Document:

Securities Purchase Agreement

    

       

      SUBSCRIPTION
        AGREEMENT

       

       

      THIS
        SUBSCRIPTION AGREEMENT
        (this
“Agreement”),
        dated
        as of May 31, 2006, by and among Ness Energy International, Inc., a Washington
        corporation (the “Company”),
        and
        the subscribers identified on the signature page hereto (each a “Subscriber”
and
        collectively “Subscribers”).

       

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

       

      WHEREAS,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Subscribers, as provided
        herein,
        and the Subscribers, in the aggregate, shall purchase up to $1,022,727.29
        (the
        "Aggregate
        Principal Amount")
        of
        principal amount of promissory notes of the Company (“Note”
or
        “Notes”),
        a
        form of which is annexed hereto as Exhibit
        A,
        convertible into shares of the Company's common stock, no par value (the
        "Common
        Stock")
        at a
        per share conversion price set forth in the Note (“Conversion
        Price”);
        and
        share purchase warrants (the “Warrants”),
        in
        the form annexed hereto as Exhibit
        B,
        to
        purchase shares of Common Stock (the “Warrant
        Shares”).
        The
        Notes, shares of Common Stock issuable upon conversion of the Notes (the
        “Shares”),
        the
        Warrants and the Warrant Shares are collectively referred to herein as the
        "Securities";
        and

       

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

       

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

       

      1. Conditions
        to Closing.
        Subject
        to the satisfaction or waiver of the terms and conditions of this Agreement,
        on
        the Closing Date, each Subscriber shall purchase and the Company shall sell
        to
        each Subscriber a Note in the principal amount designated on the signature
        page
        hereto. The principal amount of the Notes to be purchased by the Subscribers
        on
        the Closing Date shall, in the aggregate, be equal to the Aggregate Principal
        Amount. The aggregate purchase price for the Notes (“Aggregate
        Purchase Price”)
        shall
        equal to the result of (x) divided by (y), where (x) equals the Aggregate
        Principal Amount and (y) equals 1.136363.

       

      2. Closing
        Date.
        The
“Closing
        Date”
shall
        be the date that subscriber funds representing the net amount due the Company
        from the Closing Purchase Price of the Offering [as defined in Section 8(b)]
        is
        transmitted by wire transfer or otherwise to or for the benefit of the Company.
        The consummation of the transactions contemplated herein for all Closings
        shall
        take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue,
        Suite 1601, New York, New York 10176, upon the satisfaction of all conditions
        to
        Closing set forth in this Agreement.

      

      3. Warrants.
        On the
        Closing Date, the Company will issue and deliver Warrants to the Subscribers.
        One Class A Warrant will be issued for each one Share which would be issued
        on
        the Closing Date assuming the complete conversion of the Notes issued on
        the
        Closing Date at the Conversion Price in effect on the Closing Date. The per
        Warrant Share exercise price to acquire a Warrant Share upon exercise of
        a Class
        A Warrant shall be 108% of the average of the volume weighted average price
        of
        the Common Stock as reported by Bloomberg L.P. for the five trading days
        preceding the Closing Date. The Class A Warrants shall be exercisable until
        three years after the Closing Date, or five years after the Closing Date
        if the
        Registration Statement [as defined in Section 11.1(iv)] is not declared
        effective by the Commission within one hundred and eighty days after the
        Closing
        Date.

      

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

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

      

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

         

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

      

      (d) Information
        on Company.
        The
        Subscriber has been furnished with or has had access at the EDGAR Website
        of the
        Commission to the Company's Form 10-KSB for the year ended December 31, 2005
        and
        all periodic reports filed with the Commission thereafter, but not later
        than
        five business days before the Closing Date (hereinafter referred to as the
        "Reports").
        In
        addition, the Subscriber has received in writing from the Company such other
        information concerning its operations, financial condition and other matters
        as
        the Subscriber has requested in writing (such other information is collectively,
        the "Other
        Written Information"),
        and
        considered all factors the Subscriber deems material in deciding on the
        advisability of investing in the Securities. 

       

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

       

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

       

        (g) Compliance
          with Securities Act.
          The
          Subscriber understands and agrees that the Securities have not been registered
          under the 1933 Act or any applicable state securities laws, by reason of
          their
          issuance in a transaction that does not require registration under the
          1933 Act
          (based in part on the accuracy of the representations and warranties of
          Subscriber contained herein), and that such Securities must be held indefinitely
          unless a subsequent disposition is registered under the 1933 Act or any
          applicable state securities laws or is exempt from such registration. From
          the
          date the Subscriber received a written offer from the Company describing
          the
          Offering until the date of the public announcement or Form 8-K filing described
          in Section 9(m), the Subscriber will not have directly or indirectly purchased
          or sold Common Stock or Common Stock equivalents except as part of the
          Offering.
          Notwithstanding anything to the contrary contained in this Agreement, such
          Subscriber may transfer (without restriction and without the need for an
          opinion
          of counsel) the Securities to its Affiliates (as defined below) provided
          that
          each such Affiliate is an “accredited investor” under Regulation D and such
          Affiliate agrees to be bound by the terms and conditions of this Agreement.
          For
          the purposes of this Agreement, an “Affiliate”
of
          any
          person or entity means any other person or entity directly or indirectly
          controlling, controlled by or under direct or indirect common control with
          such
          person or entity. Affiliate when employed in connection with the Company
          includes each Subsidiary [as defined in Section 5(a)] of the Company. For
          purposes of this definition, “control”
means
          the power to direct the management and policies of such person or firm,
          directly
          or indirectly, whether through the ownership of voting securities, by contract
          or otherwise.

       

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

       

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

       

      (i) Warrants
        Legend.
        The
        Warrants shall bear the following 

       

      or
        similar legend:

       

      "THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
        STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
        NESS
        ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

      

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

       

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

       

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

       

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

      

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

      

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

      

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      (ii) result
        in
        the creation or imposition of any lien, charge or encumbrance upon the
        Securities or any of the assets of the Company or any of its Affiliates;
        or

       

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

       

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

       

      (g) The
        Securities.
        The
        Securities upon issuance:

       

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

      

      (ii) have
        been, or will be, duly and validly authorized and on the date of conversion
        of
        the Notes and upon exercise of the Warrants, the Shares and Warrant Shares
        will
        be duly and validly issued, fully paid and nonassessable and, if registered
        pursuant to the 1933 Act and resold pursuant to an effective registration
        statement, will be free trading and unrestricted;

       

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

       

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

       

      (v) will
        have
        been issued in reliance upon an exemption from the registration requirements
        of
        and will not result in a violation of Section 5 under the 1933 Act.

         

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

       

      (i) Reporting
        Company.
        The
        Company is a publicly-held company subject to reporting obligations pursuant
        to
        Section 13 of the Securities Exchange Act of 1934 (the “1934
        Act”)
        and
        has a
        class of common shares registered pursuant to Section 12(g) of the 1934 Act.
        Pursuant to the provisions of the 1934 Act, the Company has timely filed
        all
        reports and other materials required to be filed thereunder with the Commission
        during the preceding twelve months, except for the report on Form 10-QSB
        for the
        quarter ended March 31, 2006 which was filed on May 24, 2006.

       

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

       

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

       

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

       

      (m) Defaults.
        The
        Company is not in violation of its articles of incorporation or bylaws. The
        Company is (i) not in default under or in violation of any other material
        agreement or instrument to which it is a party or by which it or any of its
        properties are bound or affected, which default or violation would have a
        Material Adverse Effect,
        (ii)
        not subject to nor in default with respect to any order of any court, arbitrator
        or governmental body or subject to or party to any order of any court or
        governmental authority arising out of any action, suit or proceeding under
        any
        statute or other law respecting antitrust, monopoly, restraint of trade,
        unfair
        competition or similar matters, or (iii) to the Company’s knowledge not in
        violation of any statute, rule or regulation of any governmental authority
        which
        violation would have a Material Adverse Effect.

       

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

       

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

       

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

         

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

       

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

       

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

       

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

       

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

      

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

      

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

      

      (x) Subsidiary
        Representations.
        The
        Company makes each of the representations contained in Sections 5(a), (b),
        (d),
        (e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as
        same
        relate to each Subsidiary of the Company, with the same qualifications to
        each
        such representation.

      

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

       

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

       

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

      

      7.1. Conversion
        of Note.

      

      (a) Upon
        the
        conversion of a Note or part thereof, the Company shall, at its own cost
        and
        expense, take all necessary action, including obtaining and delivering, an
        opinion of counsel acceptable to the Company’s transfer agent, so that the
        Company's transfer agent shall issue stock certificates in the name of
        Subscriber (or its nominee) or such other persons as designated by Subscriber
        and in such denominations to be specified at conversion representing the
        number
        of shares of Common Stock issuable upon such conversion. The Company warrants
        that no instructions other than these instructions have been or will be given
        to
        the transfer agent of the Company's Common Stock and that, unless waived
        by the
        Subscriber, the Shares will be free-trading, and freely transferable, and
        will
        not contain a legend restricting the resale or transferability of the Shares,
        provided the Subscriber represents that the Shares are or will be sold pursuant
        to an effective registration statement covering the Shares or exemption from
        registration, or are otherwise exempt from registration. 

      

      (b) Subscriber
        will give notice of its decision to exercise its right to convert the Note,
        interest, any sum due to the Subscriber under the Transaction Documents
        including Liquidated Damages, or part thereof by telecopying an executed
        and
        completed Notice
        of Conversion
        (a form
        of which is annexed as Exhibit
        A
        to the
        Note) to the Company via confirmed telecopier transmission or otherwise pursuant
        to Section 13(a) of this Agreement. The Subscriber will not be
        required to surrender the Note
        until
        the Note has been fully converted or satisfied. Each date on which a Notice
        of
        Conversion is telecopied to the Company in accordance with the provisions
        hereof
        shall be deemed a Conversion
        Date.
        The
        Company will itself or cause the Company’s transfer agent to transmit the
        Company's Common Stock certificates representing the Shares issuable upon
        conversion of the Note to the Subscriber via express courier for receipt
        by such
        Subscriber within three (3) business days after receipt by the Company of
        the
        Notice of Conversion (such third day being the "Delivery
        Date").
        In
        the event the Shares are electronically transferable, then delivery of the
        Shares must
        be made
        by electronic transfer provided request for such electronic transfer has
        been
        made by the Subscriber
        and the Subscriber has complied with all applicable securities laws in
        connection with the sale of the Common Stock, including, without limitation,
        the
        prospectus delivery requirements. A Note representing the balance of the
        Note
        not so converted will be provided by the Company to the Subscriber if requested
        by Subscriber, provided the Subscriber delivers the
        original Note to the Company. In the event that a Subscriber elects not to
        surrender a Note for reissuance upon partial payment or conversion, the
        Subscriber hereby indemnifies the Company against any and all loss or damage
        attributable to a third-party claim in an amount in excess of the actual
        amount
        then due under the Note. “Business
        day”
and
        “trading
        day”
as
        employed in the Transaction Documents is a day that the New York Stock Exchange
        is open for trading for three or more hours.

      (c) The
        Company understands that a delay in the delivery of the Shares in the form
        required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
        described in Section 7.2 hereof, respectively after the Delivery Date or
        the
        Mandatory Redemption Payment Date (as hereinafter defined) could result in
        economic loss to the Subscriber. As compensation to the Subscriber for such
        loss, the Company agrees to pay (as liquidated damages and not as a penalty)
        to
        the Subscriber for late issuance of Shares in the form required pursuant
        to
        Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
        business day after the Delivery Date for each $10,000 of Note principal amount
        being converted of the corresponding Shares which are not timely delivered.
        The
        Company shall pay any payments incurred under this Section in immediately
        available funds upon demand. Furthermore, in addition to any other remedies
        which may be available to the Subscriber, in the event that the Company fails
        for any reason to effect delivery of the Shares by the Delivery Date or make
        payment by the Mandatory Redemption Payment Date, the Subscriber may revoke
        all
        or part of the relevant Notice of Conversion or rescind all or part of the
        notice of Mandatory Redemption by delivery of a notice to such effect to
        the
        Company whereupon the Company and the Subscriber shall each be restored to
        their
        respective positions immediately prior to the delivery of such notice, except
        that the liquidated damages described above shall be payable through the
        date
        notice of revocation or rescission is given to the Company.

      

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

      

      7.2. Mandatory
        Redemption at Subscriber’s Election.
        In the
        event (i) the Company is prohibited from issuing Shares, (ii) the Company
        fails
        to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of
        any
        other Event of Default (as defined in the Note or in this Agreement), any
        of the
        foregoing that continues for more than twenty (20) business days, or (iv)
        of the
        liquidation, dissolution or winding up of the Company, then at the Subscriber's
        election, the Company must pay to the Subscriber ten (10) business days after
        request by the Subscriber (“Calculation
        Period”),
        a sum
        of money determined by multiplying up to the outstanding principal amount
        of the
        Note designated by the Subscriber by the greater of (y) 120%, or (z) a fraction
        in which the numerator is the highest closing price of the Common Stock during
        the Calculation Period and the denominator is the lowest applicable Conversion
        Price during the Calculation Period, together with accrued but unpaid interest
        thereon ("Mandatory
        Redemption Payment").
        The
        Mandatory Redemption Payment must be received by the Subscriber on the same
        date
        as the Shares otherwise deliverable or within ten (10) business days after
        request, whichever is sooner ("Mandatory
        Redemption Payment Date").
        Upon
        receipt of the Mandatory Redemption Payment, the corresponding Note principal
        and interest will be deemed paid and no longer outstanding. Liquidated damages
        calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
        for
        the ten day period prior to the actual receipt of the Mandatory Redemption
        Payment by the Subscriber shall be credited against the Mandatory Redemption
        Payment. 

      

      7.3. Maximum
        Conversion.
        The
        Subscriber shall not be entitled to convert on a Conversion Date that amount
        of
        the Note in connection with that number of shares of Common Stock which would
        be
        in excess of the sum of (i) the number of shares of common stock beneficially
        owned by the Subscriber and its Affiliates on a Conversion Date, and (ii)
        the
        number of shares of Common Stock issuable upon the conversion of the Note
        with
        respect to which the determination of this provision is being made on a
        Conversion Date, which would result in beneficial ownership by the Subscriber
        and its Affiliates of more than 4.99% of the outstanding shares of common
        stock
        of the Company on such Conversion Date. Beneficial ownership shall be determined
        in accordance with Section 13(d) of the Securities Exchange Act of 1934,
        as
        amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
        Subscriber shall not be limited to aggregate conversions of only 4.99% and
        aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber
        may
        waive the conversion limitation described in this Section 7.3, in whole or
        in
        part, upon and effective after 61 days prior written notice to the Company
        to
        increase such percentage to up to 9.99%. The Subscriber may decide whether
        to
        convert a Note or exercise Warrants to achieve an actual 4.99% or up to 9.99%
        ownership position as described above.

      

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

      

        7.5. Buy-In.
          In
          addition to any other rights available to the Subscriber, if the Company
          fails
          to deliver to the Subscriber such shares issuable upon conversion of a
          Note by
          the Delivery Date and if after six (6) business days after the Delivery
          Date the
          Subscriber or a broker on the Subscriber’s behalf, purchases (in an open market
          transaction or otherwise) shares of Common Stock to deliver in satisfaction
          of a
          sale by such Subscriber of the Common Stock which the Subscriber was entitled
          to
          receive upon such conversion (a "Buy-In"),
          then
          the Company shall pay in cash to the Subscriber (in addition to any remedies
          available to or elected by the Subscriber) the amount by which (A) the
          Subscriber's total purchase price (including brokerage commissions, if
          any) for
          the shares of Common Stock so purchased exceeds (B) the aggregate principal
          and/or interest amount of the Note for which such conversion was not timely
          honored,
          together with interest thereon at a rate of 15% per annum, accruing until
          such
          amount and any accrued interest thereon is paid in full (which amount shall
          be
          paid as liquidated damages and not as a penalty). For
          example, if the Subscriber purchases shares of Common Stock having a total
          purchase price of $11,000 to cover a Buy-In with respect to an attempted
          conversion of $10,000 of note principal and/or interest, the Company shall
          be
          required to pay the Subscriber $1,000,
          plus interest. The
          Subscriber shall provide the Company written notice indicating the amounts
          payable to the Subscriber in respect of the Buy-In.

      

      7.6 Adjustments.
        The
        Conversion Price, Warrant exercise price and amount of Shares issuable upon
        conversion of the Notes and exercise of the Warrants shall be adjusted as
        described in this Agreement, the Notes and Warrants.

       

      7.7. Redemption.
        The
        Securities shall not be redeemable or mandatorily convertible except as
        described in the Note and Warrants. 

      

      8. Broker/Legal
        Fees.

      

      (a)  Broker’s
        Commission.
        The
        Company on the one hand, and each Subscriber (for himself only) on the other
        hand, agrees to indemnify the other against and hold the other harmless from
        any
        and all liabilities to any persons claiming brokerage commissions or similar
        fees other than the entity identified on Schedule
        8,
        (the
“Broker”)
        on
        account of services purported to have been rendered on behalf of the
        indemnifying party in connection with this Agreement or the transactions
        contemplated hereby and arising out of such party’s actions. Anything in this
        Agreement to the contrary notwithstanding, each Subscriber is providing
        indemnification only for such Subscriber’s own actions and not for any action of
        any other Subscriber. The Company agrees that it will pay the Broker the
        fee set
        forth on Schedule
        8
        (“Broker’s
        Fees”).
        The
        Company represents that there are no other parties entitled to receive fees,
        commissions, or similar payments in connection with the offering described
        in
        this Agreement except the Broker.

       

      (b) Legal
        Fees.
        The
        Company shall pay to Grushko & Mittman, P.C., a cash fee of $25,000
        (“Legal
        Fees”)
        (of
        which $10,000 has been paid) as reimbursement for services rendered to the
        Subscribers in connection with this Agreement and the purchase and sale of
        the
        Notes and Warrants (the “Offering”).
        The
        Legal Fees and reimbursement for estimated UCC search fees, if any, (less
        any
        amounts paid prior to Closing) to be paid by the Company will be payable
        on the
        Closing Date out of funds held pursuant to the Escrow Agreement.

       

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

       

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

       

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

       

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

       

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

       

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

       

      (f) Reservation.
        Prior
        to the Closing Date, the Company undertakes to reserve, pro rata,
        on
        behalf of the Subscribers from its authorized but unissued common stock,
        a
        number of common shares equal to 200%
        of
        the amount of Common Stock necessary to allow each Subscriber to be able
        to
        convert all Notes issuable pursuant to this Agreement and interest thereon
        and
        reserve 100% of the amount of Warrant Shares issuable upon exercise of the
        Warrants. Failure to have sufficient shares reserved pursuant to this Section
        9(f) shall be a material default of the Company’s obligations under this
        Agreement and an Event of Default under the Note.

       

      (g) Taxes.
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        promptly pay and discharge, or cause to be paid and discharged, when due
        and
        payable, all lawful taxes, assessments and governmental charges or levies
        imposed upon the income, profits, property or business of the Company; provided,
        however, that any such tax, assessment, charge or levy need not be paid if
        the
        validity thereof shall currently be contested in good faith by appropriate
        proceedings and if the Company shall have set aside on its books adequate
        reserves with respect thereto, and provided, further, that the Company will
        pay
        all such taxes, assessments, charges or levies forthwith upon the commencement
        of proceedings to foreclose any lien which may have attached as security
        therefore.

       

      (h) Insurance.
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        keep its assets which are of an insurable character insured by financially
        sound
        and reputable insurers against loss or damage by fire, explosion and other
        risks
        customarily insured against by companies in the Company’s line of business, in
        amounts sufficient to prevent the Company from becoming a co-insurer and
        not in
        any event less than one hundred percent (100%) of the insurable value of
        the
        property insured less reasonable deductible amounts; and the Company will
        maintain, with financially sound and reputable insurers, insurance against
        other
        hazards and risks and liability to persons and property to the extent and
        in the
        manner customary for companies in similar businesses similarly situated and
        to
        the extent available on commercially reasonable terms.

       

      (i) Books
        and Records.
        From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        keep true records and books of account in which full, true and correct entries
        will be made of all dealings or transactions in relation to its business
        and
        affairs in accordance with generally accepted accounting principles applied
        on a
        consistent basis.

       

      (j) Governmental
        Authorities.
        From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company shall
        duly observe and conform in all material respects to all valid requirements
        of
        governmental authorities relating to the conduct of its business or to its
        properties or assets.

       

      (k) Intellectual
        Property.
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company shall
        maintain in full force and effect its corporate existence, rights and franchises
        and all licenses and other rights to use intellectual property owned or
        possessed by it and reasonably deemed to be necessary to the conduct of its
        business, unless it is sold for value.

       

      (l) Properties.
        From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        (as
        defined in Section 11.1(ii) hereof) or pursuant to Rule 144, without regard
        to
        volume limitations, the Company will keep its properties in good repair,
        working
        order and condition, reasonable wear and tear excepted, and from time to
        time
        make all necessary and proper repairs, renewals, replacements, additions
        and
        improvements thereto; and the Company will at all times comply with each
        provision of all leases to which it is a party or under which it occupies
        property if the breach of such provision could reasonably be expected to
        have a
        Material Adverse Effect.

       

      (m) Confidentiality/Public
        Announcement.
        From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company agrees
        that except in connection with a Form 8-K or the Registration Statement or
        as
        otherwise required in any other Commission filing, it will not disclose publicly
        or privately the identity of the Subscribers unless expressly agreed to in
        writing by a Subscriber, only to the extent required by law and then only
        upon
        five days prior notice to Subscriber. In any event and subject to the foregoing,
        the Company shall file
        a
        Form 8-K or make a public announcement describing the Offering not later
        than
        the first business day after the Closing Date. In the Form 8-K or public
        announcement, the Company will specifically disclose the amount of common
        stock
        outstanding immediately after the Closing. A form of the proposed Form 8-K
        or
        public announcement to be employed in connection with the Closing is annexed
        hereto as Exhibit
        E.

       

      (n) Further
        Registration Statements.
        Except
        for a registration statement filed on behalf of the Subscribers pursuant
        to
        Section 11 of this Agreement, and as set forth on Schedule
        11.1
        hereto,
        the Company will not file any registration statements, including but not
        limited
        to Forms S-8, with the Commission or with state regulatory authorities without
        the consent of the Subscriber until the expiration of the “Exclusion
        Period”,
        which
        shall be defined as the sooner of (i) the Registration Statement shall have
        been
        current and available for use in connection with the resale of the Registrable
        Securities (as defined in Section 11.1(i) for a period of 180 days, or (ii)
        until all the Shares and Warrant Shares have been resold or transferred by
        the
        Subscribers pursuant to the Registration Statement or Rule 144(k) under the
        1933
        Act, without regard to volume limitations. The Exclusion Period will be tolled
        during the pendency of an Event of Default (as defined in the
        Note).

       

      (o) Blackout.
        The
        Company undertakes and covenants that until the end of the Exclusion Period,
        the
        Company will not enter into any acquisition, merger, exchange or sale or
        other
        transaction that could have the effect of delaying the effectiveness of any
        pending registration statement or causing an already effective registration
        statement to no longer be effective or current.

       

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

       

      (q) Offering
        Restrictions.
        Until
        the expiration of the Exclusion Period and during the pendency of an Event
        of
        Default, except for the Excepted Issuances, the Company will not enter into
        an
        agreement to nor issue any equity, convertible debt or other securities
        convertible into Common Stock or equity of the Company nor modify any of
        the
        foregoing which may be outstanding at anytime, without the prior written
        consent
        of the Subscriber, which consent may be withheld for any reason. For so long
        as
        at least twenty-five percent (25%) of the principal amount of the Notes is
        outstanding, the Company will not enter into any equity line of credit or
        similar agreement, nor issue nor agree to issue any floating or variable
        priced
        equity linked instruments nor any of the foregoing or equity with price reset
        rights.

      

      (r) Negative
        Covenants.
        So long
        as at least twenty-five percent (25%) of the principal amount of the Notes
        issued on the Closing Date is outstanding and during the pendency of an Event
        of
        Default (as defined in the Note), without the consent of the Subscribers,
        the
        Company will not and will not permit any of its Subsidiaries to directly
        or
        indirectly:

      

      (i) create,
        incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
        arrangement, lien, charge, claim, security interest, security title, mortgage,
        security deed or deed of trust, easement or encumbrance, or preference, priority
        or other security agreement or preferential arrangement of any kind or nature
        whatsoever (including any lease or title retention agreement, any financing
        lease having substantially the same economic effect as any of the foregoing,
        and
        the filing of, or agreement to give, any financing statement perfecting a
        security interest under the Uniform Commercial Code or comparable law of
        any
        jurisdiction) (each, a “Lien”)
        upon
        any of its property, whether now owned or hereafter acquired except for (i)
        the
        Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed
        by law for taxes that are not yet due or are being contested in good faith
        and
        for which adequate reserves have been established in accordance with generally
        accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
        material men’s, repairmen’s and other like Liens imposed by law, arising in the
        ordinary course of business and securing obligations that are not overdue
        by
        more than 30 days or that are being contested in good faith and by appropriate
        proceedings; (c) pledges and deposits made in the ordinary course of business
        in
        compliance with workers’ compensation, unemployment insurance and other social
        security laws or regulations; (d) deposits to secure the performance of bids,
        trade contracts, leases, statutory obligations, surety and appeal bonds,
        performance bonds and other obligations of a like nature, in each case in
        the
        ordinary course of business; (e) Liens created with respect to the financing
        of
        the purchase of new property in the ordinary course of the Company’s business up
        to the amount of the purchase price of such property, or (f) easements, zoning
        restrictions, rights-of-way and similar encumbrances on real property imposed
        by
        law or arising in the ordinary course of business that do not secure any
        monetary obligations and do not materially detract from the value of the
        affected property (each of (a) through (f), a “Permitted
        Lien”)
        and
        (iii) indebtedness for borrowed money which is not senior or pari passu in
        right
        of payment to the payment of the Notes;

       

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

       

       

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

       

       

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

       

       

      (s) Limited
        Standstill.
        The
        Company will deliver to the Subscribers on or before the Closing Date and
        enforce the provisions of irrevocable standstill agreements (“Limited
        Standstill Agreements”)
        in the
        form annexed hereto as Exhibit
        F,
        with
        the parties identified on Schedule
        9(s)
        hereto,
        who comprise all owners beneficially or otherwise, of 2.5% or more of the
        Company’s Common Stock and options or rights to acquire Common
        Stock.

       

       

      10. Covenants
        of the Company and Subscriber Regarding Indemnification.

       

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

       

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

       

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

       

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

       

      11.1. Registration
        Rights.
        The
        Company hereby grants the following registration rights to holders of the
        Securities.

       

      (i) On
        one
        occasion, for a period commencing one hundred and twenty-one (121) days after
        the Closing Date, but not later than two (2) years after the Closing Date,
        upon
        a written request therefor from any record holder or holders of more than
        50% of
        the Shares issued and issuable upon conversion of the outstanding Notes and
        outstanding Warrant Shares, the Company shall prepare and file with the
        Commission a registration statement under the 1933 Act registering the
        Registrable Securities, as defined in Section 11.1(iv) hereof, which are
        the
        subject of such request for unrestricted public resale by the holder thereof.
        For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall
        not
        include Securities which are (A) registered for resale in an effective
        registration statement, (B) included for registration in a pending registration
        statement, or (C) which have been issued without further transfer restrictions
        after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
        receipt of such request, the Company shall promptly give written notice to
        all
        other record holders of the Registrable Securities that such registration
        statement is to be filed and shall include in such registration statement
        Registrable Securities for which it has received written requests within
        ten
        (10) days after the Company gives such written notice. Such other requesting
        record holders shall be deemed to have exercised their demand registration
        right
        under this Section 11.1(i).

       

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

       

      (iii) If,
        at
        the time any written request for registration is received by the Company
        pursuant to Section 11.1(i), the Company has determined to proceed with the
        actual preparation and filing of a registration statement under the 1933
        Act in
        connection with the proposed offer and sale for cash of any of its securities
        for the Company's own account and the Company actually does file such other
        registration statement, such written request shall be deemed to have been
        given
        pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights
        of the
        holders of Registrable Securities covered by such written request shall be
        governed by Section 11.1(ii).

       

      (iv) The
        Company shall file with the Commission a Form SB-2 registration statement
        (the
“Registration
        Statement”)
        (or
        such other form that it is eligible to use) in order to register the Registrable
        Securities for resale and distribution under the 1933 Act within thirty (30)
        calendar days after the Closing Date (the
        “Filing
        Date”),
        and
        cause to be declared effective not
        later
        than one hundred and twenty (120) calendar days after the Closing Date
(the
        “Effective
        Date”).
        The
        Company will register not less than a number of shares of common stock in
        the
        aforedescribed registration statement that is equal to 200%
        of
        the Shares issuable upon conversion of all of the Notes issuable to the
        Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement
        upon exercise of the Warrants (collectively the “Registrable
        Securities”).
        The
        Registrable Securities shall be reserved and set aside exclusively for the
        benefit of each Subscriber and Warrant holder, pro rata,
        and not
        issued, employed or reserved for anyone other than each such Subscriber and
        Warrant holder. The Registration Statement will immediately be amended or
        additional registration statements will be immediately filed by the Company
        as
        necessary to register additional shares of Common Stock to allow the public
        resale of all Common Stock included in and issuable by virtue of the Registrable
        Securities. Except with the written consent of the Subscriber, no securities
        of
        the Company other than the Registrable Securities will be included in the
        Registration Statement. It shall be deemed a Non-Registration Event if at
        any
        time after the date the Registration Statement is declared effective by the
        Commission (“Actual
        Effective Date”)
        the
        Company has registered for unrestricted resale on behalf of the Subscribers
        fewer than 125%
        of
        the amount of Common Shares issuable upon full conversion of all sums due
        under
        the Notes and 100% of the Warrant Shares issuable upon exercise of the
        Warrants.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      11.4. Non-Registration
        Events.
        The
        Company and the Subscribers agree that the Sellers will suffer damages if
        the
        Registration Statement is not filed by the Filing Date and not declared
        effective by the Commission by the Effective Date, and any registration
        statement required under Section 11.1(i) or 11.1(ii) is not filed within
        60 days
        after written request and declared effective by the Commission within 120
        days
        after such request, and maintained in the manner and within the time periods
        contemplated by Section 11 hereof, and it would not be feasible to ascertain
        the
        extent of such damages with precision. Accordingly, if (A) the Registration
        Statement is not filed on or before the Filing Date, (B) is not declared
        effective on or before the Effective Date, (C) due to the action or inaction
        of
        the Company the Registration Statement is not declared effective within three
        (3) business days after receipt by the Company or its attorneys of a written
        or
        oral communication from the Commission that the Registration Statement will
        not
        be reviewed or that the Commission has no further comments, (D) if the
        registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
        within 60 days after such written request, or is not declared effective within
        120 days after such written request, or (E) any registration statement described
        in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective
        but
        shall thereafter cease to be effective without being succeeded within fifteen
        (15) business days by an effective replacement or amended registration statement
        or for a period of time which shall exceed thirty (30) days in the aggregate
        per
        year (defined as every rolling period of 365 consecutive days commencing
        on the
        Actual Effective Date (each such event referred to in clauses A through E
        of
        this Section 11.4 is referred to herein as a "Non-Registration
        Event"),
        then
        the Company shall deliver to the holder of Registrable Securities, as
Liquidated
        Damages,
        an
        amount equal to one percent (1%) for each thirty (30) days (or such lesser
        pro-rata amount for any period of less than thirty (30) days) of the Purchase
        Price of the outstanding Notes and purchase price of Shares issued upon
        conversion of the Notes owned of record by such holder which are subject
        to such
        Non-Registration Event. The Company must pay the Liquidated Damages in cash.
        The
        Liquidated Damages must be paid within ten (10) days after the end of each
        thirty (30) day period or shorter part thereof for which Liquidated Damages
        are
        payable. In the event a Registration Statement is filed by the Filing Date
        but
        is withdrawn prior to being declared effective by the Commission, then such
        Registration Statement will be deemed to have not been filed and Liquidated
        Damages will be calculated accordingly. All
        oral
        or written comments received from the Commission relating to the Registration
        Statement must be satisfactorily responded to within
        ten (10) business days after receipt of comments from the Commission.
        Failure
        to
        timely respond to Commission comments is a Non-Registration Event for which
        Liquidated Damages shall accrue and be payable by the Company to the holders
        of
        Registrable Securities at the same rate set forth above. Notwithstanding
        the
        foregoing, the Company shall not be liable to the Subscriber under this Section
        11.4 for any events or delays occurring as a consequence of the acts or
        omissions of the Subscribers contrary to the obligations undertaken by
        Subscribers in this Agreement. Liquidated Damages will not accrue nor be
        payable
        pursuant to this Section 11.4 nor will a Non-Registration Event be deemed
        to
        have occurred for times during which Registrable Securities are transferable
        by
        the holder of Registrable Securities pursuant to Rule 144(k) under the 1933
        Act.

       

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

       

      11.6. Indemnification
        and Contribution.

       

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

       

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

       

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

       

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

       

      11.7. Delivery
        of Unlegended Shares.

         

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

       

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

      

      (c) The
        Company understands that a delay in the delivery of the Unlegended Shares
        pursuant to Section 11 hereof later than two business days after the Unlegended
        Shares Delivery Date could result in economic loss to a Subscriber. As
        compensation to a Subscriber for such loss, the Company agrees to pay late
        payment fees (as liquidated damages and not as a penalty) to the Subscriber
        for
        late delivery of Unlegended Shares in the amount of $100 per business day
        after
        the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
        subject to the delivery default. If during any 360 day period, the Company
        fails
        to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
        of thirty (30) days, then each Subscriber or assignee holding Securities
        subject
        to such default may, at its option, require the Company to redeem all or
        any
        portion of the Shares and Warrant Shares subject to such default at a price
        per
        share equal to the greater of (i) 120%, or (ii) a fraction in which the
        numerator is the highest closing price during the aforedescribed thirty day
        period and the denominator of which is the lowest conversion price during
        such
        thirty day period, multiplied by the Purchase Price of such Common Stock
        and
        Warrant Shares (“Unlegended
        Redemption Amount”).
        The
        amount of the aforedescribed liquidated damages that have accrued or been
        paid
        for the ten day period prior to the receipt by the Subscriber of the Unlegended
        Redemption Amount shall be credited against the Unlegended Redemption Amount.
        The Company shall pay any payments incurred under this Section in immediately
        available funds upon demand.

         

        (d) In
          addition to any other rights available to a Subscriber, if the Company
          fails to
          deliver to a Subscriber Unlegended Shares as required pursuant to this
          Agreement, within six (6) business days after the Unlegended Shares Delivery
          Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
          open market transaction or otherwise) shares of common stock to deliver
          in
          satisfaction of a sale by such Subscriber of the shares of Common Stock
          which
          the Subscriber was entitled to receive from the Company (a "Buy-In"),
          then
          the Company shall pay in cash to the Subscriber (in addition to any remedies
          available to or elected by the Subscriber) the amount by which (A) the
          Subscriber's total purchase price (including brokerage commissions, if
          any) for
          the shares of common stock so purchased exceeds (B) the aggregate purchase
          price
          of the shares of Common Stock delivered to the Company for reissuance as
          Unlegended Shares  together
          with interest thereon at a rate of 15% per annum, accruing until such amount
          and
          any accrued interest thereon is paid in full (which amount shall be paid
          as
          liquidated damages and not as a penalty). For
          example, if a Subscriber purchases shares of Common Stock having a total
          purchase price of $11,000 to cover a Buy-In with respect to $10,000 of
          purchase
          price of shares of Common Stock delivered to the Company for reissuance
          as
          Unlegended Shares, the Company shall be required to pay the Subscriber
          $1,000,
          plus interest. The
          Subscriber shall provide the Company written notice indicating the amounts
          payable to the Subscriber in respect of the Buy-In.

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

      

      12. (a) Right
        of First Refusal.
        Until
        one year after the Closing Date, the Subscribers shall be given not less
        than
        seven (7) business days prior written notice of any proposed sale by the
        Company
        of its common stock or other securities or debt obligations, except in
        connection with (i) full or partial consideration in connection with a strategic
        merger, acquisition, consolidation or purchase of substantially all of the
        securities or assets of corporation or other entity which holders of such
        securities or debt are not at any time granted registration rights, (ii)
        the
        Company’s issuance of securities in connection with strategic license agreements
        and other partnering arrangements so long as such issuances are not for the
        purpose of raising capital which
        holders of such securities or debt are not at any time granted registration
        rights,
        (iii)
        the Company’s issuance of Common Stock or the issuances or grants of options to
        purchase Common Stock pursuant to stock option plans and employee stock purchase
        plans described on Schedule
        5(d)
        hereto
        at prices equal to or higher than the closing price of the Common Stock on
        the
        issue date of any of the foregoing, (iv) as a result of the exercise of Warrants
        or conversion of Notes which are granted or issued pursuant to this Agreement
        or
        that have been issued prior to the Closing Date, the issuance of which has
        been
        disclosed in a Report filed not less than five (5) days prior to the Closing
        Date, (v) the payment of any interest on the Notes and liquidated damages
        or
        other damages pursuant to the Transaction Documents or other securities
        instruments that have been issued prior to the Closing Date, the issuance
        of
        which has been disclosed in a Report filed not less than five days prior
        to the
        Closing Date, and (vi) as
        described on Schedule
        12(a)
        (collectively the foregoing are “Excepted
        Issuances”).
        The
        Subscribers who exercise their rights pursuant to this Section 12(a) shall
        have
        the right during the seven (7) business days following receipt of the notice
        to
        purchase such offered common stock, debt or other securities in accordance
        with
        the terms and conditions set forth in the notice of sale in the same proportion
        to each other as their purchase of Notes in the Offering. In the event such
        terms and conditions are modified during the notice period, the Subscribers
        shall be given prompt notice of such modification and shall have the right
        during the seven (7) business days following the notice of modification to
        exercise such right. 

       

      (b) Favored
        Nations Provision.
        Other
        than in connection with the Excepted Issuances, if at any time Notes or Warrants
        are outstanding, and as limited in connection with the Warrants and Warrants
        Shares to the time periods set forth in Section 3.4 of the Warrant, the Company
        shall offer, issue or agree to issue any common stock or securities convertible
        into or exercisable for shares of common stock (or modify any of the foregoing
        which may be outstanding) to any person or entity at a price per share or
        conversion or exercise price per share which shall be less than the Conversion
        Price in respect of the Shares, or if less than the Warrant exercise price
        in
        respect of the Warrant Shares, without the consent of each Subscriber holding
        Notes, Shares, Warrants, or Warrant Shares, then the Company shall issue,
        for
        each such occasion, additional shares of Common Stock to each Subscriber
        so that
        the average per share purchase price of the shares of Common Stock issued
        to the
        Subscriber (of only the Common Stock or Warrant Shares still owned by the
        Subscriber) is equal to such other lower price per share and the Conversion
        Price and Warrant exercise price shall automatically be reduced to such other
        lower price. The average Purchase Price of the Shares and average exercise
        price
        in relation to the Warrant Shares shall be calculated separately for the
        Shares
        and Warrant Shares. The foregoing calculation and issuance shall be made
        separately for Shares received upon conversion and separately for Warrant
        Shares. The delivery to the Subscriber of the additional shares of Common
        Stock
        shall be not later than the closing date of the transaction giving rise to
        the
        requirement to issue additional shares of Common Stock. The Subscriber is
        granted the registration rights described in Section 11 hereof in relation
        to
        such additional shares of Common Stock except that the Filing Date and Effective
        Date vis-à-vis such additional common shares shall be, respectively, the
        thirtieth (30th)
        and
        sixtieth (60th)
        date
        after the closing date giving rise to the requirement to issue the additional
        shares of Common Stock. For purposes of the issuance and adjustment described
        in
        this paragraph, the issuance of any security of the Company carrying the
        right
        to convert such security into shares of Common Stock or of any warrant, right
        or
        option to purchase Common Stock shall result in the issuance of the additional
        shares of Common Stock upon the sooner of the agreement to or actual issuance
        of
        such convertible security, warrant, right or option and again at any time
        upon
        any subsequent issuances of shares of Common Stock upon exercise of such
        conversion or purchase rights if such issuance is at a price lower than the
        Conversion Price or Warrant exercise price in effect upon such issuance.
        The
        rights of the Subscriber set forth in this Section 12 are in addition to
        any
        other rights the Subscriber has pursuant to this Agreement, the Note, any
        Transaction Document, and any other agreement referred to or entered into
        in
        connection herewith. The Subscriber is also given the right to elect to
        substitute any term or terms of any other offering in connection with which
        the
        Subscriber has rights as described in Section 12(a), for any term or terms
        of
        the Offering in connection with Securities owned by Subscriber as of the
        date
        the notice described in Section 12(a) is required to be given to
        Subscriber.

         

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

       

      13. Miscellaneous.

       

      (a) Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in the mail,
        registered or certified, return receipt requested, postage prepaid, (iii)
        delivered by reputable air courier service with charges prepaid, or (iv)
        transmitted by hand delivery, telegram, or facsimile, addressed as set forth
        below or to such other address as such party shall have specified most recently
        by written notice. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be: (i) if to the Company, to: Ness
        Energy International, Inc., 4201
        East
        Interstate 20, Willow Park, TX 76087, Attn: JF Hoover, CFO, telecopier: (817)
        597-4303, with a copy by telecopier only to: Kevin Woltjen, Woltjen Law Firm,
        4144 North Central Expressway, Suite 410, Dallas, TX 75204, telecopier: (214)
        742-5545, (ii) if to the Subscriber, to: the one or more addresses and
        telecopier numbers indicated on the signature pages hereto, with an additional
        copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
        1601, New York, New York 10176, telecopier number: (212) 697-3575, and (iii)
        if
        to the Broker, to: the address and telecopier number set forth on Schedule
        8
        hereto.

       

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

       

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

       

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

       

      (e) Specific
        Enforcement, Consent to Jurisdiction.
        To the
        extent permitted by law, the Company and Subscriber acknowledge and agree
        that
        irreparable damage would occur in the event that any of the provisions of
        this
        Agreement were not performed in accordance with their specific terms or were
        otherwise breached. It is accordingly agreed that the parties shall be entitled
        to one or more preliminary and final injunctions to prevent or cure breaches
        of
        the provisions of this Agreement and to enforce specifically the terms and
        provisions hereof, this being in addition to any other remedy to which any
        of
        them may be entitled by law or equity. Subject to Section 13(d) hereof, each
        of
        the Company, Subscriber and any signator hereto in his personal capacity
        hereby
        waives, and agrees not to assert in any such suit, action or proceeding,
        any
        claim that it is not personally subject to the jurisdiction in New York of
        such
        court, that the suit, action or proceeding is brought in an inconvenient
        forum
        or that the venue of the suit, action or proceeding is improper. Nothing
        in this
        Section shall affect or limit any right to serve process in any other manner
        permitted by law.

       

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

       

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

       

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

       

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

       

      

       

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (A)

       

      

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

      

      NESS
        ENERGY INTERNATIONAL, INC.

      a
        Washington corporation

      

      

      

      

      By:_________________________________

      Name:
        

      Title:
        

      

      Dated:
        May _____, 2006

      

      

      

      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              	
                CLASS
                  A WARRANTS

              
	
                ALPHA
                  CAPITAL AKTIENGESELLSCHAFT

                Pradafant
                  7

                9490
                  Furstentums

                Vaduz,
                  Lichtenstein

                Fax:
                  011-42-32323196

                 

                 

                 

                 

                __________________________________

                (Signature)

                By:
                  

              	 	 	 

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (B)

       

      

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

      

      NESS
        ENERGY INTERNATIONAL, INC.

      a
        Washington corporation

      

      

      

      

      By:_________________________________

      Name:
        

      Title:
        

      

      Dated:
        May _____, 2006

      

      

      

      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              	
                CLASS
                  A WARRANTS

              
	
                IROQUOIS
                  MASTER FUND LTD.

                641
                  Lexington Avenue

                New
                  York, NY 10022

                Fax:
                  (212)

                 

                 

                 

                 

                __________________________________

                (Signature)

                By:
                  

              	 	 	 

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (C)

       

      

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

      

      NESS
        ENERGY INTERNATIONAL, INC.

      a
        Washington corporation

      

      

      

      

      By:_________________________________

      Name:
        

      Title:
        

      

      Dated:
        May _____, 2006

      

      

      

      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              	
                CLASS
                  A WARRANTS

              
	
                BRISTOL
                  INVESTMENT FUND, LTD.

                Caledonian
                  House, Jennett Street

                George
                  Town, Grand Cayman

                Cayman
                  Islands

                Fax:
                  (310) 696-0334

                 

                 

                 

                 

                 

                __________________________________

                (Signature)

                By:
                  

              	 	 	 

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (D)

       

      

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

      

      NESS
        ENERGY INTERNATIONAL, INC.

      a
        Washington corporation

      

      

      

      

      By:_________________________________

      Name:
        

      Title:
        

      

      Dated:
        May _____, 2006

      

      

      

      
        	
                SUBSCRIBER

              	
                NOTE
                  PRINCIPAL AMOUNT

              	
                PURCHASE
                  PRICE

              	
                CLASS
                  A WARRANTS

              
	
                ELLIS
                  INTERNATIONAL LTD.

                53rd
                  Street Urbanizacion Obarrio

                Swiss
                  Tower, 16th
                  Floor, Panama

                Republic
                  of Panama

                Fax:
                  (516) 887-8990

                 

                 

                 

                 

                 

                __________________________________

                (Signature)

                By:
                  

              	 	 	 

      

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      LIST
        OF EXHIBITS AND SCHEDULES

       

       

       

      Exhibit
        A  Form
        of
        Note

       

      Exhibit
        B  Form
        of
        Warrant

       

      Exhibit
        C  Escrow
        Agreement

       

      Exhibit
        D  Form
        of
        Legal Opinion

       

      Exhibit
        E  Form
        of
        Form 8-K or Public Announcement

       

      Exhibit
        F  Limited
        Standstill Agreement

       

      Schedule
        5(a)  Subsidiaries

       

      Schedule
        5(d)  Additional
        Issuances / Capitalization

       

      Schedule
        5(q)  Undisclosed
        Liabilities

       

      Schedule
        5(v)  Transfer
        Agent

       

      Schedule
        8  Broker

       

      Schedule
        9(e)  Use
        of
        Proceeds

       

      Schedule
        9(r)  Officer
        and Director Mineral Rights

       

      Schedule
        9(s)  Limited
        Standstill Providers

       

      Schedule
        12(a)  Other
        Excepted Issuances

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
        F

      

      LIMITED
        STANDSTILL AGREEMENT

      

      This
        AGREEMENT (the "Agreement") is made as of the ___ day of May, 2006, by the
        signatories hereto (each a "Holder"), in connection with his ownership of
        shares
        of Ness Energy International, Inc., a Washington corporation (the
        "Company").

      

      NOW,
        THEREFORE, for good and valuable consideration, the sufficiency and receipt
        of
        which consideration are hereby acknowledged, Holder agrees as
        follows:

      

      1. Background.

      

      a.
         Holder
        is
        the beneficial owner of the amount of shares of the Common Stock, no par
        value,
        of the Company (“Common Stock”) designated on the signature page
        hereto.

      

      b. Holder
        acknowledges that the Company has entered into or will enter into an agreement
        with each subscriber (“Subscription Agreement”) to the Company’s convertible
        notes and warrants (the “Subscribers”), for the sale of an aggregate of up to
        $1,000,000 of principal amount of convertible promissory notes and warrants
        to
        the Subscribers (the “Offering”). Holder understands that, as a condition to
        proceeding with the Offering, the Subscribers have required, and the Company
        has
        agreed to assist the Subscribers in obtaining, an agreement from the Holder
        to
        refrain from selling any securities of the Company from the date of the
        Subscription Agreement and until the expiration of the Exclusion Period (as
        defined in Section 9(n) of the Subscription Agreement (the "Restriction
        Period"). 

      

      2. Share
        Restriction. 

      

      a. Holder
        hereby agrees that during the Restriction Period, the Holder will not sell
        or
        otherwise dispose of any shares of Common Stock or any options, warrants
        or
        other rights to purchase shares of Common Stock or any other security of
        the
        Company which Holder owns or has a right to acquire as of the date hereof
        and
        the Closing Date (as defined in the Subscription Agreement), other than in
        connection with an offer made to all shareholders of the Company or any merger,
        consolidation or similar transaction involving the Company. Holder further
        agrees that the Company is authorized to and the Company agrees to place
        "stop
        orders" on its books to prevent any transfer of shares of Common Stock or
        other
        securities of the Company held by Holder in violation of this
        Agreement.

      

      b. Any
        subsequent issuance to and/or acquisition of shares or the right to acquire
        shares by Holder will be subject to the provisions of this
        Agreement.

      

      c.
         Notwithstanding
        the foregoing restrictions on transfer, the Holder may, at any time and from
        time to time during the Restriction Period, transfer the Common Stock (i)
        as
        bona fide gifts or transfers by will or intestacy, (ii) to any trust for
        the
        direct or indirect benefit of the undersigned or the immediate family of
        the
        Holder, provided that any such transfer shall not involve a disposition for
        value, (iii) to a partnership which is the general partner of a partnership
        of
        which the Holder is a general partner, provided, that, in the case of any
        gift
        or transfer described in clauses (i), (ii) or (iii), each donee or transferee
        agrees in writing prior to the transfer, to be bound by the terms and conditions
        contained herein in the same manner as such terms and conditions apply to
        the
        undersigned. For purposes hereof, "immediate family" means any relationship
        by
        blood, marriage or adoption, not more remote than first cousin.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      3. Miscellaneous.

      

      a. At
        any
        time, and from time to time, after the signing of this Agreement Holder will
        execute such additional instruments and take such action as may be reasonably
        requested by the Subscribers to carry out the intent and purposes of this
        Agreement.

      

      b. This
        Agreement shall be governed, construed and enforced in accordance with the
        laws
        of the State of New York without regard to conflicts of laws principles that
        would result in the application of the substantive laws of another jurisdiction,
        except to the extent that the securities laws of the state in which Holder
        resides and federal securities laws may apply. Any proceeding brought to
        enforce
        this Agreement may be brought exclusively in courts sitting in New York County,
        New York.

      

      c. This
        Agreement contains the entire agreement of the Holder with respect to the
        subject matter hereof.

      

      d. This
        Agreement shall be binding upon Holder, its legal representatives, successors
        and assigns.

      

      e. This
        Agreement may be signed and delivered by facsimile and such facsimile signed
        and
        delivered shall be enforceable.

      

      f. The
        Company agrees not to take any action or allow any act to be taken which
        would
        be inconsistent with this Agreement.

      

      IN
        WITNESS WHEREOF, and intending to be legally bound hereby, Holder has executed
        this Agreement as of the day and year first above written.

      

      HOLDER:

      

      

      ________________________________

      (Signature
        of Holder) 

      

      

      

      _________________________________

      (Print
        Name of Holder)       

      

      _________________________________

      Number
        of
        Shares of Common Stock

      Beneficially
        Owned

      

      COMPANY:

      

      NESS
        ENERGY INTERNATIONAL, INC.

      

      

      By:______________________________

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Schedule
        8

       

      Broker

      

      

      Broker:  KMR
        CAPITAL, LLC, a division of MidAmerica Financial Services Inc.

      353
        East
        Mill Street

      New
        Braunfels, TX 78130

      Fax:
        (830) 626-7444 

      

       

      Cash
        Fee.
        The
        Company agrees that it will pay the Broker, on the Closing Date a fee of
        seven
        percent (7%) of the Purchase Price (“Broker’s Cash Fee”). The Company represents
        that there are no other parties entitled to receive fees, commissions, or
        similar payments in connection with the Offering except the Broker.

      

      Broker’s
        Warrants.
        On the
        Closing Date, the Company will issue to the Broker, share purchase warrants
        similar to and carrying the same rights as the Class A Warrants issuable
        to the
        Subscribers (“Broker’s
        Warrants”)
        except
        that the Broker’s Warrants will be exercisable for five years from the Closing
        Date at an exercise price equal to the lesser of $0.155, or 100% of the closing
        bid price of the Common Stock as reported by Bloomberg L.P. for the Principal
        Market for the trading day preceding the Closing Date. The Broker will receive,
        in the aggregate, five (5) Broker’s Warrants for each one hundred (100) Shares
        issuable on the Closing Date.

      

      All
        the
        representations, covenants, warranties, undertakings, remedies, liquidated
        damages, indemnification, and other rights including but not limited to
        reservation and registration rights made or granted to or for the benefit
        of the
        Subscribers are hereby also made by the Company and granted to the holders
        of
        the Broker’s Warrants.10% Convertible Debenture

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

     

    Principal
      Amount $454,545.46     Issue
      Date: May 31, 2006

    Purchase
      Price $400,000.00

    

    

    CONVERTIBLE
      NOTE

    

    FOR
      VALUE
      RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter
      called "Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT,
      Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax: 011-42-32323196 (the
      "Holder") or order, without demand, the sum of FOUR HUNDRED FIFTY-FOUR THOUSAND
      FIVE HUNDRED FORTY-FIVE DOLLARS AND FORTY-SIX CENTS ($454,545.46), on May 31,
      2007 (the "Maturity Date"), if not retired sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1 Payment
      Grace Period.
      The
      Borrower shall have a ten (10) day grace period to pay any monetary amounts
      due
      under this Note, after which grace period and during the pendency of any other
      Event of Default (as defined below) a default interest rate of fifteen percent
      (15%) per annum shall apply to the amounts owed hereunder.

    

    1.2 Conversion
      Privileges.
      The
      Conversion Privileges set forth in Article II shall remain in full force and
      effect immediately from the date hereof and until the Note is paid in full
      regardless of the occurrence of an Event of Default. Unless previously converted
      into Common Stock in accordance with Article II hereof, the Note shall be
      payable in full on the Maturity Date, provided, that if an Event of Default
      has
      occurred, the Borrower may extend the Maturity Date up to an amount of time
      equal to the pendency of the Event of Default. Such extension must be on notice
      in writing.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    Principal
      Amount $113,636.37     Issue
      Date: May 31, 2006

    Purchase
      Price $100,000.00

    

    

    CONVERTIBLE
      NOTE

    

    FOR
      VALUE
      RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter
      called "Borrower"), hereby promises to pay to IROQUOIS MASTER FUND LTD., 641
      Lexington Avenue, New York, NY 10022 (the "Holder") or order, without demand,
      the sum of ONE HUNDRED AND THIRTEEN THOUSAND SIX HUNDRED AND THIRTY-SIX DOLLARS
      AND THIRTY-SEVEN CENTS ($113,636,37), on May 31, 2007 (the "Maturity Date"),
      if
      not retired sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1 Payment
      Grace Period.
      The
      Borrower shall have a ten (10) day grace period to pay any monetary amounts
      due
      under this Note, after which grace period and during the pendency of any other
      Event of Default (as defined below) a default interest rate of fifteen percent
      (15%) per annum shall apply to the amounts owed hereunder.

    

    1.2 Conversion
      Privileges.
      The
      Conversion Privileges set forth in Article II shall remain in full force and
      effect immediately from the date hereof and until the Note is paid in full
      regardless of the occurrence of an Event of Default. Unless previously converted
      into Common Stock in accordance with Article II hereof, the Note shall be
      payable in full on the Maturity Date, provided, that if an Event of Default
      has
      occurred, the Borrower may extend the Maturity Date up to an amount of time
      equal to the pendency of the Event of Default. Such extension must be on notice
      in writing.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    Principal
      Amount $227,272.73     Issue
      Date: May 31, 2006

    Purchase
      Price $200,000.00

    

    

    CONVERTIBLE
      NOTE

    

    FOR
      VALUE
      RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter
      called "Borrower"), hereby promises to pay to BRISTOL INVESTMENT FUND, LTD.,
      Caledonian House, Jennett Street, George Town, Grand Cayman, Cayman Islands,
      Fax: (310) 696-0334 (the "Holder") or order, without demand, the sum of TWO
      HUNDRED AND TWENTY-SEVEN THOUSAND TWO HUNDRED AND SEVENTY-TWO DOLLARS AND
      SEVENTY-THREE CENTS ($227,272.73), on May 31, 2007 (the "Maturity Date"), if
      not
      retired sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1 Payment
      Grace Period.
      The
      Borrower shall have a ten (10) day grace period to pay any monetary amounts
      due
      under this Note, after which grace period and during the pendency of any other
      Event of Default (as defined below) a default interest rate of fifteen percent
      (15%) per annum shall apply to the amounts owed hereunder.

    

    1.2 Conversion
      Privileges.
      The
      Conversion Privileges set forth in Article II shall remain in full force and
      effect immediately from the date hereof and until the Note is paid in full
      regardless of the occurrence of an Event of Default. Unless previously converted
      into Common Stock in accordance with Article II hereof, the Note shall be
      payable in full on the Maturity Date, provided, that if an Event of Default
      has
      occurred, the Borrower may extend the Maturity Date up to an amount of time
      equal to the pendency of the Event of Default. Such extension must be on notice
      in writing.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    Principal
      Amount $227,272.73     Issue
      Date: May 31, 2006

    Purchase
      Price $200,000.00

    

    CONVERTIBLE
      NOTE

    

    FOR
      VALUE
      RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter
      called "Borrower"), hereby promises to pay to ELLIS INTERNATIONAL LTD.,
      53rd
      Street
      Urbanizacion Obarrio, Swiss Tower, 16th
      Floor,
      Panama, Republic of Panama, Fax: (516) 887-8990 (the "Holder") or order, without
      demand, the sum of TWO HUNDRED AND TWENTY-SEVEN THOUSAND TWO HUNDRED AND
      SEVENTY-TWO DOLLARS AND SEVENTY-THREE CENTS ($227,272.73), on May 31, 2007
      (the
      "Maturity Date"), if not retired sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1 Payment
      Grace Period.
      The
      Borrower shall have a ten (10) day grace period to pay any monetary amounts
      due
      under this Note, after which grace period and during the pendency of any other
      Event of Default (as defined below) a default interest rate of fifteen percent
      (15%) per annum shall apply to the amounts owed hereunder.

    

    1.2 Conversion
      Privileges.
      The
      Conversion Privileges set forth in Article II shall remain in full force and
      effect immediately from the date hereof and until the Note is paid in full
      regardless of the occurrence of an Event of Default. Unless previously converted
      into Common Stock in accordance with Article II hereof, the Note shall be
      payable in full on the Maturity Date, provided, that if an Event of Default
      has
      occurred, the Borrower may extend the Maturity Date up to an amount of time
      equal to the pendency of the Event of Default. Such extension must be on notice
      in writing.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      II

    

    CONVERSION
      RIGHTS

    

    The
      Holder shall have the right to convert the principal and any interest due under
      this Note into Shares of the Borrower's Common Stock, no par value per share
      (“Common Stock”) as set forth below.

    

    2.1. Conversion
      into the Borrower's Common Stock.

    

    (a) The
      Holder shall have the right from and after the date of the issuance of this
      Note
      and then at any time until this Note is fully paid, to convert any outstanding
      and unpaid principal portion of this Note, at the election of the Holder (the
      date of giving of such notice of conversion being a "Conversion Date") into
      fully paid and nonassessable shares of Common Stock as such stock exists on
      the
      date of issuance of this Note, or any shares of capital stock of Borrower into
      which such Common Stock shall hereafter be changed or reclassified, at the
      conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"),
      determined as provided herein. Upon delivery to the Borrower of a completed
      Notice of Conversion, a form of which is annexed hereto, Borrower shall issue
      and deliver to the Holder within three (3) business days after the Conversion
      Date (such third day being the “Delivery Date”) that number of shares of Common
      Stock for the portion of the Note converted in accordance with the foregoing.
      At
      the election of the Holder, the Borrower will deliver accrued but unpaid
      interest on the Note, if any, through the Conversion Date directly to the Holder
      on or before the Delivery Date (as defined in the Subscription Agreement).
      The
      number of shares of Common Stock to be issued upon each conversion of this
      Note
      shall be determined by dividing that portion of the principal of the Note to
      be
      converted by the Conversion Price.

    

    (b)  Subject
      to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
      share shall be $0.155.

    

    (c) 
      The
      Conversion Price and number and kind of shares or other securities to be issued
      upon conversion determined pursuant to Section 2.1(a), shall be subject to
      adjustment from time to time upon the happening of certain events while this
      conversion right remains outstanding, as follows:

    

    A. Merger,
      Sale of Assets, etc. If the Borrower at any time shall consolidate with or
      merge
      into or sell or convey all or substantially all its assets to any other
      corporation, this Note, as to the unpaid principal portion thereof and accrued
      interest thereon, shall thereafter be deemed to evidence the right to purchase
      such number and kind of shares or other securities and property as would have
      been issuable or distributable on account of such consolidation, merger, sale
      or
      conveyance, upon or with respect to the securities subject to the conversion
      or
      purchase right immediately prior to such consolidation, merger, sale or
      conveyance. The foregoing provision shall similarly apply to successive
      transactions of a similar nature by any such successor or purchaser. Without
      limiting the generality of the foregoing, the anti-dilution provisions of this
      Section shall apply to such securities of such successor or purchaser after
      any
      such consolidation, merger, sale or conveyance.

    

    B. Reclassification,
      etc. If the Borrower at any time shall, by reclassification or otherwise, change
      the Common Stock into the same or a different number of securities of any class
      or classes that may be issued or outstanding, this Note, as to the unpaid
      principal portion thereof and accrued interest thereon, shall thereafter be
      deemed to evidence the right to purchase an adjusted number of such securities
      and kind of securities as would have been issuable as the result of such change
      with respect to the Common Stock immediately prior to such reclassification
      or
      other change.

    

    C. Stock
      Splits, Combinations and Dividends. If the shares of Common Stock are subdivided
      or combined into a greater or smaller number of shares of Common Stock, or
      if a
      dividend is paid on the Common Stock in shares of Common Stock, the Conversion
      Price shall be proportionately reduced in case of subdivision of shares or
      stock
      dividend or proportionately increased in the case of combination of shares,
      in
      each such case by the ratio which the total number of shares of Common Stock
      outstanding immediately after such event bears to the total number of shares
      of
      Common Stock outstanding immediately prior to such event..

     

    D. Share
      Issuance. So long as this Note is outstanding, if the Borrower shall issue
      or
      agree to issue any shares of Common Stock except for the Excepted Issuances
      (as
      defined in the Subscription Agreement) for a consideration less than the
      Conversion Price in effect at the time of such issue, then, and thereafter
      successively upon each such issue, the Conversion Price shall be reduced to
      such
      other lower issue price. For purposes of this adjustment, the issuance of any
      security carrying the right to convert such security into shares of Common
      Stock
      or of any warrant, right or option to purchase Common Stock shall result in
      an
      adjustment to the Conversion Price upon the issuance of the above-described
      security and again upon the issuance of shares of Common Stock upon exercise
      of
      such conversion or purchase rights if such issuance is at a price lower than
      the
      then applicable Maximum Base Price. The reduction of the Conversion Price
      described in this paragraph is in addition to other rights of the Holder
      described in this Note and the Subscription Agreement.

    

    (d) Whenever
      the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
      shall promptly mail to the Holder a notice setting forth the Conversion Price
      after such adjustment and setting forth a statement of the facts requiring
      such
      adjustment.

    

    (e) During
      the period the conversion right exists, Borrower will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of Common Stock issuable upon the full conversion of this
      Note
      and as described in the Subscription Agreement. Borrower represents that upon
      issuance, such shares will be duly and validly issued, fully paid and
      non-assessable. Borrower agrees that its issuance of this Note shall constitute
      full authority to its officers, agents, and transfer agents who are charged
      with
      the duty of executing and issuing stock certificates to execute and issue the
      necessary certificates for shares of Common Stock upon the conversion of this
      Note.

    

    2.2 Method
      of Conversion.
      This
      Note may be converted by the Holder in whole or in part as described in Section
      2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this
      Note, a new Note containing the same date and provisions of this Note shall,
      at
      the request of the Holder, be issued by the Borrower to the Holder for the
      principal balance of this Note and interest which shall not have been converted
      or paid.

    

    2.3 Maximum
      Conversion.
      The
      Holder shall not be entitled to convert on a Conversion Date that amount of
      the
      Note in connection with that number of shares of Common Stock which would be
      in
      excess of the sum of (i) the number of shares of Common Stock beneficially
      owned
      by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock
      issuable in connection with the unconverted portion of the Note, and (iii)
      the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Holder and
      its affiliates of more than 4.99% of the outstanding shares of Common Stock
      of
      the Borrower on such Conversion Date. For the purposes of the provision to
      the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
      shall not be limited to aggregate conversions of only 4.99% and aggregate
      conversion by the Holder may exceed 4.99%. The Holder shall have the authority
      and obligation to determine whether the restriction contained in this Section
      2.3 will limit any conversion hereunder and to the extent that the Holder
      determines that the limitation contained in this Section applies, the
      determination of which portion of the Notes are convertible shall be the
      responsibility and obligation of the Holder. The Holder may waive the conversion
      limitation described in this Section 2.3, in whole or in part, upon and
      effective after 61 days prior written notice to the Borrower to increase such
      percentage to up to 9.99%. The Holder may allocate which of the equity of the
      Borrower deemed beneficially owned by the Holder shall be included in the 4.99%
      amount or up to 9.99% amount as described above.

    

    2.4 Optional
      Redemption of Principal Amount.
      Provided an Event of Default or an event which with the passage of time or
      the
      giving of notice could become an Event of Default has not occurred, whether
      or
      not such Event of Default has been cured, the Borrower will have the option
      of
      prepaying the outstanding Principal amount of this Note ("Optional Redemption"),
      in whole or in part, by paying to the Holder a sum of money equal to one hundred
      and twenty percent (120%) of the Principal amount to be redeemed, together
      with
      accrued but unpaid interest thereon, if any, and any and all other sums due,
      accrued or payable to the Holder arising under this Note or any Transaction
      Document through the Redemption Payment Date as defined below (the "Redemption
      Amount"). Borrower’s election to exercise its right to prepay must be by notice
      in writing (“Notice of Redemption”). A Notice of Redemption may be given only
      within five days after the closing price of the Common Stock as reported by
      Bloomberg L.P. for the Principal Market is less than $0.155 for five consecutive
      trading days (“Lookback Period”). The Notice of Redemption shall specify the
      date for such Optional Redemption (the "Redemption Payment Date"), which date
      shall be thirty (30) days after the date of the Notice of Redemption (the
      "Redemption Period"). A Notice of Redemption may not be given or fulfilled
      unless the Registration Statement (as defined in the Subscription Agreement)
      has
      been effective for the unrestricted public resale of the Registrable Securities
      (as defined in the Subscription Agreement) each day during the Lookback Period
      and through the Redemption Payment Date. The amount of Note principal included
      in a Notice of Redemption shall be reduced to an amount that would not cause
      the
      Holder to exceed the limitation described in Section 2.3 of this Note if the
      amount of Note Principal being redeemed was instead converted pursuant to
      Section 3.1. A Notice of Redemption shall not be effective with respect to
      any
      portion of the Principal Amount for which the Holder has a pending election
      to
      convert or for which a Conversion Notice is given during the Redemption Period.
      On the Redemption Payment Date, the Redemption Amount shall be paid in good
      funds to the Holder. In the event the Borrower fails to pay the Redemption
      Amount on the Redemption Payment Date as set forth herein, then (i) such Notice
      of Redemption will be null and void, (ii) Borrower will have no right to deliver
      another Notice of Redemption, and (iii) Borrower’s failure may be deemed by
      Holder to be a non-curable Event of Default. A Notice of Redemption may not
      be
      given nor may the Borrower effectuate a Redemption without the consent of the
      Holder, if at any time during the Redemption Period an Event of Default or
      an
      Event which with the passage of time or giving of notice could become an Event
      of Default (whether or not such Event of Default has been cured), has occurred.
      A Notice of Redemption must be given to all Holders of Notes similar to this
      Note, in proportion to the amount of Note Principal held by all Holders of
      such
      Notes. Except as described in this Section 2.4, the Note may not be paid prior
      to the Maturity Date without the consent of the Holder.

     

                                                      
ARTICLE
      III

     

                                  EVENT
      OF DEFAULT

    

    The
      occurrence of any of the following events of default ("Event of Default") shall,
      at the option of the Holder hereof, make all sums of principal and interest
      then
      remaining unpaid hereon and all other amounts payable hereunder immediately
      due
      and payable, upon demand, without presentment, or grace period, all of which
      hereby are expressly waived, except as set forth below:

    

    3.1 Failure
      to Pay Principal or Interest.
      The
      Borrower fails to pay any installment of principal, interest or other sum due
      under this Note when due and such failure continues for a period of ten (10)
      days after the due date. The ten (10) day period described in this Section
      3.1
      is the same ten (10) day period described in Section 1.1 hereof.

    

    3.2 Breach
      of Covenant.
      The
      Borrower breaches any material covenant or other term or condition of the
      Subscription Agreement or this Note in any material respect and such breach,
      if
      subject to cure, continues for a period of ten (10) business days after written
      notice to the Borrower from the Holder.

    

    3.3 Breach
      of Representations and Warranties.
      Any
      material representation or warranty of the Borrower made herein, in the
      Subscription Agreement, or in any agreement, statement or certificate given
      in
      writing pursuant hereto or in connection therewith shall be false or misleading
      in any material respect as of the date made and the Closing Date.

    

    3.4 Receiver
      or Trustee.
      The
      Borrower shall make an assignment for the benefit of creditors, or apply for
      or
      consent to the appointment of a receiver or trustee for it or for a substantial
      part of its property or business; or such a receiver or trustee shall otherwise
      be appointed.

    

    3.5 Judgments.
      Any
      money judgment, writ or similar final process shall be entered or filed against
      Borrower or any of its property or other assets for more than $50,000, and
      shall
      remain unvacated, unbonded or unstayed for a period of forty-five (45)
      days.

    

    3.6 Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any law, or the issuance
      of
      any notice in relation to such event, for the relief of debtors shall be
      instituted by or against the Borrower and if instituted against Borrower are
      not
      dismissed within 45 days of initiation.

    

    3.7  Delisting.
      Delisting of the Common Stock from the OTC Bulletin Board (“Bulletin Board”) or
      Principal Market; failure to comply with the requirements for continued listing
      on the Bulletin Board for a period of five consecutive trading days; or
      notification from the Bulletin Board or any Principal Market that the Borrower
      is not in compliance with the conditions for such continued listing on the
      Bulletin Board or other Principal Market.

    

    3.8 Non-Payment.
      A
      default by the Borrower under any one or more obligations in an aggregate
      monetary amount in excess of $100,000 for more than twenty days after the due
      date, unless the Borrower is contesting the validity of such obligation in
      good
      faith.

    

    3.9 Stop
      Trade.
      A
      Securities and Exchange Commission or judicial stop trade order or Principal
      Market trading suspension that lasts for five or more consecutive trading
      days.

    

    3.10 Failure
      to Deliver Common Stock or Replacement Note.
      Borrower's failure to timely deliver Common Stock to the Holder pursuant to
      and
      in the form required by this Note and Sections 7 and 11 of the Subscription
      Agreement, or, if required, a replacement Note.

    

    3.11 Non-Registration
      Event.
      The
      occurrence of a Non-Registration Event as described in Section 11.4 of the
      Subscription Agreement.

    

    3.12 Reservation
      Default.
      Failure
      by the Borrower to have reserved for issuance upon conversion of the Note the
      amount of Common stock as set forth in this Note and the Subscription
      Agreement.

    

    3.13 Cross
      Default.
      A
      default by the Borrower of a material term, covenant, warranty or undertaking
      of
      any other agreement to which the Borrower and Holder are parties, or the
      occurrence of a material event of default under any such other agreement which
      is not cured after any required notice and/or cure period.

    

    ARTICLE
      IV

    

                      
      MISCELLANEOUS

    

    4.1 Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

    

    4.2 Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Borrower to: Ness
      Energy International, Inc., 4201
      East
      Interstate 20, Willow Park, TX 76087, Attn: JF Hoover, CFO, telecopier: (817)
      597-4303, with a copy by telecopier only to: Kevin Woltjen, Woltjen Law Firm,
      4144 North Central Expressway, Suite 410, Dallas, TX 75204, telecopier: (214)
      742-5545, and (ii) if to the Holder, to the name, address and telecopy number
      set forth on the front page of this Note, with a copy by telecopier only to
      Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
      10176, telecopier number: (212) 697-3575.

    

    4.3 Amendment
      Provision.
      The
      term "Note" and all reference thereto, as used throughout this instrument,
      shall
      mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented.

    

    4.4 Assignability.
      This
      Note shall be binding upon the Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns. The
      Borrower may not assign any of its obligations under this Note without the
      consent of the Holder.

    

    

    4.5 Cost
      of Collection.
      If
      default is made in the payment of this Note, Borrower shall pay the Holder
      hereof reasonable costs of collection, including reasonable attorneys'
      fees.

    

    4.6 Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York. Any action brought by either party against the other concerning
      the
      transactions contemplated by this Agreement shall be brought only in the state
      courts of New York or in the federal courts located in the state of New York.
      Both parties and the individual signing this Agreement on behalf of the Borrower
      agree to submit to the jurisdiction of such courts. The prevailing party shall
      be entitled to recover from the other party its reasonable attorney's fees
      and
      costs.

    

    4.7 Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by the Borrower to the
      Holder and thus refunded to the Borrower.

    

    4.8 Shareholder
      Status.
      The
      Holder shall not have rights as a shareholder of the Borrower with respect
      to
      unconverted portions of this Note. However, the Holder will have all the rights
      of a shareholder of the Borrower with respect to the shares of Common Stock
      to
      be received by Holder after delivery by the Holder of a Conversion Notice to
      the
      Borrower.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by an authorized officer
      as of the ____ day of May, 2006.

     

    NESS
      ENERGY INTERNATIONAL, INC.

    

    

     

    By:________________________________

    Name:
      

    Title:
      

     

    WITNESS:

    

    

    

    ______________________________________

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

                     
      NOTICE OF CONVERSION

    

    (To
      be
      executed by the Registered Holder in order to convert the Note)

    

    

    The
      undersigned hereby elects to convert $_________ of the principal and $_________
      of the interest due on the Note issued by Ness Energy International, Inc. on
      May
      31, 2006 into Shares of Common Stock of Ness Energy International, Inc. (the
      "Borrower") according to the conditions set forth in such Note, as of the date
      written below.

    

    

    

    Date
      of
      Conversion:____________________________________________________________________

    

    

    Conversion
      Price:______________________________________________________________________

    

    

    Shares
      To
      Be
      Delivered:_________________________________________________________________

    

    

    Signature:____________________________________________________________________________

    

    

    Print
      Name:__________________________________________________________________________

    

    

    Address:_____________________________________________________________________________

    

    ____________________________________________________________________________

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