
                                    underwriter, broker or dealer in securities,
                                    or as an affiliated person, director or
                                    employee of any investment company, bank,
                                    savings and loan association or insurance
                                    company, as a futures commission merchant,
                                    introducing broker, commodity trading
                                    advisor, commodity pool operator, floor
                                    broker, any other Person regulated by the
                                    Commodity Futures Trading Commission
                                    ("CFTC") or engaging in or continuing any
                                    conduct or practice in connection with such
                                    activity;

                           (ii)     engaging in any type of business practice;
                                    or

                           (iii)    engaging in any activity in connection with
                                    the purchase or sale of any security or
                                    commodity or in connection with any
                                    violation of federal or state securities
                                    laws or federal commodities laws;

                  (4) Such Company Control Person was the subject of any order,
         judgment or decree, not subsequently reversed, suspended or vacated, of
         any federal or state authority barring, suspending or otherwise
         limiting for more than 60 days the right of such Company Control Person
         to engage in any activity described in paragraph (3) of this item, or
         to be associated with Persons engaged in any such activity; or

<PAGE>

                  (5) Such Company Control Person was found by a court of
         competent jurisdiction in a civil action or by the CFTC or SEC to have
         violated any federal or state securities law, and the judgment in such
         civil action or finding by the CFTC or SEC has not been subsequently
         reversed, suspended, or vacated.

                  m. PRIOR ISSUES. [Intentionally Omitted]

                  n. NO UNDISCLOSED LIABILITIES OR EVENTS. To the knowledge of
the Company, the Company has no liabilities or obligations other than those
disclosed in the Transaction Agreements or the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since the Last Audited
Date, or which individually or in the aggregate, do not or would not have a
Material Adverse Effect. No event or circumstances has occurred or exists with
respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, 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.
Except as disclosed in the Company's SEC Documents, there are no proposals
currently under consideration or currently anticipated to be under consideration
by the Board of Directors or the executive officers of the Company which
proposal would (X) change the certificate of incorporation or other charter
document or by-laws of the Company, each as currently in effect, with or without
shareholder approval, which change would reduce or otherwise adversely affect
the rights and powers of the shareholders of the Common Stock or (Y) materially
or substantially change the business, assets or capital of the Company,
including its interests in subsidiaries.

                  o. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time within the past six months made any offer or sales of
any security or solicited any offers to buy any security under circumstances
that would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.

                  p. DILUTION. The number of Shares issuable upon conversion of
the Debentures may have a dilutive effect on the ownership interests of the
other shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment that such issuance is
in the best interests of the Company. The Company specifically acknowledges that
its obligation to issue the Shares upon conversion of the Debentures and upon
exercise of the Warrants is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company, and the Company will honor every Notice of
Conversion (as defined in the Debentures) relating to the conversion of the
Debentures, and every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.

<PAGE>

                  r. TRADING IN SECURITIES. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), the Lender retains the right (but is not otherwise obligated) to
buy, sell, engage in hedging transactions or otherwise trade in the securities
of the Company, including, but not necessarily limited to, the Securities, at
any time before, contemporaneous with or after the execution of this Agreement
or from time to time, but only, in each case, in any manner whatsoever permitted
by applicable federal and state securities laws.

                  s. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of
fees to Persons previously disclosed to Lender, payment of which is the sole
responsibility of the Company pursuant to the terms of the Escrow Agreement, the
Company has taken no action which would give rise to any claim by any Person for
brokerage commission, finder's fees or similar payments by Lender relating to
this Agreement or the transactions contemplated hereby. Lender shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Lender, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.

                  4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

                  a. TRANSFER RESTRICTIONS. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Lender shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.

                  b. RESTRICTIVE LEGEND. The Lender acknowledges and agrees
that, until such time as the Common Stock has been registered under the 1933 Act
and sold in accordance with an effective Registration Statement or otherwise in
accordance with another effective registration statement, the certificates and
other instruments representing any of the Securities (including the Shares)
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of any such Securities):

<PAGE>

     THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
     AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
     OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
     THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
     COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                  c. FILINGS. The Company undertakes and agrees to make all
necessary filings required to be made by the Company in connection with the sale
of the Debentures and Warrants to the Lender under any United States laws and
regulations applicable to the Company, or by any domestic securities exchange or
trading market, and to provide a copy thereof to the Lender promptly after such
filing.

                  d. REPORTING STATUS. So long as the Lender beneficially owns
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act in a time frame
that permits it to maintain the continued quotation and trading of its Common
Stock (including, without limitation, all Registrable Securities) on the
Principal Trading Market or a listing on the NASDAQ/Small Cap or National
Markets and, to the extent applicable to it, shall take all reasonable action
under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company will take
all reasonable action under its control to maintain the continued quotation and
trading of its Common Stock (including, without limitation, all Registrable
Securities) on the Principal Trading Market or a listing on the NASDAQ/Small Cap
or National Markets and, to the extent applicable to it, will comply in all
material respects with the Company's reporting, filing and other obligations
under the by-laws or rules of the Principal Trading Market and/or the National
Association of Securities Dealers, Inc., as the case may be, at least through
the date which is thirty (30) days after the later of the date on which all of
the Debentures have been converted or all of the Warrants have been exercised or
have expired.

                  e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Securities) for general
corporate purposes.

                  f. WARRANTS. In respect of $100,000 in Convertible Debentures
purchased by the Lender, the Company agrees to issue to the Lender on the
Closing Date transferable divisible warrants (the "Warrants") for the purchase
of 1,428,571 Shares at an exercise price of $.10. The Warrants will expire on
the second annual anniversary of the Effective Date. The Warrant shall be in the
form annexed hereto as ANNEX VI.

<PAGE>

                  g. AVAILABLE SHARES. After the Certificate of Incorporation
Amendment Filing Date the Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares at least
equal to the sum of (x) one hundred and fifty percent (150%) of the number of
shares of Common Stock issuable as may be required to satisfy the conversion
rights of the Holders of all outstanding Convertible Debentures (including
interest thereon) , plus (y) the number of shares issuable upon exercise of all
outstanding Warrants held by all Holders (in each case, whether such Convertible
Debentures or Warrants were originally issued to the Holder, the Lender or to
any other Holder or Lender). For the purposes of such calculations, the Company
should assume that all such Debentures were then convertible and all Warrants
were then exercisable without regard to any restrictions which might limit any
Lender's right to convert any of the Convertible Debentures or exercise any of
the Warrants held by any Holder.

                  h. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless the inclusion of such statement
is required, in the opinion of legal counsel for such party, in order for such
party to comply with its disclosure obligations under applicable law. In
furtherance of the foregoing, the Company will provide to the Lender drafts of
the applicable text of any filing intended to be made with the SEC which refers
to the Transaction Agreements or the transactions contemplated thereby as soon
as practicable (but at least two (2) business days before such filing will be
made and will not include in such filing any statement or statements or other
material to which the other party reasonably objects , unless the inclusion of
such statement is required, in the opinion of legal counsel for such party, in
order for such party to comply with its disclosure obligations under applicable
law. Notwithstanding the foregoing, each of the parties hereby consents to the
inclusion of the text of the Transaction Agreements in filings made with the SEC
(but any descriptive text accompanying or part of such filing shall be subject
to the other provisions of this paragraph). Notwithstanding, but subject to, the
foregoing, the Company intends to file within four business days following the
Closing Date a Current Report on Form 8-K referring to the transactions
contemplated by the Transaction Documents.

                  i. HEDGING TRANSACTIONS. Lender agrees that as long as it or
any of its Affiliates holds any Securities it shall not, and Lender shall cause
it Affiliates not to, hold any short sale position or any hedging position with
respect to any Company Securities in excess of $25,000; provided that any such
short sale or hedging transaction may only be made in connection with a
conversion under the Debenture or an exercise of the Warrants. Lender agrees
that it shall not transfer any Securities unless the transferee thereof
explicitly agrees in writing to be bound by the terms hereof, except in
connection with transfers of Shares that are not Registrable Securities. The
Company agrees that unless and until (i) the Company has affirmatively
demonstrated by the use of specific clear and convincing evidence that the
Lender has traded in securities of the Company in violation of applicable
federal securities laws and (ii) there has been issued against the Lender a
final non-appealable decision from a court of competent jurisdiction to the

<PAGE>

effect that the Lender has violated applicable federal securities laws with
respect to its trading of the Company's securities, the Lender shall be assumed
to be in compliance with such laws and the Company shall remain obligated to
fulfill all of its obligations under each of the Transaction Agreements;
provided, further, that the Company shall under no circumstances be entitled to
request or demand that the Lender affirmatively demonstrate that it has not
engaged in any such violations as a condition to the Company's fulfillment of
its obligations under any of the Transaction Agreements and shall not assert,
whether as an affirmative claim or a defense to any claim made against the
Company, that the Lender's failure to demonstrate such absence of such
violations (including, but not limited to, its failure to provide any trading or
other records, it being specifically agreed that the Company, directly or
indirectly, will request the Lender or any of its agents, advisors, brokers or
representatives to provide such records in any forum) serves either as a defense
to any breach of the Company's obligations under any of the Transaction
Agreements or otherwise reflects adversely in any manner on the legality of any
action taken by the Lender.

                  j. CERTAIN AGREEMENTS.

                        (i) (A) The term "Lower Price Transaction" means a New
          Transaction consummated during the period (the "New Transaction
          Period") from the Closing Date and continuing through and including
          the Final Lock-up Date (as defined below), where (x) either the lowest
          fixed purchase price of any shares of Common Stock contemplated in the
          New Transaction or the lowest fixed conversion price of any securities
          of the Company convertible or exchangeable into Common Stock which
          would be applicable under the terms of the New Transaction is, or by
          its terms, is below the Fixed Conversion Price or (y) if such purchase
          price or conversion price is determined by multiplying a market price
          of the Common Stock by a percentage, such percentage is below the
          Variable Conversion Rate (the "Lower Percentage").

                        (B) The term "Final Lock-up Date" means the date which
          is the number of days after the Effective Date equal to the sum of (X)
          ninety (90) days, plus (Y) the number of days, if any, during which
          sale of Registrable Securities was suspended after the Effective Date.

                  (ii) The Company covenants and agrees that, if there is a
Lower Price Transaction during the New Transaction Period, then;

                        (A) if such transaction is of the type contemplated by
          Section 4(j)(i)(A)(x), then the Fixed Conversion Price on any
          principal amount of the Debentures which has not been converted as of
          the relevant date shall be adjusted to an amount (the "Adjusted
          Conversion Price") equal to the lower of (1) the lowest fixed purchase
          price of any shares of the Common Stock contemplated in the Lower
          Price Transaction or (2) the lowest fixed conversion price of any
          securities of the Company convertible or exchangeable into Common
          Stock which would be applicable under the terms of the Lower Price
          Transaction;

<PAGE>

                        (B) if such transaction is of the type contemplated by
          Section 4(j)(ii)(A)(y), then the Variable Conversion Rate on any
          principal amount of the Debentures which has not been converted as of
          the relevant date shall be adjusted to an amount equal to the Lower
          Percentage; and

                        (C) the exercise price on all unexercised Warrants
          (unless the Adjusted Exercise Price (as defined in the Warrants) is
          then in effect) shall be adjusted to equal the lowest of (1) the then
          existing applicable exercise price of such Warrant, and (2) 143% of
          the Adjusted Conversion Price.

                  (iii) For purposes of this Section 4(j), the conversion price
for which each share of Common Stock shall be deemed to be issued upon issuance
or sale of any securities convertible, exercisable or exchangeable into Common
Stock shall be determined by dividing (x) the total consideration, if any,
received by the Company as consideration for such securities plus the minimum
aggregate of additional consideration, if any, ever payable to the Company upon
the conversion, exercise or exchange of such securities by (y) the maximum
number of shares of Common Stock ever issuable (except pursuant to anti-dilution
provisions associated with such securities on account of events that are unknown
on such date) upon conversion, exercise or exchange of such securities

                  5. TRANSFER AGENT INSTRUCTIONS.

                  (a) The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Lender or its nominee and in such denominations to be specified
by the Lender in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Lender's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Lender provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Lender of any of the Securities in accordance with clause (1)(B)
of Section 4(a) of this Agreement is not required under the 1933 Act, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such name and in such
denominations as specified by the Lender.

<PAGE>

                  (b) Subject to the provisions of this Agreement, the Company
will permit the Lender to exercise its right to convert the Debentures in the
manner contemplated by the Debentures and to exercise the Warrants in the manner
contemplated by the Warrants.

                  c. (i) The Company understands that a delay in the issuance of
the Shares beyond the Delivery Date (as defined in the Debenture) could result
in economic loss to the Lender. As compensation to the Lender for such loss, the
Company agrees, commencing thirty (30) days after the Certificate of
Incorporation Amendment Filing Date, to pay late payments to the Lender for late
issuance of Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" refers to the number of Trading Days which is
beyond four (4) Trading Days after the Delivery Date): (1)

          No. Business Days Late             Late Payment For Each $10,000
                                        of Principal or Interest Being Converted

                 1                             $100
                 2                             $200
                 3                             $300
                 4                             $400
                 5                             $500
                 6                             $600
                 7                             $700
                 8                             $800
                 9                             $900
                 10                            $1,000
                 >10                           $1,000 + $200 for each Business
                                               Day Late beyond 10 days

_________________

(1) Example: Notice of Conversion is delivered on Monday, March 6, 2006. The
Delivery Date would be Thursday March 9 (the third Trading Day after such
delivery). If the certificate is delivered by Wednesday, March 15 (4 Trading
Days after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on March 16, that is 1 "Business Day Late" in the
table below; if delivered on March 21, that is 4 "Business Days Late" in the
table.

<PAGE>

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c) ,,the provisions of the immediately
following Section 5(d) of this Agreement and Section 12(c) of the Debenture) for
such delay. Furthermore, in addition to any other remedies which may be
available to the Lender, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock by close of business on the
Delivery Date, the Lender will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company, whereupon the
Company and the Lender shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion; provided, however,
that an amount equal to any payments contemplated by this Section 5(c) which
have accrued through the date of such revocation notice shall remain due and
owing to the Converting Holder (as defined below) notwithstanding such
revocation. Anything in the foregoing provisions of this paragraph (c) to the
contrary notwithstanding, the total amount payable by the Company under this
paragraph (c) shall be reduced by an amount equal to fifty percent (50%) of any
Buy-In Adjustment Amount (as defined below) actually paid by the Company to the
Holder (but not by more than the total amount due without regard to the
provisions of this sentence).

                  (d) If, by the relevant Delivery Date, commencing thirty (30)
days after the Certificate of Incorporation Amendment Filing Date, the Company
fails for any reason to deliver the Shares to be issued upon conversion of a
Debenture and after such Delivery Date, the Holder of the Debentures being
converted (a "Converting Holder") purchases, in an arm's-length open market
transaction or otherwise, shares of Common Stock (the "Covering Shares") in
order to make delivery in satisfaction of a sale of Common Stock by the
Converting Holder (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Converting Holder shall have the right, to require the Company to
pay to the Converting Holder, in addition to and not in lieu of the amounts due
under Section 5(c) hereof (but in addition to all other amounts contemplated in
other provisions of the Transaction Agreements, and not in lieu of any such
other amounts), the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Company in
immediately available funds immediately upon demand by the Converting Holder. By
way of illustration and not in limitation of the foregoing, if the Converting
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Converting Holder will be $1,000.

                  (e) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Holder and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.

<PAGE>

                  (f) The holder of any Debentures shall be entitled to exercise
its conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Debentures.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.

                  (g) The Company will authorize its transfer agent to give
information relating to the Company directly to the Lender or the Lender's
representatives upon the request of the Lender or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Lender in connection with a Notice of
Conversion or exercise of a Warrant, or (ii) the number of outstanding shares of
Common Stock of all shareholders as of a current or other specified date. On the
Closing Date, the Company will provide the Lender with a copy of the
authorization so given to the transfer agent.

                  6. CLOSING DATE.

                  a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.

                  Each closing of the purchase and issuance of Debentures and
Warrants shall occur on the relevant Closing Date at the offices of the Escrow
Agent and shall take place no later than 3:00 P.M., New York time, on such day
or such other time as is mutually agreed upon by the Company and the Lender.

                  Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the relevant Escrow Funds to the
Company and to release the other relevant Escrow Property on the relevant
Closing Date upon satisfaction of the conditions set forth in Sections 7 and 8
hereof and as provided in the Joint Escrow Instructions.

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

                  The Lender understands that the Company's obligation to sell
the Debentures and the Warrants to the Lender pursuant to this Agreement on the
relevant Closing Date is conditioned upon:

<PAGE>

                  The execution and delivery of this Agreement and the
Registration Rights Agreement by the Lender;

                  Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Securities in
accordance with this Agreement;

                  The accuracy on such Closing Date of the representations and
warranties of the Lender contained in this Agreement, each as if made on such
date, and the performance by the Lender on or before such date of all covenants
and agreements of the Lender required to be performed on or before such date;
and

                  There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.

                  8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.

                  The Company understands that the Lender's obligation to
purchase the Debentures and the Warrants on the relevant Closing Date is
conditioned upon:

                  The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;

                  Delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;

         [On the Closing Date, the Lender shall have received a Secretary's
Certificate and Officer's Certificate from the Company, dated the Closing Date
in form, scope and substance reasonably satisfactory to the Lender,
substantially to the effect set forth in ANNEX III attached hereto;]

                  The accuracy in all material respects on such Closing Date of
the representations and warranties of the Company contained in this Agreement,
each as if made on such date, and the performance by the Company on or before
such date of all covenants and agreements of the Company required to be
performed on or before such date;

                  There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and

                  From and after the date hereof to and including such Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Lender, makes it impracticable or
inadvisable to purchase the Debentures.

<PAGE>

                  9. INDEMNIFICATION.

                  a. (i) The Company agrees to indemnify and hold harmless
Lender and its officers, directors, employees, and agents, and each Lender
Control Person from and against any losses, claims, damages, liabilities or
expenses incurred (collectively, "Damages"), joint or several, and any action in
respect thereof to which the Lender, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Lender Control
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Lender's failure to perform any covenant or agreement contained in this
Agreement or Lender's or its officers, directors, employees, agents or Lender
Control Persons negligence, recklessness or bad faith in performing its
obligations under this Agreement.

                           (ii) If (x) the Lender becomes involved in any
capacity in any action, proceeding or investigation brought by any stockholder
of the Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement or the other Transaction Agreements
(other than the Registration Rights Agreement), or if the Lender is impleaded in
any such action, proceeding or investigation by any Person, or (y) the Lender
becomes involved in any capacity in any action, proceeding or investigation
brought by the SEC, any self-regulatory organization or other body having
jurisdiction, against or involving the Company or in connection with or as a
result of the consummation of the transactions contemplated by this Agreement or
the other Transaction Agreements (other than the Registration Rights Agreement),
or if the Lender is impleaded in any such action, proceeding or investigation by
any Person, then in any such case, other than by reason of the Lender's actions
(other than the Lender's execution of the Transaction Agreements to which it is
a signatory, the payment of the Purchase Price, and/or the exercise of any of
the Lender's rights under any one or more of the Transaction Agreements), the
Company hereby agrees to indemnify, defend and hold harmless the Lender from and
against and in respect of all Damages resulting from, imposed upon or incurred
by the Lender, directly or indirectly, and reimburse such Lender for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) for a single firm of counsel incurred in connection therewith, as
such expenses are incurred. The indemnification and reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Lender who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and Lender Control
Persons (if any), as the case may be, of the Lender and any such Affiliate, and
<PAGE>

shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Lender, any such Affiliate and
any such Person. The Company also agrees that neither the Lender nor any such
Affiliate, partner, director, agent, employee or Lender Control Person shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or the other Transaction Agreements, other than by reason of the
Lender's actions (other than the Lender's execution of the Transaction
Agreements to which it is a signatory, the payment of the Purchase Price, and/or
the exercise of any of the Lender's rights under any one or more of the
Transaction Agreements).

                  b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section 9 shall be asserted and resolved as follows:

                  (i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section 9 (an
"Indemnified Party") might seek indemnity under Section 9(a) is asserted against
or sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a "Third Party Claim"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of this Section 9 against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section 9 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.

         (x) If the Indemnifying Party notifies the Indemnified Party within the
         Dispute Period that the Indemnifying Party desires to defend the
         Indemnified Party with respect to the Third Party Claim pursuant to
         this Section 9(b), then the Indemnifying Party shall have the right to
         defend, with counsel reasonably satisfactory to the Indemnified Party,
         at the sole cost and expense of the Indemnifying Party, such Third
         Party Claim by all appropriate proceedings, which proceedings shall be
         vigorously and diligently prosecuted by the Indemnifying Party to a
         final conclusion or will be settled at the discretion of the
         Indemnifying Party (but only with the consent of the Indemnified Party
         in the case of any settlement that provides for any relief other than
         the payment of monetary damages or that provides for the payment of
         monetary damages as to which the Indemnified Party shall not be
         indemnified in full pursuant to Section 9(a)). The Indemnifying Party
         shall have full control of such defense and proceedings, including any
         compromise or settlement thereof; provided, however, that the

<PAGE>

         Indemnified Party may, at the sole cost and expense of the Indemnified
         Party, at any time prior to the Indemnifying Party's delivery of the
         notice referred to in the first sentence of this subparagraph (x), file
         any motion, answer or other pleadings or take any other action that the
         Indemnified Party reasonably believes to be necessary or appropriate to
         protect its interests; and provided further, that if requested by the
         Indemnifying Party, the Indemnified Party will, at the sole cost and
         expense of the Indemnifying Party, provide reasonable cooperation to
         the Indemnifying Party in contesting any Third Party Claim that the
         Indemnifying Party elects to contest. The Indemnified Party may
         participate in, but not control, any defense or settlement of any Third
         Party Claim controlled by the Indemnifying Party pursuant to this
         subparagraph (x), and except as provided in the preceding sentence, the
         Indemnified Party shall bear its own costs and expenses with respect to
         such participation. Notwithstanding the foregoing, the Indemnified
         Party may take over the control of the defense or settlement of a Third
         Party Claim at any time if it irrevocably waives its right to indemnity
         under Section 9(a) with respect to such Third Party Claim.

         (y) If the Indemnifying Party fails to notify the Indemnified Party
         within the Dispute Period that the Indemnifying Party desires to defend
         the Third Party Claim pursuant to Section 9(b), or if the Indemnifying
         Party gives such notice but fails to prosecute vigorously and
         diligently or settle the Third Party Claim, or if the Indemnifying
         Party fails to give any notice whatsoever within the Dispute Period,
         then the Indemnified Party shall have the right to defend, at the sole
         cost and expense of the Indemnifying Party, the Third Party Claim by
         all appropriate proceedings, which proceedings shall be prosecuted by
         the Indemnified Party in a reasonable manner and in good faith or will
         be settled at the discretion of the Indemnified Party (with the consent
         of the Indemnifying Party, which consent will not be unreasonably
         withheld). The Indemnified Party will have full control of such defense
         and proceedings, including any compromise or settlement thereof;
         provided, however, that if requested by the Indemnified Party, the
         Indemnifying Party will, at the sole cost and expense of the
         Indemnifying Party, provide reasonable cooperation to the Indemnified
         Party and its counsel in contesting any Third Party Claim which the
         Indemnified Party is contesting. Notwithstanding the foregoing
         provisions of this subparagraph (y), if the Indemnifying Party has
         notified the Indemnified Party within the Dispute Period that the
         Indemnifying Party disputes its liability or the amount of its
         liability hereunder to the Indemnified Party with respect to such Third
         Party Claim and if such dispute is resolved in favor of the
         Indemnifying Party in the manner provided in subparagraph (z) below,
         the Indemnifying Party will not be required to bear the costs and
         expenses of the Indemnified Party's defense pursuant to this
         subparagraph (y) or of the Indemnifying Party's participation therein
         at the Indemnified Party's request, and the Indemnified Party shall
         reimburse the Indemnifying Party in full for all reasonable costs and
         expenses incurred by the Indemnifying Party in connection with such
         litigation. The Indemnifying Party may participate in, but not control,
         any defense or settlement controlled by the Indemnified Party pursuant
         to this subparagraph (y), and the Indemnifying Party shall bear its own
         costs and expenses with respect to such participation.

<PAGE>

         (z) If the Indemnifying Party notifies the Indemnified Party that it
         does not dispute its liability or the amount of its liability to the
         Indemnified Party with respect to the Third Party Claim under Section
         9(a) or fails to notify the Indemnified Party within the Dispute Period
         whether the Indemnifying Party disputes its liability or the amount of
         its liability to the Indemnified Party with respect to such Third Party
         Claim, the amount of Damages specified in the Claim Notice shall be
         conclusively deemed a liability of the Indemnifying Party under Section
         9(a) and the Indemnifying Party shall pay the amount of such Damages to
         the Indemnified Party on demand. If the Indemnifying Party has timely
         disputed its liability or the amount of its liability with respect to
         such claim, the Indemnifying Party and the Indemnified Party shall
         proceed in good faith to negotiate a resolution of such dispute;
         provided, however, that if the dispute is not resolved within thirty
         (30) days after the Claim Notice, the Indemnifying Party shall be
         entitled to institute such legal action as it deems appropriate.

                  (ii) In the event any Indemnified Party should have a claim
under Section 9(a) against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 9(a) specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 9(a) and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Indemnity Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.

                  The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to.

                  10. JURY TRIAL WAIVER. The Company and the Lender hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.

<PAGE>

                  11. GOVERNING LAW: MISCELLANEOUS.

                  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement or
any of the other Transaction Agreements and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Lender for any
reasonable legal fees and disbursements incurred by the Lender in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

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

                  This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.

                  All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.

                  A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.

                  This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.

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

                  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 or the
validity or enforceability of this Agreement in any other jurisdiction.

                  This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.

                  This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.

<PAGE>

                  12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of

                  (a) the date delivered, if delivered by personal delivery as
                  against written receipt therefor or by confirmed facsimile
                  transmission,

                  (b) the seventh business day after deposit, postage prepaid,
                  in the United States Postal Service by registered or certified
                  mail, or

                  (c) the third business day after mailing by domestic or
                  international express courier, with delivery costs and fees
                  prepaid,

in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):

Company:                   Advanced Technology Industries, Inc.
                           211 Madison Avenue, #28B
                           New York, New York 10016
                           Attn: Allan Klepfisz
                           Telephone No.:  (212) 532-2736
                           Telecopier No.:  (212) 532-2904

                           with a copy to:
                           Anthony J. Norris , Esq.

                           Ropes & Gray LLP
                           45 Rockefeller Plaza
                           New York, NY 10111
                           Tel: 212-841-0659
                           Fax: 212-841-5725

Lender: At the address set forth on the signature page of this Agreement.

<PAGE>

                           with a copy to:

                           Krieger & Prager LLP, Esqs.
                           39 Broadway
                           Suite 1440
                           New York, NY 10006
                           Attn: Samuel M. Krieger, Esq.
                           Telephone No.: (212) 363-2900
                           Telecopier No.  (212) 363-2999

Escrow Agent:              Krieger & Prager LLP
                           39 Broadway
                           Suite 1440
                           New York, NY 10006
                           Attn: Samuel Krieger, Esq.
                           New York, New York 10016
                           Telephone No.: (212) 363-2900
                           Telecopier No.  (212) 363-2999

                  13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Lender's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price for a period of two years after the
Closing Date, and shall inure to the benefit of the Lender and the Company and
their respective successors and assigns.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

<PAGE>

                  IN WITNESS WHEREOF, this Agreement has been duly executed by
the Lender (if an entity, by one of its officers thereunto duly authorized) as
of the date set forth below.

PURCHASE PRICE:                                      $ 100,000.00
NUMBER OF WARRANTS:                                  1,428,571

                             SIGNATURES FOR LENDERS

                  IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and correct and that it has caused this Securities
Purchase Agreement to be duly executed on its behalf this ____ day of April,
2005.

                                    JM INVESTORS, LLC

                                    By:
                                        --------------------------

                                    Title:
                                           -----------------------

JM Investors, LLC
152 East 9th Street
Lakewood, NJ 08071
Tel:  917-209-1028
Fax: 732-905-9049

As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.

ADVANCED TECHNOLOGY INDUSTRIES, INC.

By:
    -----------------------------

Title:
       --------------------------

Date:                      , 2005
     ---------------------

<PAGE>

         ANNEX I           FORM OF DEBENTURE

         ANNEX II          JOINT ESCROW INSTRUCTIONS

         ANNEX III         SECRETARY'S CERTIFICATE

         ANNEX IV          REGISTRATION RIGHTS AGREEMENT

         ANNEX V           COMPANY DISCLOSURE MATERIALS

         ANNEX VI-         FORM OF WARRANT

         ANNEX VII         COMPANY'S SEC DOCUMENTS AVAILABLE ON EDGARExhibit 10.1

    EXHIBIT
      10.1

    
 

    EMPLOYMENT
      AGREEMENT

     

     

    This
      EMPLOYMENT AGREEMENT (this “Agreement”),
      is
      entered into as of June 1, 2005 (the “Effective
      Date”),
      by
      and between SulphCo, Inc., a Nevada corporation (along with its successors
      and
      assigns, the “Company”),
      and
      Peter Gunnerman (“Executive”).
      

     

    WHEREAS,
      the Company desires to employ Executive, and Executive desires to be employed
      by
      the Company, on the terms and conditions hereinafter set forth;

     

    NOW,
      THEREFORE, in consideration of the mutual promises contained herein and other
      good and valuable consideration, the Company and Executive agree as follows:
      

     

    1.
       Employment.
      

     

    (a) Term.
      Subject
      to the terms hereof, Executive’s employment hereunder shall commence as of the
      Effective Date and shall continue until terminated pursuant to Section 3 below
      (such period, the “Employment
      Period”).
      

     

    (b) Position,
      Place of Performance and Duties.
      Executive will serve as the Company’s President and Chief Operating Officer.
      Executive will have the responsibilities, duty and authority commensurate with
      the positions of President and Chief Operating Officer and will perform such
      other services of an executive nature as may be prescribed from time to time
      by
      the Company’s Board of Directors (the “Board”) and agreed to by Executive.
      Executive’s employment will be based at the Company’s principal offices in
      Sparks, Nevada or such other place as may be agreed to by Executive and the
      Board. In addition, Executive will be available to travel at such times and
      to
      such places as may be reasonably necessary in connection with the performance
      of
      his duties hereunder. Subject to the last sentence of this Section 1(b),
Executive
      shall devote his full business time and efforts in the performance of his duties
      hereunder. Notwithstanding the foregoing, it is expressly agreed that (i)
      Executive may (A) manage his personal investments, (B) provide consulting
      services to existing clients of Global 6, LLC, (C) engage in charitable or
      not-for-profit activities, and/or (D) serve on the board of directors of up
      to
      one other company which is not a competitor of the Company, in
      each
      case, in a manner that does not materially interfere with his obligations to
      the
      Company hereunder, and (ii) neither the Company nor any officer, director,
      employee, shareholder or other person shall have any right, by virtue of this
      Agreement, to share or participate in such other investments or activities
      or to
      the income or proceeds derived therefrom. 

     

    2.
       Compensation.

     

    (a) Base
      Salary.
      Commencing on the Effective Date, the Company will pay Executive a base salary
      at the annual rate of $220,000, which amount shall be reviewed annually and
      subject to increase (but not decrease) at the good faith discretion of the
      Board
      (as adjusted from time to time, the “Base
      Salary”).
      The
      Base Salary will be payable in substantially equal installments (no less
      frequently than bi-weekly) in accordance with the Company’s payroll practices as
      in effect from time to time. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Bonus.
      Based
      on Executive’s performance and the overall performance of the Company, Executive
      will be eligible to receive bonuses from time to time, the amount and nature
      of
      which shall be determined by the Board. 

     

    (c) Equity
      Compensation.
      Executive shall be entitled to receive awards from any Company incentive
      compensation plan applicable to similarly situated senior executives of the
      Company, in accordance with the terms thereof and on a basis commensurate with
      Executive’s position and responsibilities. 

     

    (d) Vacation.
      Executive will be entitled to (i) a minimum of three calendar weeks paid
      vacation in each calendar year (to be taken at such times and in such number
      of
      days as Executive shall determine), (ii) paid sick days as needed due to illness
      or other incapacity, and (iii) paid holidays in accordance with the Company’s
      policies for its senior executives as in effect from time to time. Accrued
      unused vacation may be carried over for up to twelve months. 

     

    (e) Benefits.
      Commencing as of the Effective Date, Executive (and his eligible dependents)
      will be entitled to participate in the same manner as the Company’s other senior
      executives in any employee benefit plans which the Company provides or may
      establish for the benefit of its senior executives generally (including, without
      limitation, disability, medical, and other insurance, bonuses and similar plans)
      (collectively, the “Benefits”).
      

     

    (f) Reimbursement
      of Expenses.
      The
      Company will reimburse Executive for all out-of-pocket business expenses that
      are incurred by him in furtherance of the Company’s business in accordance with
      the Company’s policies with respect thereto as in effect from time to time.
      Without limiting the generality of the foregoing, the Company shall pay or
      reimburse Executive for charges relating to the use of his cellular phone and
      business travel expenses, it being understood that he shall travel on first
      or
      business class at his discretion.

     

    3.
       Termination.
      Executive’s employment
      hereunder will terminate upon the first to occur of the following: 

     

    (a) Executive’s
      his death; 

     

    (b) by
      the
      Company or Executive (or his legal representative) in the event of Executive’s
      Disability (as defined below);

     

    (c) by
      the
      Company for Cause (as defined below);

     

    (d) by
      the
      Company without Cause; or 

     

    (e) by
      Executive, with or without Good Reason (as defined below). 

     

    For
      purposes of this Agreement, the following terms shall have the following
      meanings:

     

    “Cause”
      means
      (i) Executive’s conviction of a felony, either in connection with the
      performance of his obligations to the Company or which otherwise materially
      and
      adversely affects his ability to perform such obligations, (ii)
      Executive’s willful disloyalty or deliberate dishonesty, (iii) the commission by
      Executive of an act of fraud or embezzlement against the Company, or (iv) a
      material breach by Executive of any material provision of this Agreement which
      breach is not cured within 30 days after delivery to Executive by the Company
      of
      written notice of such breach, provided that, if such breach is not capable
      of
      being cured within such 30 day period, Executive will have a reasonable
      additional period to cure such breach. No act or omission on Executive’s part
      will be considered “willful” unless done, or admitted to be done, by Executive
      in bad faith or without his reasonable belief that such act or omission was
      in
      the best interest of the Company. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Disability”
      means
      Executive’s mental, physical or other disability the condition of which renders
      him incapable of performing his obligations under this Agreement for a period
      of
      90 consecutive days or an aggregate of 120 days (whether or not consecutive)
      in
      any 12-month period. 

     

    “Good
      Reason”
      means
      (i) a failure by the Company to comply with any material provision of this
      Agreement which is not cured within 10 days after Executive has given written
      notice of such noncompliance to the Company, (ii) any change in Executive’s
      duties inconsistent with his positions as President and Chief Operating Officer
      (including, any change in his offices or reporting requirements), or (iii)
      at
      Executive’s election, a Change in Control of the Company if, following such
      Change in Control, Executive is no longer the President and Chief Operating
      Officer of the Company (or the surviving or successor company, as applicable),
      or is offered a position not acceptable to him. 

     

    “Change
      in Control”
      means
      (i) the acquisition by any person, entity or affiliated group (other than Rudolf
      W. Gunnerman) becoming the beneficial owner or owners of more than 50% of the
      outstanding equity securities of the Company or otherwise becoming entitled
      to
      vote more than 50% of the voting power of the Company, (ii) a consolidation
      or
      merger (in one transaction or a series of related transactions) of the Company
      pursuant to which the holders of the Company’s equity securities immediately
      prior to such transaction or series of related transactions would not be the
      holders immediately after such transaction or series of related transactions
      of
      more than 50% of the voting power of the entity surviving such transaction
      or
      series of related transactions, or (iii) the sale, lease, exchange or other
      transfer (in one transaction or a series of related transactions) of all or
      substantially all of the assets of the Company. 

     

    4.
       Termination
      Procedures; Effect of Termination.
      

     

    (a) Notice
      of Termination.
      Any
      termination of Executive’s employment by the Company or Executive (other than
      termination on account of Executive’s death) shall be communicated by written
      notice (a “Notice
      of Termination”)
      to the
      other party hereto in accordance with Section 8(a) below, which notice shall
      indicate the specific termination provision in Section 3 of this Agreement
      relied upon and, if termination by the Company for Cause, the specific reasons
      therefore.

     

    (b) Date
      of Termination.
      As used
      herein, “Date
      of Termination”
      shall
      mean (i) if Executive’s employment is terminated as a result of Executive’s
      death, the date of Executive’s death, (ii) if Executive’s employment is
      terminated by reason of Executive’s Disability, on the date Notice of
      Termination is given or such later date specified in the Notice of Termination
      as the effective date of termination, (iii) if Executive’s employment is
      terminated by the Company for Cause, on the date Notice of Termination is given
      or such later date specified in the Notice of Termination as the effective
      date
      of termination, (iv) if Executive’s employment is terminated by the Company
      without Cause, such date which is specified in the Notice of Termination as
      the
      effective date of termination, provided that such date shall be at least 30
      days
      after the date such Notice of Termination is given, and (v) if Executive’s
      employment is terminated by Executive, with or without Good Reason, such date
      which is specified in the Notice of Termination as the effective date of
      termination. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (c) Compensation
      Upon Termination.
      

     

    (i) At
      any
      time that Executive’s employment is terminated, the Company will pay the Accrued
      Obligations to Executive (or to his estate or legal representative, if
      applicable) on or promptly following the Date of Termination. For purposes
      of
      this Agreement, “Accrued
      Obligations”
      means
      (A) the portion of Executive’s Base Salary as has accrued up through the Date of
      Termination which the Executive has not yet been paid, (B) an amount equal
      to
      any unpaid bonus which have accrued through the Date of Termination, (C) an
      amount equal to the value of Executive’s accrued unused vacation days, and (D)
      the amount of expenses incurred by Executive on behalf of the Company prior
      to
      the Date of Termination and not yet reimbursed.

     

    (ii) In
      addition to the payments required under subsection 4(c)(i), if Executive’s
      employment is terminated by reason of his Disability and such Disability arose
      from a job-related accident or other event, by the Company without Cause or
      by
      Executive for Good Reason, then within 30 days following the Date of
      Termination, the Company will (A) pay to Executive (or his estate or legal
      representative if applicable), a lump-sum severance payment equal to three
      months of his then current Base Salary, and (B) continue to pay the group
      medical and dental insurance coverage premiums of fees for Executive and his
      eligible dependents for a period of six months following the Date of Termination
      as an “active employee” under the Company’s then existing plans. 

     

    (d) Other
      Provisions.
      The
      effect of termination on any stock options or restricted stock granted or issued
      to Executive shall be governed by the terms and provisions of any applicable
      option agreement, restricted stock agreement or equity incentive plan. If
      Executive’s employment is terminated by the Company without Cause, the Company
      will use its best efforts to secure Executive alternative employment on
      substantially the same or more favorable terms. Notwithstanding any other
      provision of this Agreement, (i) Executive will have no obligation to mitigate
      Executive’s damages for any breach of this Agreement by the Company or for any
      termination of this Agreement, whether by seeking employment or otherwise,
      and
      (ii) the amount of any benefit due to Executive after the date of such
      termination pursuant to this Agreement will not be reduced or offset by any
      payment or benefit that Executive may receive from any other
      source.

     

    5.
       Confidentiality.
      Executive will enter into a confidentiality/non-disclosure agreement,
      substantially similar to the Company’s standard form of
      confidentiality/non-disclosure agreement for its senior executives.

     

    6.
       Indemnification.
      The
      Company shall, to the fullest extent permitted by law and by its Certificate
      of
      Incorporation and Bylaws, indemnify Executive and hold him harmless for any
      acts
      or decisions made by him in good faith while performing his duties to the
      Company, and shall at all times during Executive’s employment with the Company,
      maintain Directors’ and Officers’ Liability Insurance in amounts and on such
      other terms as agreed to by Executive and the Board. In addition, the Company
      will enter into a separate indemnification agreement setting forth the Company’s
      indemnification obligations to Executive, in form and substance mutually
      agreeable to Executive and the Board. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    7.
       Company
      Representations and Warranties.
      In
      order
      to induce Executive to accept employment as the Company’s President and Chief
      Operating Officer, the Company represents and warrants to Executive as set
      forth
      below and acknowledges that Executive is relying on such representations and
      warranties in accepting his employment hereunder: 

     

    (a) The
      Company is in compliance in all material respects with all applicable
      requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
      regulations thereunder, and all other applicable laws, regulations, orders,
      judgments and decrees. 

     

    (b) The
      registration statements, proxy statements, annual, quarterly and current reports
      and other reports or filings filed with the U.S. Securities Exchange Commission,
      and the press releases disseminated, by the Company since its inception, taken
      as a whole, do not contain any untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary in order to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading, including, without limitation, with regard to the
      Company’s technology or other intellectual property.

     

    (c) The
      Company is in compliance with all listing or maintenance requirements of the
      Over-the-Counter Bulletin Board and has no reason to believe that it will not,
      in the foreseeable future, continue to be in such compliance. 

     

    8.
       General.

     

    (a) Notices.
      All
      notices, requests, consents and other communications hereunder will be in
      writing, will be addressed to the receiving party’s address set forth below or
      to such other address as a party may designate by notice hereunder, and will
      be
      either (i) delivered by hand, (ii) sent by overnight courier,
      or
      (iii) sent by registered or certified mail, return receipt requested,
      postage prepaid. All notices, requests, consents and other communications
      hereunder will be deemed to have been given either (A) if by hand, at
      the
      time of the delivery thereof to the receiving party at the address of such
      party
      set forth above, (B) if sent by overnight courier, on the next business
      day
      following the day such notice is delivered to the courier service, or (C) if
      sent by registered or certified mail, on the third business day following the
      day such mailing is made. All notices, requests, consents and other
      communications hereunder will be sent as follows:

     

    If
      to the
      Company:  SulphCo,
      Inc.

    850
      Spice
      Islands Drive

    Sparks,
      Nevada 89431

    Attention:
      Chairman of the Board

     

    If
      to
      Executive:    Peter
      Gunnerman

    1250
      Del
      Monte Lane

    Reno,
      Nevada 89511

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (b) Entire
      Agreement.
      This
      Agreement (together with the indemnification agreement referred to herein)
      embodies the entire agreement and understanding between the parties hereto
      with
      respect to the subject matter hereof and supersedes all prior oral or written
      agreements and understandings relating to the subject matter hereof. No
      statement, representation, warranty, covenant or agreement of any kind not
      expressly set forth in this Agreement will affect, or be used to interpret,
      change or restrict, the express terms and provisions of this
      Agreement.

     

    (c) Modifications
      and Amendments.
      The
      terms and provisions of this Agreement may be modified or amended only by
      written agreement executed by the parties hereto.

     

    (d) Waivers
      and Consents.
      The
      terms and provisions of this Agreement may be waived, or consent for the
      departure therefrom granted, only by written document executed by the party
      entitled to the benefits of such terms or provisions. No such waiver or consent
      will be deemed to be or will constitute a waiver or consent with respect to
      any
      other terms or provisions of this Agreement, whether or not similar. Each such
      waiver or consent will be effective only in the specific instance and for the
      purpose for which it was given, and will not constitute a continuing waiver
      or
      consent.

     

    (e) Successors
      and Assigns; Third Party Beneficiaries.
      All
      statements, representations, warranties, covenants and agreements in this
      Agreement will be binding on the parties hereto and will inure to the benefit
      of
      the respective successors, heirs, executors and permitted assigns of each party
      hereto; provided that no party hereto may assign any rights or obligations
      hereunder without the consent of the other party. Nothing in this Agreement
      will
      be construed to create any rights or obligations except among the parties
      hereto, and (except for Executive’s estate or other legal representative) no
      person or entity will be regarded as a third-party beneficiary of this
      Agreement.

     

    (f) Governing
      Law.
      This
      Agreement and the rights and obligations of the parties hereunder will be
      construed in accordance with and governed by the law of the State of Nevada,
      without giving effect to the conflict of law principles thereof.

     

    (g) Jurisdiction,
      Venue.
      Any
      legal action or proceeding with respect to this Agreement will be brought in
      the
      Federal or state courts of Washoe County, Nevada with competent subject matter
      jurisdiction. By execution and delivery of this Agreement, each of the parties
      hereto accepts for itself and in respect of its property, generally and
      unconditionally, the exclusive jurisdiction of the aforesaid courts.

     

    (h) Severability.
      The
      parties intend this Agreement to be enforced as written. However, if
      any
      court of competent jurisdiction determines any provision, or any portion
      thereof, of this Agreement to be unenforceable or invalid, then such provision
      shall be deemed limited to the extent that such court deems it valid or
      enforceable and the remaining provisions of this Agreement shall nevertheless
      remain in full force and effect

     

    (i) Headings
      and Captions.
      The
      headings and captions of the various subdivisions of this Agreement are for
      convenience of reference only and will in no way modify or affect the meaning
      or
      construction of any of the terms or provisions hereof.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (j) No
      Waiver of Rights, Powers and Remedies.
      No
      failure or delay by a party hereto in exercising any right, power or remedy
      under this Agreement, and no course of dealing between the parties hereto,
      will
      operate as a waiver of any such right, power or remedy of the party. No single
      or partial exercise of any right, power or remedy under this Agreement by a
      party hereto, nor any abandonment or discontinuance of steps to enforce any
      such
      right, power or remedy, will preclude such party from any other or further
      exercise thereof or the exercise of any other right, power or remedy hereunder.
      The election of any remedy by a party hereto will not constitute a waiver of
      the
      right of such party to pursue other available remedies. No notice to or demand
      on a party not expressly required under this Agreement will entitle the party
      receiving such notice or demand to any other or further notice or demand in
      similar or other circumstances or constitute a waiver of the rights of the
      party
      giving such notice or demand to any other or further action in any circumstances
      without such notice or demand.

     

    (k) Expenses.
      The
      Company shall bear its own fees and expenses incurred in connection with the
      preparation, negotiation, execution and delivery of this Agreement and the
      indemnification agreement referred to in Section 5 hereof and shall pay or
      reimburse Executive for his fees and expenses (including, legal fees and
      expenses) reasonably incurred in connection with same. The prevailing party
      in
      any legal proceeding to enforce this Agreement shall be entitled to legal fees
      and costs reasonably incurred. 

     

    (l) Deductions
      and Withdrawals.
      The
      Company will deduct from each payment to be made to Executive under this
      Agreement such amounts, if any, required to be deducted or withheld under
      applicable law or under any employment benefit plan in which Executive
      participate.

     

    (m) Counterparts.
      This
      Agreement may be executed in two or more counterparts, and by different parties
      hereto on separate counterparts, each of which will be deemed an original,
      but
      all of which together will constitute one and the same instrument. This
      Agreement may be delivered by facsimile, and facsimile signatures shall be
      treated as original signatures for all applicable purposes. 

     

    {Remainder
      of page left intentionally blank. Signature page(s) to follow.}

     

    
      
        
           

           

        

        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has executed and delivered this Employment
      Agreement as of the date and year first above written.

     

    

     

    SULPHCO,
      INC.

     

    By:
      /s/
      Alan L. Austin, Jr.

    Name: Alan
      L.
      Austin, Jr. 

    Title:
      Vice President for Finance and Chief Financial Officer

     

    

     

    /s/
      Peter Gunnerman

    PETER
      GUNNERMAN

     

     

    

    8

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