Document:

Exhibit
10.1

     

    RESERVE EQUITY FINANCING
AGREEMENT

     

    THIS AGREEMENT dated as of the
28th
day of September 2010 (the “Agreement”) between
AGS Capital Group, LLC
(the “Investor”), and Baeta Corporation (the “Company”).

     

    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Investor, from time to time as provided herein, and
the Investor shall purchase from the Company up to Five Million Dollars
($5,000,000) of the Company’s fully registered, freely tradable common stock
(the “Common
Stock”),; and

     

    WHEREAS, such investments will
be made in reliance upon the provisions of Regulation D (“Regulation D”) of the
Securities Act of 1933, as amended, and the regulations promulgated thereunder
(the “Securities
Act”), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.

     

    NOW, THEREFORE, the parties hereto
agree as follows:

     

    ARTICLE
I.

    Certain
Definitions

     

    Section
1.1. “Advance”
shall mean the portion of the Commitment Amount requested by the Company in the
Advance Notice.

     

    Section
1.2. “Advance
Date” shall mean the first Trading Day after expiration of the applicable
Pricing Period for each Advance.

     

    Section
1.3. “Advance
Notice” shall mean a written notice in the form of Exhibit A attached
hereto to the Investor executed by an officer of the Company and setting forth
the Advance amount that the Company requests from the Investor.

     

    Section
1.4 “Advance Notice
Date” shall mean each date the Company delivers (in accordance with
Section 2.2(b) of this Agreement) to the Investor an Advance Notice. No Advance
Notice Date shall be less than five (5) Trading Days after the prior Advance
Notice Date.

     

    Section
1.5 “Average Daily
Trading Volume” means the average trading volume of the ten (10) Trading
Days prior to the date of delivery of the Advance Notice that results from
excluding the three (3) highest trading volume days and three (3) lowest trading
volume Trading Days during such ten (10) Trading Day period.

     

    Section
1.6. “Bid
Price” shall mean, on any date, the closing bid price (as reported by
Bloomberg L.P. or other comparable reporting service) of the Common Stock on the
Principal Market or if the Common Stock is not traded on a Principal Market, the
highest reported bid price for the Common Stock, as furnished by the Financial
Industry Regulatory Authority.

     

    Section
1.7. “Closing”
shall mean one of the closings of a purchase and sale of Common Stock pursuant
to Section 2.3.

     

    Section
1.8. “Commitment
Amount” shall mean the aggregate amount of up to Five Million Dollars
($5,000,000) which the Investor has agreed to provide to the Company in order to
purchase the Company’s Common Stock pursuant to the terms and conditions of this
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
1.9. “Commitment
Period” shall mean the period commencing on the Effective Date, and
expiring upon the termination of this Agreement in accordance with Section
10.2.

     

    Section
1.10. “Common
Stock” shall mean the Company’s freely tradable, fully registered and
unencumbered common stock.

     

    Section
1.11. “Condition
Satisfaction Date” shall have the meaning set forth in Section
7.2.

     

    Section
1.12. “Damages”
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorney’s fees and disbursements and costs and
expenses of expert witnesses and investigation).

     

    Section
1.13. “Effective
Date” shall mean the date on which the SEC first declares effective a
Registration Statement registering the resale of the Registrable Securities as
set forth in Section 7.2(a).

     

    Section
1.14. Intentionally
Omitted.

     

    Section
1.15. “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

     

    Section
1.16. “Material
Adverse Effect” shall mean any condition, circumstance, or situation that
may result in, or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of the Agreement, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under the Agreement.

     

    Section
1.17. “Market
Price” shall mean the lowest closing bid price of the Company’s Common
Stock during the Pricing Period.

     

     
Section 1.18. “Maximum
Advance Amount” shall be equal to a maximum of one hundred thousand
dollars ($100,000).

     

    Section
1.19. “FINRA”
shall mean the Financial Industry Regulatory Authority.

     

    Section
1.20. “Person”
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.

     

    Section
1.21. “Pricing
Period” shall mean the five (5) consecutive Trading Days after the
Advance Notice Date.

     

    Section
1.22. “Principal
Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin
Board, or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.

     

    Section
1.23. “Purchase
Price” shall mean ninety five percent (95%) of the Market Price during
the Pricing Period.

     

    Section
1.24. “Registrable
Securities” shall mean the shares of Common Stock to be issued hereunder
(i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances meeting
all of the applicable conditions of Rule 144 (or any similar provision then in
force) under the Securities Act (“Rule 144”) or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
1.25. “Registration
Rights Agreement” shall mean the Registration Rights Agreement dated the
date hereof, regarding the filing of the Registration Statement for the resale
of the Registrable Securities, entered into between the Company and the
Investor.

     

    Section
1.26. “Registration
Statement” shall mean a registration statement on Form S-1 or Form S-3
(if use of such form is then available to the Company pursuant to the rules of
the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement, and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities
Act.

     

    Section
1.27. “Regulation
D” shall have the meaning set forth in the recitals of this
Agreement.

     

    Section
1.28. “SEC”
shall mean the United States Securities and Exchange Commission.

     

    Section
1.29. “Securities
Act” shall have the meaning set forth in the recitals of this
Agreement.

     

     Section
1.30 “Trading
Cushion” Unless the parties agree in writing otherwise, there shall be a
minimum of three (3) Trading Days between the expiration of any Pricing Period
and the beginning of the next succeeding Pricing Period.

     

    Section
1.31. “Trading
Day” shall mean any day during which the New York Stock Exchange shall be
open for business.

     

    Section
1.32. “VWAP”
means, as of any date, the daily dollar volume-weighted average price for such
security as reported by Bloomberg, LP through its “Historical Price Table Screen
(HP)” with Market: Weighted Ave function selected (or comparable financial news
service (U.S market only), or, if no dollar volume-weighted average price is
reported for such security by Bloomberg, LP (or comparable financial news
service (U.S market only), the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC.

     

    ARTICLE
II.

    Advances

    Section
2.1. Advances”

     

    Subject
to the terms and conditions of this Agreement (including, without limitation,
the provisions of Article VII hereof), the Company, at its sole and exclusive
option, may issue and sell to the Investor, and the Investor shall purchase from
the Company, shares of the Company’s Common Stock by the delivery, in the
Company’s sole discretion, of Advance Notices. The aggregate maximum amount of
all Advances that the Investor shall be obligated to make under this Agreement
shall not exceed the Commitment Amount. The Company shall send an Advance Notice
to Investor at least once every month equaling the Maximum Advance
Amount.

     

    Section
2.2. Mechanics.

     

    (a) Advance Notice. At
any time during the Commitment Period, the Company may require the Investor to
purchase shares of Common Stock by delivering an Advance Notice to the Investor,
subject to the conditions set forth in Article VII; provided, however, that (i)
the amount for each Advance in the Advance Notice shall not be more than the
Maximum Advance Amount, (ii) the aggregate amount of the Advances pursuant to
this Agreement shall not exceed the Commitment Amount, (iii) in no event shall
the number of shares of Common Stock issuable to the Investor pursuant to an
Advance cause the aggregate number of shares of Common Stock beneficially owned
(as calculated pursuant to Section 13(d) of the Exchange Act) by the Investor
and its affiliates to equal or exceed five percent of the then outstanding
Common Stock (the “Ownership
Limitation”) (as of the date of this Agreement, Investor and its
affiliates held 0% of the outstanding Common Stock), (iv) under no circumstances
shall the aggregate offering price or number of Shares, as the case may be,
exceed the aggregate offering price or number of Shares available for issuance
under the Registration Statement (the “Registration
Limitation”) and (iv) the Common Stock must be DWAC eligible and sent to
Investor in electronic form, instead of certificate form. There shall be a
minimum of five Trading Days between each Advance Notice Date. Notwithstanding
any other provision in this Agreement, the Company acknowledges and agrees that
upon receipt of an Advance Notice, the Investor may sell shares that it is
unconditionally obligated to purchase under such Advance Notice prior to taking
possession of such shares.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) Date of Delivery of Advance
Notice. An Advance Notice shall be deemed delivered on (i) the Trading
Day it is received by email (to the address set forth in Section 11.1 herein) by
the Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii)
the immediately succeeding Trading Day if it is received by email after 5:00 pm
Eastern Time on a Trading Day or at any time on a day which is not a Trading
Day. No Advance Notice may be deemed delivered on a day that is not a Trading
Day. The Company acknowledges and agrees that the Investor shall be entitled to
treat any email it receives from officers whose email addresses are identified
by the Company purporting to be an Advance Notice as a duly executed and
authorized Advance Notice from the Company.

     

    Section
2.3. Closings.

     

    (a)  
  On the day of the Advance Notice, the Company shall deliver to the
Investor in electronic form, such number of shares of the DWAC eligible Common
Stock registered in the name of the Investor as shall equal the number of shares
specified in the Advance Notice. On the later of the Advance Date or one Trading
Day following receipt of the shares of Common Stock corresponding to the Advance
Notice, the Investor shall deliver to the Company the amount of the Advance by
wire transfer of immediately available funds. On or prior to the Advance Date,
each of the Company and the Investor shall deliver to the other all documents,
instruments and writings required to be delivered by either of them pursuant to
Section 2.3(b) below in order to implement and effect the transactions
contemplated herein. To the extent the Company has not paid the fees, expenses,
and disbursements of the Investor in accordance with Section 12.4, the amount of
such fees, expenses, and disbursements may be deducted by the Investor (and
shall be paid to the relevant party) directly out of the proceeds of the Advance
with no reduction in the amount of shares of the Company’s Common Stock to be
delivered on such Advance Date.

     

     (b)
Obligations Upon
Closing. The Investor agrees to advance the amount corresponding to the
Advance Notice to the Company upon completion of each of the following
conditions:

     

    (i) The
Company shall deliver to the Investor the shares of Common Stock applicable to
the Advance in accordance with Section 2.3(a). The certificates evidencing such
shares shall be free of restrictive legends.

     

    (ii) The
Registration Statement filed pursuant to the Registration Rights Agreement shall
be effective and available for the resale of all applicable shares of Common
Stock to be issued in connection with the Advance and certificates evidencing
such shares shall be free of restrictive legends;

     

    (iii) the
Company shall have obtained all material permits and qualifications required by
any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom. The sale and issuance of
the Registrable Securities shall be legally permitted by all laws and
regulations to which the Company is subject;

     

    (iv) the
Company shall have filed with the SEC in a timely manner all reports, notices
and other documents required of a “reporting company” under the Exchange Act and
applicable Commission regulations;

     

    (v) the
Company shall pay any unpaid fees as set forth in Section 12.4 below or withhold
such amounts as provided in Section 2.3; and

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (vi) the
Company’s transfer agent shall be DWAC eligible.

     

    (vii) the
conditions in Section 7.2.3(a)(i) above and provided the Company is in
compliance with its obligations in Section 2.3, the Investor shall deliver to
the Company the amount of the Advance specified in the Advance Notice by wire
transfer of immediately available funds are satisfied.

     

    Section
2.4. Lock Up
Period. On the date hereof, the Company shall obtain from each officer
and director a lock-up agreement, as defined below, in the form annexed hereto
as Schedule 2.4. The Company shall cause its officers and directors to refrain
from selling Common Stock during each Pricing Period.

     

    Section
2.5. Hardship.
In the event the Investor sells shares of the Company’s Common Stock after
receipt of an Advance Notice and the Company fails to perform its obligations as
mandated in Section 2.3, the Company agrees that in addition to and in no way
limiting the rights and obligations set forth in Article V hereto and in
addition to any other remedy to which the Investor is entitled at law or in
equity, including, without limitation, specific performance, it will hold the
Investor harmless against any loss, claim, damage, or expense (including
reasonable legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and acknowledges that irreparable
damage would occur in the event of any such default. It is accordingly agreed
that the Investor shall be entitled to an injunction or injunctions to prevent
such breaches of this Agreement and to specifically enforce, without the posting
of a bond or other security, the terms and provisions of this
Agreement.

     

    Section
2.6. Removal of
Restricted Legends. If the Company is fully reporting six months after
the issuance of any restricted stock to Investor, and fails to remove the
restricted legend from the Investor’s stock certificate three days after the
Investor’s request to remove such restricted legend, then the Company shall pay
the Investor USD1,000.00 for each day the company fails to remove such
restricted legend. Company covenants that there shall be no justifiable reason
not to remove the restricted legend from the stock certificates and in the event
that Company attempts to offer such justification, the Company shall pay the
Investor USD$2,000.00 for each day the company fails to remove such restricted
legend.

     

    Section
2.7 Increase in
Commitment Amount. At any time prior to the one year anniversary of the
Effective Date (the “Commitment Increase
Date”) the Company may notify the Investor in writing that it wishes to
increase the Commitment Amount (provided that the Company has the ability to
register the additional Commitment Amount on the Registration Statement)
effective upon the Commitment Increase Date and the Commitment Amount shall
automatically be deemed increased.

     

    Section
2.8 Promissory
Notes. On a monthly basis, after the completion of the first Advance
under this Agreement and thereafter during the Commitment Period, the Company
may request the Investor to purchase promissory notes (each, a “Note”) issued by the
Company with a principal amount of up to five hundred thousand dollars. The
Investor may decide in its sole discretion whether or not to purchase any Note
requested by the Company. The aggregate principal amount of the Notes shall not
exceed fifty percent (50%) of the aggregate REF Amount. Any Notes purchased by
the Investor will be on terms mutually acceptable to both the Company and the
Investor and will be subject to certain conditions precedent, including without
limitation, the completion of due diligence by the Investor to its satisfaction.
The aggregate amount of the Notes issued each shall not exceed one half of the
REF Amount. The interest rate for such note shall be LIBOR plus 8%, may be
payable in kind at the option of the company subject to a 2% premium, will have
a maturity of one year and will not be subject to prepayment
penalty.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
2.9 Reimbursement. If (I)
the Investor becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by the Reserve
Equity Financing, or if the Investor is impleaded in any such action, proceeding
or investigation by any person (other than as a result of a breach of the
Investor’s representations and warranties set forth in this Agreement); or (II)
the Investor becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Reserve Equity Financing (other than as a result of a breach
of the Investor’s representations and warranties set forth in this Agreement),
or if this Investor is impleaded in any such action, proceeding or investigation
by any person, then in any such case, the Company will reimburse the Investor
for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which the Investor is a named party, the Company will pay to the Investor the
charges, as reasonably determined by the Investor, for the time of any officers
or employees of the Investor devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any affiliates of the Investor that are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees,
attorneys, accountants, auditors and controlling persons (if any), as the case
may be, of Investor and any such affiliate, and shall be binding upon and inure
to the benefit of any successors of the Company, the Investor and any such
affiliate and any such person.

    

    ARTICLE
III.

    Representations
of Investor

     

    Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:

     

    Section
3.1. Organization and
Authorization. The Investor is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority to purchase and hold the securities issuable
hereunder. The decision to invest and the execution and delivery of this
Agreement by such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part
of the Investor. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments (including, without
limitations, the Registration Rights Agreement), on behalf of the Investor. This
Agreement has been duly executed and delivered by the Investor and, assuming the
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.

     

    Section
3.2. Evaluation of
Risks. The Investor has such knowledge and experience in financial, tax
and business matters as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the Company and of
protecting its interests in connection with this transaction. It recognizes that
its investment in the Company involves a high degree of risk.

     

    Section
3.3. No Legal Advice
From the Company. The Investor acknowledges that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax advisors. The Investor
is relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.

     

    Section
3.4. Intentionally Omitted.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
3.5. Information. The
Investor and its advisors (and its counsel), if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and information it deemed material to making an informed investment decision.
The Investor and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor any
other due diligence investigations conducted by such Investor or its advisors,
if any, or its representatives shall modify, amend or affect the Investor’s
right to rely on the Company’s representations and warranties contained in this
Agreement. The Investor understands that its investment involves a high degree
of risk. The Investor is in a position regarding the Company, which, based upon
employment, family relationship or economic bargaining power, enabled and
enables such Investor to obtain information from the Company in order to
evaluate the merits and risks of this investment.

     

    Section
3.6. Receipt of
Documents. The Investor has received and read in their entirety: (i) this
Agreement and the Exhibits annexed hereto; (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-Q for the
period ended June 30, 2009 and other SEC filings ; and (iv) answers to all
questions the Investor submitted to the Company regarding an investment in the
Company; and the Investor has relied on the information contained therein and
has not been furnished any other documents, literature, memorandum or
prospectus.

     

    Section
3.7. Not an
Affiliate. The Investor is not an officer, director or a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the Company or any “Affiliate” of the
Company (as that term is defined in Rule 405 of the Securities
Act).

     

    Section
3.8. Trading
Activities. The Investor’s trading activities with respect to the
Company’s Common Stock shall be in compliance with all applicable federal and
state securities laws, rules and regulations and the rules and regulations of
the Principal Market on which the Company’s Common Stock is listed or traded.
Investor makes no representations or covenants that it will not engage in
trading in the securities of the Company, other than the Investor will not
engage in any Short Sales of the Company's common stock at any time during the
Agreement. The Company acknowledges and agrees that upon receipt of an Advance
Notice the Investor has the right to sell the shares to be purchased by the
Investor pursuant to the Advance Notice prior to taking possession of such
Shares.

     

    ARTICLE
IV.

    Representations
and Warranties of the Company

     

    Except as
stated below, on the disclosure schedules attached hereto the Company hereby
represents and warrants to, and covenants with, the Investor that the following
are true and correct as of the date hereof:

     

    Section
4.1. Organization and
Qualification. The Company is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite corporate power to own its properties and to carry on its business as
now being conducted. Each of the Company and its subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.

     

    Section
4.2. Authorization,
Enforcement, Compliance with Other Instruments. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and any related agreements by
the Company and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by the Company’s Board of Directors and
no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement, the Registration Rights
Agreement and any related agreements have been duly executed and delivered by
the Company, (iv) this Agreement, the Registration Rights Agreement and assuming
the execution and delivery thereof and acceptance by the Investor and any
related agreements constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and
remedies.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.3. Capitalization. The
authorized capital stock of the Company consists of 150,000,000 shares of Common
Stock, of which 23,000,000 shares of Common Stock are issued and outstanding,
and 100 shares of authorized Preferred Stock, of which no shares are issued and
outstanding All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed on Schedule 4.3, as of
the date hereof, (i) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities (iii) there are no outstanding
registration statements; and (iv) there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register the sale
of any of their securities under the Securities Act (except pursuant to the
Registration Rights Agreement), except pursuant to the terms of an agreement
between the Company and the Investor. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by this
Agreement or any related agreement or the consummation of the transactions
described herein or therein. The Company has furnished to the Investor true and
correct copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date
hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.

     

    Section
4.4. No
Conflict. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of Incorporation,
any certificate of designations of any outstanding series of preferred stock of
the Company or By-laws or (ii) conflict with or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market on
which the Common Stock is quoted) applicable to the Company or any of its
subsidiaries or by which any material property or asset of the Company or any of
its subsidiaries is bound or affected and which would cause a Material Adverse
Effect. Neither the Company nor its subsidiaries is in violation of any term of
or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted in violation of any material law, ordinance, regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its subsidiaries are unaware of any fact or
circumstance which might give rise to any of the foregoing.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
4.5. SEC Documents;
Financial Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
under the Securities Exchange Act for the two years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (all of the foregoing filed prior to the date hereof or amended
after the date hereof and all exhibits include therein and financial statements
and schedules thereto and documents incorporated by reference therein, being
hereinafter referred to as the “SEC Documents”) on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such extension. The
Company has delivered to the Investor or its representatives, or made available
through the SEC’s website at http://www.sec.gov., true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Such financial statements have been prepared in accordance with
generally accepted accounting principles. For preparation of the Company’s
financials after the date of this Agreement, they shall use the accounting and
audit services of Friedman LLP to ensure compliance with applicable accounting
requirements and the published rules and regulations of the SEC. No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made and
not misleading.

     

    Section
4.6. No Misstatement
or Omission. Each part of the Registration Statement, when such part
became or becomes effective, and the Prospectus, on the date of filing thereof
with the SEC and at each Advance Notice Date and Closing Date, conformed or will
conform in all material respects with the requirements of the Securities Act and
the rules and regulations promulgated thereunder; each part of the Registration
Statement, when such part became or becomes effective, did not or will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Prospectus, on the date of filing thereof with the SEC and
at each Advance Notice Date and Share Issuance Date, did not or will not include
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; except that the foregoing shall not apply
to statements or omissions in any such document made in reliance on information
furnished in writing to the Company by the Investor expressly stating that such
information is intended for use in the Registration Statement, the Prospectus,
or any amendment or supplement thereto.

     

    Section
4.7. No
Default. The Company is not in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the Company
of its obligations under this Agreement or any of the exhibits or attachments
hereto will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under its Certificate of Incorporation, By-Laws, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound, or any
statute, or any decree, judgment, order, rules or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, in each case which default, lien or charge is likely to cause a
Material Adverse Effect on the Company’s business or financial
condition.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
4.8. Absence of Events
of Default. No Event of Default, 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 (as so
defined), has occurred and is continuing, which would have a Material Adverse
Effect on the Company’s business, properties, prospects, financial condition or
results of operations.

     

    Section
4.9. Intellectual
Property Rights. The Company and its subsidiaries own or possess adequate
rights or licenses to use all material trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company, there is no claim, action or proceeding being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

     

    Section
4.10. Employee
Relations. Neither the Company nor any of its subsidiaries is involved in
any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company’s or its
subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are
good.

     

    Section
4.11. Environmental
Laws. The Company and its subsidiaries are (i) in compliance with any and
all applicable material foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval.

     

    Section
4.12. Title.
The Company has good and marketable title to its properties and material assets
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest other than such as are not material to the business
of the Company. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.

     

     Section
4.13. Insurance. The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.

     

    Section
4.14. Regulatory
Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.16. No Material
Adverse Breaches, etc. Neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company’s
officers has or is expected in the future to have a Material Adverse Effect on
the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries. Except as set forth in the SEC
Documents, neither the Company nor any of its subsidiaries is in breach of any
contract or agreement which breach, in the judgment of the Company’s officers,
has or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.

     

    Section
4.17. Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a Material Adverse Effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) have a Material Adverse Effect on the business, operations, properties,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.

     

    Section
4.18. Subsidiaries. The
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business
entity.

     

    Section
4.19. Tax
Status. The Company and each of its subsidiaries has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.

     

    Section
4.20. Certain
Transactions. None of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

     

    Section
4.21. Rights of First
Refusal. The Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.

     

    Section
4.22. Use of
Proceeds. The Company shall use the net proceeds from this offering for
working capital and other general corporate purposes including paying relevant
fees and commissions incurred from this transaction.

     

    Section
4.23. Maintenance of
Listing or Quotation on Principal Market. For so long as any securities
issuable hereunder held by the Investor remain outstanding, the Company
acknowledges, represents, warrants and agrees that it will /maintain the listing
or quotation, as applicable, of its Common Stock on the Principal
Market.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.24. Opinion of
Counsel. Investor shall receive an opinion letter from counsel to the
Company on the date hereof in the form attached hereto as Exhibit
C.

     

    Section
4.25. Opinion of
Counsel. The Company will obtain for the Investor, at the Company’s
expense, any and all opinions of counsel which may be reasonably required in
order to sell the securities issuable hereunder without
restriction.

     

    Section
4.26. Dilutive
Effect. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment, and
with full understanding of the implications, that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such limitations as are expressly set forth in the Agreement, its obligation to
issue shares of Common Stock upon purchases pursuant to this Agreement is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the
Company.

    

    Section
4.27. Acknowledgment
Regarding Investor’s Purchase of Shares. The Company acknowledges and
agrees that the Investor is acting solely in the capacity of an arm’s length
investor with respect to this Agreement and the transactions contemplated
hereunder. The Company further acknowledges that the Investor is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereunder and any
advice given by the Investor or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereunder is
merely incidental to the Investor’s purchase of the Common Stock hereunder. The
Company is aware and acknowledges that it may not be able to request Advances
under this Agreement if it cannot obtain an effective Registration Statement or
if any issuances of Common Stock pursuant to any Advances would violate any
rules of the Principal Market. The Company further is aware and acknowledges
that any fees paid pursuant to Section 12.4 hereunder or shares issued pursuant
to Section 12.4(b) hereunder shall be earned on the date hereof and not
refundable or returnable under any circumstances.

     

    Section
4.28. No Legal Advice
From the Investor. The Company acknowledges that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax advisors. The Company
is relying solely on such counsel and advisors and not on any statements or
representations of the Investor or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction. The Company is not relying on any representation except for the
representations of the Investor contained in this Agreement.

     

    Section
4.29. No Similar
Transactions. The Company has not entered into any transaction similar in
nature to the one described in this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section 4.30 Sarbanes-Oxley; Internal
Accounting Controls. The Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no changes in the Company’s internal
control over financial reporting (as such term is defined in the Exchange Act)
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

     

    Section
4.32 Other
Transactions. During the Term of the Reserve Equity Financing, the
Company will be prohibited from effecting or entering into (i) an agreement to
effect any financing involving the sale of debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock at a price that is based upon and/or
varies with the trading prices of Company’s Common Stock at any time after the
initial issuance of such securities or is subject to reset upon the occurrence
of specified or contingent events and (ii) any agreement, including but not
limited to an Equity Line of Credit, whereby the Issuer may sell securities at a
future determined price.

    

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

     

     Section 4.34 The Shares. The
Shares have been duly authorized and, when issued, delivered and paid for
pursuant to this Agreement, will be validly issued and fully paid and
non-assessable, free and clear of all encumbrances and will be issued in
compliance with all applicable United States federal and state securities laws;
the capital stock of the Company, including the Common Stock, conforms in all
material respects to the description thereof contained in the Registration
Statement and the Common Stock, including the Shares, will conform to the
description thereof contained in the Prospectus as amended or supplemented.
Neither the stockholders of the Company, nor any other Person have any
preemptive rights or rights of first refusal with respect to the Shares or other
rights to purchase or receive any of the Shares or any other securities or
assets of the Company, and no Person has the right, contractual or otherwise, to
cause the Company to issue to it, or register pursuant to the Securities Act,
any shares of capital stock or other securities or assets of the Company upon
the issuance or sale of the Shares. The Company is not obligated to offer the
Shares on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.

     

    Section
4.35 Broker
Fees. No brokers, finders or financial advisory fees or commissions will
be payable by the Company, its agents or Subsidiaries, with respect to the
transactions contemplated by this Agreement, except as otherwise disclosed in
this Agreement.

     

    Section
4.35 Blue Sky.
The Company shall, at its sole cost and expense, on or before each of the
Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Investor at each of the Closings pursuant to this Agreement
under applicable securities or "Blue Sky" laws of such states of the United
States, as reasonably specified by the Investor, and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing
Date.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.35 Reservation of
Shares. The Company shall reserve five million (5,000,000) shares of
Stock for the issuance of the Securities to the Investor as required hereunder.
In the event that the Company determines that it does not have a sufficient
number of authorized shares of Common Stock to reserve and keep available for
issuance as described in this Section 5(F), the Company shall use all
commercially reasonable efforts to increase the number of authorized shares of
Common Stock by seeking shareholder approval for the authorization of such
additional shares.

     

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

    

    ARTICLE
V.

    Indemnification

     

    The
Investor and the Company represent to the other the following with respect to
itself:

     

    Section
5.1. Indemnification.

     

     (a)
In consideration of the Investor’s execution and delivery of this Agreement, and
in addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, and all
of its officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Investor Indemnitee not arising out of any action or inaction of an
Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) Contribution. In the
event that the indemnity provided in Section 5.1 is unavailable to or
insufficient to hold harmless an indemnified party for any reason, the Company
severally agrees to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively “Losses”) to which the
Company may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand from transactions
contemplated by this Agreement. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Investor
severally shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and of the Investor on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by it, and benefits received
by the Investor shall be deemed to be equal to the total discounts received by
the Investor. Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information
provided by the Company on the one hand or the Investor on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Investor agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this section shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this secton the Investor shall not be required to contribute any amount in
excess of the amount by which the Purchase Price for Shares actually purchased
pursuant to this Agreement exceeds the amount of any damages which the Investor
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Article V, each person who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each director, officer, employee and agent of
the Investor shall have the same rights to contribution as the Investor, and
each person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this section.

     

    (c) The
remedies provided for in this Article V are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified
person at law or in equity. The obligations of the parties to indemnify or make
contribution under this Article V shall survive termination.

     

    Section
5.2 Notification of
Claims for Indemnification. Each party entitled to indemnification under
this Article V (an “Indemnified Party”)
shall, promptly after the receipt of notice of the commencement of any claim
against such Indemnified Party in respect of which indemnity may be sought from
the party obligated to indemnify such Indemnified Party under this Article V
(the “Indemnifying
Party”), notify the Indemnifying Party in writing of the commencement
thereof. Any such notice shall describe the claim in reasonable detail. The
failure of any Indemnified Party to so notify the Indemnifying Party of any such
action shall not relieve the Indemnifying Party from any liability which it may
have to such Indemnified Party (a) other than pursuant to this Article V or (b)
under this Article V unless, and only to the extent that, such failure results
in the Indemnifying Party’s forfeiture of substantive rights or defenses or the
Indemnifying Party is prejudiced by such delay. The procedures listed below
shall govern the procedures for the handling of indemnification
claims.

     

    (a) Any
claim for indemnification for Indemnified Liabilities that do not result from a
Third Party Claim as defined in the following paragraph, shall be asserted by
written notice given by the Indemnified Party to the Indemnifying Party. Such
Indemnifying Party shall have a period of thirty (30) days after the receipt of
such notice within which to respond thereto. If such Indemnifying Party does not
respond within such thirty (30) day period, such Indemnifying Party shall be
deemed to have refused to accept responsibility to make payment as set forth in
Section 5.1. If such Indemnifying Party does not respond within such thirty (30)
day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) If an
Indemnified Party shall receive notice or otherwise learn of the assertion by a
person or entity not a party to this Agreement of any threatened legal action or
claim (collectively a “Third Party Claim”),
with respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.

     

    (c) An
Indemnifying Party may elect to defend (and, unless the Indemnifying Party has
specified any reservations or exceptions, to seek to settle or compromise) at
such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim. Within thirty (30) days after the receipt of
notice from an Indemnified Party (or sooner if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions.
If such Indemnifying Party does not respond within such thirty (30) day period
or rejects such claim in whole or in part, the Indemnified Party shall be free
to pursue such remedies as specified in this Agreement. In case any such Third
Party Claim shall be brought against any Indemnified Party, and it shall notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding the
foregoing, in any Third Party Claim in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel and to control its own defense of such claim if, in the
reasonable opinion of counsel to such Indemnified Party, either (x) one or more
significant defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that in such circumstances the Indemnifying Party
(i) shall not be liable for the fees and expenses of more than one counsel to
all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for
such reasonable fees and expenses of such counsel incurred in any such Third
Party Claim, as such expenses are incurred, provided that the Indemnified
Parties agree to repay such amounts if it is ultimately determined that the
Indemnifying Party was not obligated to provide indemnification under this
Article IX. The Indemnifying Party agrees that it shall not, without the prior
written consent of the Indemnified Party, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liability arising or that may arise out of such claim. The
Indemnifying Party shall not be liable for any settlement of any claim effected
against an Indemnified Party without the Indemnifying Party’s written consent,
which consent shall not be unreasonably withheld, conditioned or delayed. The
rights accorded to an Indemnified Party hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise; provided, however, that notwithstanding the foregoing or anything
to the contrary contained in this Agreement, nothing in this Article V shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
VI.

    Covenants
of the Company

     

    Section
6.1. Registration
Rights. The Company shall cause the Registration Rights Agreement to
remain in full force and effect and the Company shall comply in all material
respects with the terms thereof. During the Commitment Period, the Company shall
notify the Investor promptly if (i) the Registration Statement shall cease to be
effective under the Securities Act, (ii) the Common Stock shall cease to be
authorized for listing on the Principal Market, (iii) the Common Stock ceases to
be registered under Section 12(g) of the Exchange Act or (iv) the Company fails
to file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act.

     

    Section
6.2. Quotation of
Common Stock. The Company shall maintain the Common Stock’s authorization
for quotation on the Principal Market.

     

    Section
6.3. Exchange Act
Registration. The Company will cause its Common Stock to continue to be
registered under Section 12(g) of the Exchange Act, will file in a timely manner
all reports and other documents required of it as a reporting company under the
Exchange Act and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Exchange Act.

     

    Section
6.4. Transfer Agent
Instructions. On the Advance Notice Date, the Company shall deliver
instructions to its transfer agent to issue shares of Common Stock to the
Investor free of restrictive legends on the Advance Notice Date .

     

    Section
6.5. Corporate
Existence. The Company will take all steps necessary to preserve and
continue the corporate existence of the Company.

     

    Section
6.6. Notice of Certain
Events Affecting Registration; Suspension of Right to Make an Advance.
The Company will immediately notify the Investor upon its becoming aware of the
occurrence of any of the following events in respect of a registration statement
or related prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
Federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
Federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.

     

    Section 6.7. Intentionally
Omitted.

     

    Section
6.8. Consolidation;
Merger. The Company shall not, at any time after the delivery of
anAdvance Notice and before the Advance Date applicable to such Advance Notice,
effect any merger or consolidation of the Company with or into, or a transfer of
all or substantially all the assets of the Company to another entity (a “Consolidation Event”)
unless the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section 6.9.
Issuance of the
Company’s Common Stock. The sale of the shares of Common Stock shall be
made in accordance with the provisions and requirements of Regulation D and
any applicable state securities law.

     

    Section 6.10.
Review of Public
Disclosures. All SEC filings (including, without limitation, all filings
required under the Exchange Act, which include Forms 10-Q, 10-K, 8-K, etc) and
other public disclosures made by the Company, including, without limitation, all
press releases, investor relations materials, and scripts of analysts meetings
and calls, shall be reviewed and approved for release by the Company’s attorneys
and, if containing financial information, the Company’s independent certified
public accountants.  All press releases referencing the Investor shall
first be approved by Investor prior to release.

     

    Section 6.11. Market
Activities   The Company will not, directly or indirectly
take any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Common Stock or (ii) sell, bid for or purchase the Common Stock, or pay
anyone any compensation for soliciting purchases of the Common
Stock.

     

    Section
6.12     Listing of
Shares.  The Company will use commercially reasonable efforts to
cause the Shares to be listed on the Principal Market and to qualify the Shares
for sale under the securities laws of such jurisdictions as the Investor
designates; provided that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction.

     

    Section
6.13     Comfort
Letters.  At the reasonable request of the Investor the Company will
request that its independent accountants furnish to the Investor a letter, in
form and substance reasonably satisfactory to the Investor, containing
statements and information of the type ordinarily included in accountants’
“comfort letters” to underwriters with respect to the financial statements of
the Company dated the date of and provided within a reasonable period of time
after (i) the date hereof, (ii) the date the Registration Statement or the
Prospectus shall be amended (other than (1) in connection with the filing
of a prospectus supplement that contains solely the information required
(2) in connection with the filing of any report or other document under
Section 13, 14 or 15(d) of the Exchange Act by the Company or (3) by a
prospectus supplement relating to the offering of other securities (including,
without limitation, other shares of Common Stock)) and (iii) the date of
filing or amending each Annual Report on Form 10-K and Quarterly Report on Form
10-Q for a period in which an Advance was delivered pursuant to this Agreement
and which are incorporated by reference in the Registration
Statement.

     

    ARTICLE
VII.

    Conditions
for Advance and Conditions to Closing

     

    Section 7.1.
Conditions Precedent
to the Obligations of the Company. The obligation hereunder of the
Company to issue and sell the shares of Common Stock to the Investor incident to
each Closing is subject to the satisfaction, or waiver by the Investor in
writing, at or before each such Closing, of each of the conditions set forth
below.

     

    (a)   Accuracy of the Investor’s
Representations and Warranties. The representations and warranties of the
Investor shall be true and correct in all material respects.

     

    (b) 
Performance by the
Investor. The Investor shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Investor at or prior to such Closing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section 7.2.
Conditions Precedent
to the Right of the Company to Deliver an Advance Notice. The right of
the Company to deliver an Advance Notice is subject to the fulfillment by the
Company, on such Advance Notice Date (a “Condition Satisfaction
Date”), of each of the following conditions, any of which may be waived
in writing by the Investor:

     

    (a) 
Registration of the
Common Stock with the SEC. The Company shall have filed with the SEC a
Registration Statement with respect to the resale of the Registrable Securities
in accordance with and subject to the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC’s concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist. The
Registration Statement must have been declared effective by the SEC prior to the
first Advance Notice Date.

     

    (b) 
Authority. The
Company shall have obtained all permits and qualifications required by any
applicable state in accordance with the Registration Rights Agreement for the
offer and sale of the shares of Common Stock, or shall have the availability of
exemptions therefrom. The sale and issuance of the shares of Common Stock shall
be legally permitted by all laws and regulations to which the Company is
subject.

     

    (c)  Fundamental Changes.
There shall not exist any fundamental changes to the information set forth in
the Registration Statement which would require the Company to file a
post-effective amendment to the Registration Statement.

     

    (d) 
Performance by the
Company. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition Satisfaction
Date.

     

    (e) 
No Injunction.
No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits or directly and
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of prohibiting or
adversely affecting  any of the transactions contemplated by this
Agreement.

     

    (f) 
No Suspension of
Trading in or Delisting of Common Stock. The Common Stock is trading on a
Principal Market. The trading of the Common Stock is not suspended by the SEC or
the Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing will not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening the
continued quotation of the Common Stock on the Principal Market and the Company
shall have no knowledge of any event which would be more likely than not to have
the effect of causing the Common Stock to not be trading or quoted on a
Principal Market.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) 
Maximum Advance
Amount. The amount of an Advance corresponding to the Advance Notice
shall not exceed the Maximum Advance Amount. If trading in the Company’s Common
Stock is suspended for any reason during trading hours on the Principal Market
on any Trading Day during a Pricing Period or for each day there is public
holiday during the Pricing Period, the Advance Amount in respect of such Pricing
Period shall be reduced by one fifth of the initial Advance Amount specified in
the Advance Notice. The Floor Price shall be The Floor Price shall be ninety
eight percent of the average closing price of the Common Stock for the ten
Trading Days prior to the Advance Notice Date. If on any day during the
Pricing Period, the bid price of the Common Stock falls below the Floor Price,
the Maximum Advance Amount will be changed to fifty percent of the average daily
trading volume of the Common Stock for the ten days preceding the Advance Notice
Date. If any of the Company’s representations in this Agreement are false or if
the Common Stock’s bid price is less than twenty cents, then no Advances shall
be permitted. Any portion of an Advance that would cause the Investor to exceed
the Ownership Limitation shall automatically be withdrawn. For the purposes of
this section, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act.

     

     (h) 
No Knowledge.
The Company has no knowledge of any event which would be more likely than not to
have the effect of causing such Registration Statement to be suspended or
otherwise ineffective at Closing.

     

    (i) 
Executed Advance
Notice. The Investor shall have received the Advance Notice executed by
an officer of the Company and the representations contained in such Advance
Notice shall be true and correct as of each Condition Satisfaction
Date.

     

    (j)  Failure to Deliver
Shares. Company understands that a delay in the issuance of Common Stock
could result in economic damage to the Investor.  If the Company fails
to cause the delivery of the Shares when due, the Company shall pay to the
Investor on demand in cash by wire transfer of immediately available funds to an
account designated by the Investor as liquidated damages for such failure and
not as a penalty, an amount equal to five percent (5%) of the payment required
to be paid by the Investor on such Settlement Date (i.e., the Advance Amount) for
the initial 30 days following such date until the Shares have been
delivered, and an additional 5% for each additional 30-day period thereafter
until the Shares have been delivered. If, by the third (3rd) business day after
the Closing Date, the Company fails to deliver any portion of the shares of the
Put to the Investor (the "Put Shares Due") and the Investor purchases, in an
open market transaction or otherwise, shares of Common Stock necessary to make
delivery of shares which would have been delivered if the full amount of the
shares to be delivered to the Investor by the Company (the "Open Market Share
Purchase") , then the Company shall pay to the Investor, in addition to any
other amounts due to Investor pursuant to the Put, and not in lieu thereof, the
Open Market Adjustment Amount (as defined below).  The "Open Market
Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Investor's total purchase price (including brokerage commissions, if any) for
the Open Market Share Purchase minus (y) the net proceeds (after brokerage
commissions, if any) received by the Investor from the sale of the Put Shares
Due.  The Company shall pay the Open Market Adjustment Amount to the
Investor in immediately available funds within two (2) business days of written
demand by the Investor.  By way of illustration and not in limitation
of the foregoing, if the Investor purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover an
Open Market Purchase with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Open Market Purchase Adjustment Amount which the
Company will be required to pay to the Investor will be $1,000.

     

    (k) Fees
Paid.  The Company has paid to investor all fees, expenses and
shares due under this Agreement.

     

    (l) No Material Notices.
None of the following events shall have occurred and be continuing:  (i)
receipt by the Company of any request for additional information from the SEC or
any other federal or state governmental, administrative or self regulatory
authority during the period of effectiveness of the Registration Statement, the
response to which would require any amendments or supplements to the
Registration Statement  or Prospectus; (ii) the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the occurrence of any event that makes any
statement made in the Registration Statement or the Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be required. There shall not exist
any fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post-effective amendment to
the Registration Statement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
VIII.

    Due
Diligence Review; Non-Disclosure of Non-Public Information

     

    Section 8.1.
Non-Disclosure of
Non-Public Information.

     

     (a)  Subject to Section 6.6 and except as otherwise provided
in this Agreement or the Registration Rights Agreement, the Company covenants
and agrees that it has not in the past and will refrain in the future from
disclosing, and shall cause its officers, directors, employees and agents to
refrain from disclosing, any material non-public information to the Investor
without also disseminating such information to the public.

     

    (b) Nothing
herein shall require the Company to disclose material, non-public information to
the Investor or its advisors or representatives, and the Company represents that
it does not disseminate material, non-public information to any investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts in violation of Regulation FD of the Exchange Act, provided,
however, that notwithstanding anything herein to the contrary, the Company will,
as hereinabove provided and subject to compliance with Regulation FD,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting material, non-public information (whether or not requested
of the Company specifically or generally during the course of due diligence by
such persons or entities), which, if not disclosed in the prospectus included in
the Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.1 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain material, non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of material fact or omits a
material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.

     

    ARTICLE
IX.

    Choice
of Law/Jurisdiction

     

    Section 9.  Governing Law. This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York without regard to the principles of conflict of laws. Any
dispute arising out of or in connection with this Agreement or otherwise
relating to the parties relationship shall be settled by litigation in the State
of New York, City of New York. The Company and the Investor further agree that
no demand for punitive or exemplary damages shall be made. No party to this
Agreement will challenge the jurisdiction or venue provisions as provided in
this section.  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
X.

    Assignment;
Termination

     

    Section 10.1.
Assignment.
Neither this Agreement nor any rights or obligations of the Company or the
Investor hereunder may be assigned to any other Person.

     

    Section 10.2.
Termination.

     

    (a) Unless earlier terminated as provided hereunder, this
Agreement shall terminate automatically on the earliest of (i) the first
day of the month next following the 24-month anniversary of the Effective Date,
or (ii) the date on which the Investor shall have made payment of Advances
pursuant to this Agreement in the aggregate amount of the Commitment
Amount.

     

    (b) The
Company may terminate this Agreement effective upon fifteen Trading Days’ prior
written notice to the Investor; provided that (i) there are no Advances
outstanding, and (ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement. This Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent. In the event
of any termination of this Agreement by the Company hereunder, so long as the
Investor owns any shares of Common Stock issued hereunder, unless all of such
shares of Common Stock may be resold by the Investor without registration and
without any time, volume or manner of sale limitations pursuant to Rule 144, the
Company shall not (i) cancel the common stock issued to Investor or suspend
(except as provided for in the Registration Rights Agreement)
or  withdraw the Registration Statement or otherwise cause the
Registration Statement to become ineffective, or voluntarily delist the Common
Stock from, the Principal Market without listing the Common Stock on another
Principal Market.

     

    (c) The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance Date
that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of fifty (50) Trading Days, during the Commitment Period, or
(ii) the Company shall at any time fail materially to comply with the
requirements of Article VI and such failure is not cured within thirty
(30) days after receipt of written notice from the Investor, provided, however, that this
paragraph (c) shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the date
on which such post effective amendment is declared effective by the
SEC.

     

    (d) Nothing
in this Section 10.2 shall be deemed to release the Company or the Investor
from any liability for any breach under this Agreement, or to impair the rights
of the Company and the Investor to compel specific performance by the other
party of its obligations under this Agreement. The indemnification provisions
contained in Sections 5.1 and 5.2 shall survive termination
hereunder.

     

    ARTICLE
XI.

    Notices

     

    Section 11.1.
Notices. Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally;
(ii) three (3) days after being sent by U.S. certified mail, return
receipt requested, (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same or (iv) or upon confirmation of receipt of email by
the recipient emailing back the sender that they are in receipt of the email.
The addresses and emails for such communications shall be:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              If to the Company,
      to:

            	 
      	 
      
	 
      	 
      	 
      
	
              With
      a copy to:

            	 
      	 
      
	 
      	 
      	 
      
	
              If
      to the Investor(s):

            	 
      	
              AGS
      Capital Group, LLC

            
	 
      	 
      	
              2
      Water Street, Ste.17G

            
	 
      	 
      	
              New
      York, New York

            
	 
      	 
      	
              Attention:
      Allen Silberstein

            
	 
      	 
      	
              Telephone:
      212-217-9139

            
	 
      	 
      	
              Email:
      asilberstein@agscapitalgroup.com

            

    

     

    Each
party shall provide five (5) days’ prior written notice to the other party
of any change in address or email.

     

    ARTICLE
XII.

    Miscellaneous

     

    Section 12.1.
Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party.

     

    Section 12.2 Entire Agreement;
Amendments. This Agreement and the Registration Rights Agreement
supersedes all other prior oral or written agreements between the Investor, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the Registration Rights Agreement
and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.  The provisions of this agreement shall
be construed in favor of the Investor.

     

    Section 12.3.
Reporting Entity for
the Common Stock. The reporting entity relied upon for the determination
of the trading price or trading volume of the Common Stock on any given Trading
Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.

     

    Section 12.4.
Fees and
Expenses. Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby. Company shall transfer to Investor freely
tradable Common Stock equal to five percent of the Commitment Amount upon
signing this Agreement (“Commitment Shares”). The pricing for the Commitment
Shares will be based off of the Purchase Price.

     

    Section 12.5.
Confidentiality. If
for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any information
obtained from any other party (except information publicly available or in such
party’s domain prior to the date hereof, and except as required by court order)
and shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining copies
thereof, previously furnished by it as a result of this Agreement or in
connection herein.

     

    Section
12.6 Publicity.
The Company and the Investor shall consult with each other in issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby and no party shall issue any such press release or otherwise
make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed, except that no
prior consent shall be required if such disclosure is required by law, in which
such case the disclosing party shall provide the other party with prior notice
of such public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Investor without the prior consent of the
Investor, except to the extent required by law. The Investor acknowledges that
this Agreement and all or part of the Reserve Equity Financing Documents may be
deemed to be "material contracts" as that term is defined by Item 601(b)(10) of
Regulation S-B, and that the Company may therefore be required to file such
documents as exhibits to reports or registration statements filed under the 1933
Act or the 1934 Act.  The Investor further agrees that the status of
such documents and materials as material contracts shall be determined solely by
the Company, in consultation with its counsel.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
12.7 Placement
Agent. If so required by the SEC, the Company agrees to pay a registered
broker dealer, to act as placement agent, a percentage of the Put Amount on each
draw toward the fee.  The Investor shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
persons or entities for fees of a type contemplated in this Section that may be
due in connection with the transactions contemplated by the Reserve Equity
Financing Documents. The Company shall indemnify and hold harmless the Investor,
their 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 incurred in respect of
any such claimed or existing fees, as such fees and expenses are
incurred.

     

    Section
12.8 No Third Party
Beneficiaries. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the parties
hereto any rights, remedies, obligations or liabilities under or by reason of
this Agreement, and no Person that is not a party to this Agreement (including
without limitation any partner, member, shareholder, director, officer, employee
or other beneficial owner of any party hereto, in its own capacity as such or in
bringing a derivative action on behalf of a party hereto) shall have any
standing as third party beneficiary with respect to this Agreement or the
transactions contemplated hereby.

     

    Section
12.9 No Personal
Liability of Directors, Officers, Owners, Etc. No
director, officer, employee, incorporator, shareholder, managing member, member,
general partner, limited partner, principal or other agent of any of the
Investor or the Company shall have any liability for any obligations of the
Investor or the Company under this Agreement or for any claim based on, in
respect of, or by reason of, the respective obligations of the Investor or the
Company hereunder.  Each party hereto hereby waives and releases all
such liability.  This waiver and release is a material inducement to
each party’s entry into this Agreement.

     

    Section
12.10   Entire Agreement.
This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and
thereof.  Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge, or
termination is sought.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
parties hereto have caused this Reserve Equity Financing Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.

     

    
      
        
          	 
      	 
      	
                  COMPANY:

                
	 
      	 
      	
                  Baeta
      Corporation

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	 
      	
                  /s/
      Leonid Pushkantser

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:
      Chief Executive Officer

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  INVESTOR:

                
	 
      	 
      	
                  AGS
      Capital Group, LLC

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	 
      	
                  /s/
      Allen Silberstein

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Name:
      Allen Silberstein

                
	 
      	 
      	
                  Title:
      Chief Executive Officer

                

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT A

     

    ADVANCE
NOTICE

     

    Baeta Corporation (the “Company”)

     

    The
undersigned, __________________________hereby certifies, with respect to the
sale of shares of Common Stock of the Company issuable in connection with this
Advance Notice, delivered pursuant to the Reserve Equity Financing Agreement
(the “Agreement”), as
follows:

     

    1. The
undersigned is the duly elected Officer of the Company, its Chief Executive,
President or Chief Financial Officer.

     

    2. There
are no fundamental changes to (a) the covenants in Article IV of the Reserve
Equity Financing Agreement and (b) the information set forth in the Registration
Statement which would require the Company to file a post effective amendment to
the Registration Statement.

     

    3. The
Company has performed in all material respects all covenants and agreements to
be performed by the Company and has complied in all material respects with all
obligations and conditions contained in the Agreement on or prior to the Advance
Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date. All conditions to the delivery of this Advance Notice are
satisfied as of the date hereof.

     

    4. The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC
Filings”) required to be made by it pursuant to applicable securities
laws (including, without limitation, all filings required under the Securities
Exchange Act of 1934, which include Forms 10-Q or, 10-K or, 8-K, etc.). All SEC
Filings and other public disclosures made by the Company, including, without
limitation, all press releases, analysts meetings and calls, etc. (collectively,
the “Public
Disclosures”), have been reviewed and approved for release by the
Company’s attorneys and, if containing financial information, the Company’s
independent certified public accountants. None of the Company’s Public
Disclosures contain, as of their respective dates, any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

     

    5. The
Advance requested is  _____shares.

     

    The
undersigned has executed this Certificate this  _____  day of
 _____.

     

    
      
        
          
            
              
                
                  	 
      	 	 	 
      
	 	 	 	 
	 
      	
                          By:  

                        	 
      	 
      
	 
      	 
      	
                          Name:  

                        	 
      	 
      
	 
      	 
      	
                          Title:  

                        	 
      	 
      
	 
      

                

              

            

          

        

      

    

     

    If
Returning This Advance Notice via email Please Send To: asilberstein@agscapitalgroup.com

    
      	 
      	 
      	 
      
	
              If
      by Mail, via Federal Express To:

            	 
      	
              AGS
      Capital Group, LLC, Attention Allen Silberstein

            
	 
      	 
      	
              2
      Water Street, Ste. 17G, New York, New York,
  10004

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        
 

    

    SCHEDULE
2.4

     

    Baeta Corporation

     

    The
undersigned hereby agrees that for a period commencing on September 28, 2010 and
expiring upon the termination of the Reserve Equity Financing Agreement dated
September 28, 2010 between the Company and the Investor (the “Lock-up Period”), he,
she or it will not, directly or indirectly, without the prior written consent of
the Investor, issue, offer, agree or offer to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign, hypothecate, distribute or
otherwise encumber or dispose of any securities of the Company, including common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for or evidencing any right to purchase or
subscribe for any common stock (whether or not beneficially owned by the
undersigned), or any beneficial interest therein (collectively, the “Securities”) except
in accordance with the volume limitations set forth in Rule 144(e) of the
General Rules and Regulations under the Securities Act of 1933, as amended.
Notwithstanding the forgoing, nothing herein shall prevent the undersigned from
disposing of Securities (i) if the recipient of the Securities agrees to be
bound by the terms of this Lock-up, or (ii) in connection with a merger
where the Company is not the surviving entity.

     

    In order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Company’s securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned’s investment in
the Company.

     

    Dated:
___________________, 2010

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	 
      	 
      	 
      
	 	 	

                                      Signature

                                    	 	 
	 	 	 	 	 
	 
      	 
      	
                                      Name:

                                    	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                                      Address:

                                    	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                                      City,
      State, Zip Code:

                                    	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                                        
      

                                    
	 
      	 
      	
                                      Print
      Social Security Number

                                    
	 
      	 
      	
                                      or
      Taxpayer I.D.
Number

                                    

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
C

     

    FORM
OF OPINION

     

    1.        
The Company is a corporation validly existing and in good standing under the
laws of the State of __________, with corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Company’s latest Form 10-K or 10-Q filed by the Company under the Securities
Exchange Act of 1934, as amended, (the “Exchange Act”) and
the rules and regulations of the Commission thereunder (the “Public Filings”) and
to enter into and perform its obligations under the Reserve Equity
Financing.

     

    2.        The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Reserve Equity Financing Agreement and to
issue the Common Shares in accordance with their terms.  The execution and
delivery of the Reserve Equity Financing Agreement by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required.  The Reserve Equity Financing Agreement has been duly executed
and delivered and the Reserve Equity Financing Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its respective terms, except as my be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors’ rights and remedies.

     

    3.        
The Common Shares are duly authorized and, upon issuance in accordance with the
terms of the Reserve Equity Financing Agreement, will be duly and validly
issued, fully paid and nonassessable, free of any liens, encumbrances and
preemptive or similar rights contained, to our knowledge, in any agreement filed
by the Company as an exhibit to the Company’s Public Filings.

     

    4.        
The execution, delivery and performance of the Reserve Equity Financing
Agreement by the Company (other than performance by the Company of its
obligations under the indemnification sections of such agreements, as to which
no opinion need be rendered) will not (i) result in a violation of the Company’s
Articles of Incorporation or By-Laws; (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement or, indenture filed by the
Company as an exhibit to the Company’s Public Filings; or (iii) to our
knowledge, result in a violation of any federal or state law, rule or
regulation, order, judgment or decree applicable to the Company.

     

    5.        
To our knowledge without independent investigation and other then as set forth
in the Public Filings, there are no legal or governmental proceedings pending to
which the Company is a party or of which any property or assets of the Company
is subject which is required to be disclosed in any Public Filings.HTML

      
         
            
               

                  

                  EXHIBIT 10.1

                  AMENDED AND RESTATED CONSULTING AGREEMENT

                  This Amended and Restated Consulting Agreement (this "Agreement") dated September 29, 2010 is made as the effective date of February
                     10, 2010 by and between Vycor Medical, Inc., a Delaware corporation
                     (the "Company") and Fountainhead Capital Management Limited, an entity registered
                     in Jersey ("FCM") (each a "Party" and collectively referred to hereafter as the "Parties").
                  

                  W I T N E S S E T H:

                        WHEREAS, the Company is an early-stage business with limited
                     resources to pursue its business plan and strategy.
                  

                        WHEREAS, FCM has substantial experience in corporate strategic
                     and financial advice and has substantial expertise and contacts which
                     are of value to the Company in carrying out its business plan;
                  

                        WHEREAS, to facilitate the pursuit of the goals stated in its
                     business plan, the Company desires to engage FCM to provide the
                     services specified in this Agreement;
                  

                        NOW, THEREFORE, in consideration of the premises and the mutual
                     covenants herein contained and for other good and valuable
                     consideration, the receipt and adequacy of which are hereby
                     acknowledged, the Parties, intending to be legally bound, hereby
                     agree in good faith as follows:
                  

                        1.       Services. The services which FCM shall provide under this Agreement, shall
                     include the following:
                  

                            (a)    FCM will familiarize itself to the extent it deems
                     appropriate with the business, operations, financial condition and
                     prospects of the Company solely for the purpose of assisting in
                     developing an overall strategic plan;
                  

                            (b)    At the request of the Company's management, FCM will
                     provide strategic advisory services relative to the achievement of
                     the Company's business plan;
                  

                            (c)    FCM will assist the Company on the preparation of
                     budgets and strategic plans and assist in the analysis of proposed
                     contractual and other transactions;
                  

                            (d)    FCM will assist in the identification and qualifying
                     of potential investors including institutional funds which might have
                     an interest in evaluating participation in financing transactions
                     with the Company;
                  

                            (e)    At the request of the Company's management, FCM will
                     provide advisory services related to corporate governance and matters
                     related to the maintenance
                  

               

            

         

         			

         			

         			

      

      
         
            
               
                  of the Company's status as a publicly-reporting company, and will
                     assist the Company in satisfying various corporate compliance matters;
                  

                            (f)    At the request of the Company's management, FCM will
                     assist the Company in negotiation strategies with Company creditors;
                     and
                  

                  For the avoidance of doubt, under this Consulting Agreement FCM will
                     not have the authority to bind the Company. All of the services
                     provide by FCM shall be performed outside of the United States and
                     FCM will not have any specific duties or roll as an officer or
                     Director of the Company. Any services provided by individuals which
                     may be related to FCM will be performed on an individual basis and
                     not on behalf of FCM and shall be compensated, if any, separately
                     from this Agreement.
                  

                  FCM is not a licensed broker-dealer. Under no circumstances will FCM
                     engage in any activities which would require licensure as a
                     broker-dealer or otherwise.
                  

                        2.       Term and Termination. The term of this engagement shall be for a period of two (2) years
                     commencing with the date of this Agreement and may be extended upon
                     the mutual written agreement of the Parties. Vycor has the right to
                     terminate this agreement one (1) year commencing with the date of
                     this Agreement if the Funding (as defined below) has not occurred by
                     that date.
                  

                        3.       Consideration. In consideration for FCM providing the services set forth in
                     Section 1 above, the Company will pay to FCM.
                  

                            (a)    Signing Warrants. Upon the signing of this
                     agreement, the Company shall issue to FCM warrants to purchase
                     39,063,670 shares of the Company's Common Stock, at a price of
                     $0.0125 per share.
                  

                            (b)    Success Warrants. Should new funding totaling $3
                     million in aggregate in Common Stock of Vycor or in securities
                     convertible into Common Stock of Vycor at a price of no less than
                     $0.0125 per share of Common Stock be closed during the term of this
                     agreement (the "Funding"), then the Company shall issue to FCM
                     additional warrants to purchase 39,063,670 shares of the Company's
                     Common Stock, at a price of $0.0125 per share.
                  

                           (c)    Monthly Retainer. Commencing February 10, 2010 the
                     Company shall pay to FCM a retainer of $8,500. This monthly retainer
                     shall be accrued and paid out to FCM at the option of FCM as
                     follows: (i) in Vycor stock at any time at $0.0125 per share; or (ii)
                     in cash following the closing of a fundraising of $1.5 million or on
                     the sale of the Company
                  

                           (d)    Out of Pocket Expenses. Commencing February 10, 2010
                     the Company shall reimburse FCM for all reasonable out-of-pocket
                     expenses directly incurred in the provision of the services set forth
                     in Section 1 above, to include expenses incurred during FCM's visit
                     to Vycor commencing January 24, 2010. This reimbursement shall be
                     accrued and paid out to FCM at the option of FCM as follows:
                  

               

            

         

         			

         			

         			

      

      
         
            
               
                  (i) in Vycor stock at any time at $0.0125 per share; or (ii) in cash
                     following the closing of a fundraising of $1.5 million or on the sale
                     of the Company
                  

                        4.       Notices. All notices, requests, demands, claims, and other communications
                     hereunder shall be in writing. Any notice, request, demand, claim or
                     other communication hereunder shall be deemed duly delivered four
                     business days after it is sent by registered or certified mail,
                     return receipt requested, postage prepaid, or one business day after
                     it is sent for next business day delivery via a reputable overnight
                     courier service, in each case to the intended recipient as set
                     forth below:
                  

                  	 	 	 	 	 	 

                        	 	If to the Company:
                           	 	 	Copy to:	 
	 	 	 	 	 	 
	 	
                              Vycor Medical, Inc.

                              80 Orville Dr.

                              Suite 100

                              Bohemia, NY 11716

                              

                              

                           	 	 	
                              Law Offices of Robert Diener

                              122 Ocean Park Boulevard

                              Suite 307

                              Santa Monica, California 90405

                           	 
	 	 	 
	 	Attention: Robert Diener	 
	 	 	 	 	 	 
	 	If to the FCM:	 	 	 	 
	 	 	 	 	 	 
	 	
                              Fountainhead Capital Management Limited

                              Portman House

                              Hue Street, St. Helier

                              Jersey JE4 5RP

                           	 	 	 	 
	 	 	 	 	 	 
	 	Attention: Richard Breeze	 	 	 	 

                  Any Party may give any notice, request, demand, claim or other
                     communication hereunder using any other means (including personal
                     delivery, expedited courier, messenger service, telecopy, telex,
                     ordinary mail or electronic mail), but no such notice, request,
                     demand, claim or other communication shall be deemed to have been
                     duly given unless and until it actually is received by the party for
                     whom it is intended. Any party may change the address to which
                     notices, requests, demands, claims, and other communications
                     hereunder are to be delivered by giving the other party notice in the
                     manner herein set forth.
                  

                        5.    Miscellaneous.

                           (a)    Entire Agreement. This Agreement constitutes the entire agreement among the Parties
                     and supersedes any prior understandings, agreements or
                     representations by or among the Parties, written or oral, with
                     respect to the subject matter hereof.
                  

               

            

         

         			

         			

         			

      

      
         
            
               
                           (b)    Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of
                     the Parties named herein and their respective successors and
                     permitted assigns. No Party may assign either this Agreement or any
                     of its rights, interests or obligations hereunder without the prior
                     written approval of the other party.
                  

                           (c)    Counterparts and Facsimile Signature. This Agreement may be executed in two or more counterparts, each of
                     which shall be deemed an original but all of which together shall
                     constitute one and the same instrument. This Agreement may be
                     executed by facsimile signature.
                  

                           (d)    Headings. The section headings contained in this Agreement are inserted for
                     convenience only and shall not affect in any way the meaning or
                     interpretation of this Agreement.
                  

                           (e)    Governing Law. This Agreement shall be governed by and construed in accordance
                     with the internal laws of the State of New York without giving effect
                     to any choice or conflict of law provision or rule (whether of the
                     State of New York or any other jurisdiction) that would cause the
                     application of laws of any jurisdictions other than those of the
                     State of New York. The Parties hereby consent to the exclusive
                     jurisdiction of the courts of the State of New York located in the
                     Borough of Manhattan and the United States District Court for the
                     Southern District of New York for all disputes arising under this
                     Agreement.
                  

                           (f)    Amendments and Waivers. The Parties may mutually amend any provision of this Agreement at
                     any time during the term of this Agreement prior to the termination
                     of this Agreement. No amendment of any provision of this Agreement
                     shall be valid unless the same shall be in writing and signed by the
                     Parties. No waiver of any right or remedy hereunder shall be valid
                     unless the same shall be in writing and signed by the party giving
                     such waiver. No waiver by any party with respect to any default,
                     misrepresentation or breach of warranty or covenant hereunder shall
                     be deemed to extend to any prior or subsequent default,
                     misrepresentation or breach of warranty or covenant hereunder or
                     affect in any way any rights arising by virtue of any prior or
                     subsequent such occurrence.
                  

                           (g)    Severability. Any term or provision of this Agreement that is invalid or
                     unenforceable in any situation in any jurisdiction shall not affect
                     the validity or enforceability of the remaining terms and provisions
                     hereof or the validity or enforceability of the offending term or
                     provision in any other situation or in any other jurisdiction. If the
                     final judgment of a court of competent jurisdiction declares that any
                     term or provision hereof is invalid or unenforceable, the Parties
                     agree that the court making the determination of invalidity or
                     unenforceability shall have the power to limit the term or provision,
                     to delete specific words or phrases, or to replace any invalid or
                     unenforceable term or provision with a term or provision that is
                     valid and enforceable and that comes closest to expressing the
                     intention of the invalid or unenforceable term or provision, and this
                     Agreement shall be enforceable as so modified.
                  

               

            

         

         			

         			

         			

      

      
         
            
               
                           (h)    Construction. The language used in this Agreement shall be deemed to be the
                     language chosen by the Parties to express their mutual intent, and no
                     rule of strict construction shall be applied against any party.
                     Any reference to any federal, state, local or foreign statute or law
                     shall be deemed also to refer to all rules and regulations
                     promulgated thereunder, unless the context requires otherwise.
                  

                           (i)    Remedies. FCM shall be entitled to enforce its rights under this Agreement
                     specifically to recover damages by reason of any breach of any
                     provision or term of this Agreement and to exercise all other rights
                     existing in its favor. In the event of any dispute under this
                     Agreement, the prevailing party shall be entitled to recover its
                     costs incurred in connection with the resolution thereof, including
                     reasonable attorneys fees.
                  

                  IN WITNESS WHEREOF, the parties hereto have duly executed this
                     Agreement as an instrument under seal as of the date first written
                     above.
                  

                  Vycor Medical, Inc.

                  	 	 	 	 	 	 	 	 	 

                        	 	
                              

                                          
By:      /s/ Kenneth T. Coviello           
Name:   Kenneth T. Coviello
Title:     President

                              

                              

                              Fountainhead Capital Management Limited

                                

                                          
By:      /s/ Eileen O'Shea           
Name:   Eileen O'Shea
 Title:     Director

                                

                                          
By:      /s/ Carole Dodge            
Name:   Carole Dodge
 Title:     Director

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