SB-2/A

As filed with the Securities and Exchange Commission on January 25, 2007

Securities Act File No. 333-135174

UNITED STATES SECURITIES

AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 5

TO

FORM SB-2

REGISTRATION STATEMENT

Under

The Securities Act of 1933

Converted Organics Inc.

(Name of small business issuer as specified in its charter)

Delaware	2873	20-4075963
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

7A Commercial Wharf West

Boston, MA 02110

(617) 624-0111

(Address and Telephone Number of Principal Executive Offices and Principal Place of Business)

Edward J. Gildea

7A Commercial Wharf West

Boston, MA 02110

(617) 624-0111

(Name, Address and Telephone Number of Agent for Service)

Copy to:

Mark A. von Bergen
Jason H. Barker
Holland & Knight LLP
2300 US Bancorp Tower
111 SW Fifth Avenue
Portland, OR 97204
(503) 243-2300 Thomas P. Palmer
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, OR 97204
(503) 221-1440

Approximate Date of Commencement of Proposed Sale to Public: As soon as practicable

after this registration statement becomes effective.

          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.     þ

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.     o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We have filed a registration statement with the Securities and Exchange Commission relating to this offering. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 25, 2007

PRELIMINARY PROSPECTUS

2,000,000 Units

Each unit consisting of one share of common stock,

one redeemable Class A warrant,

and one non-redeemable Class B warrant

          This is a firm commitment initial public offering of 2,000,000 units by Converted Organics Inc. Each unit consists of one share of common stock, one redeemable Class A warrant and one non-redeemable Class B warrant, each warrant to purchase one share of common stock. The common stock and warrants will trade only as part of a unit for 30 days following the closing of this offering, after which the common stock and warrants will trade separately.

          Prior to this offering, there has been no public market for our securities. We have applied to have the units, the common stock, the Class A public warrants and the Class B public warrants quoted on the Nasdaq Capital Market under the symbols COINU, COIN, COINW and COINZ, respectively. We have also applied for dual listing of the securities on the Boston Stock Exchange.

          We anticipate that the initial public offering price of our units will be between $5.00 and $6.00 per unit. The aggregate price of the units offered hereby, excluding units that may be sold on exercise of the underwriters’ over-allotment option, would be $11,000,000, assuming an initial public offering price of $5.50 per unit.

          The closing of this offering is contingent upon the concurrent closing of an approximately $17.5 million bond issue of the New Jersey Economic Development Authority, the net proceeds from which, together with a substantial portion of the net proceeds from this offering, will permit us to complete our first organic waste conversion facility in Woodbridge, New Jersey.

          These are speculative securities. Investing in the units involves significant risks. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 4.

          NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

	Per Unit	Total
Initial public offering price	$	$
Underwriting discount	$	$
Proceeds to us, before expenses	$	$

          The expenses of this offering will include a non-accountable expense allowance of 3% of the gross proceeds of this offering payable to Paulson Investment Company, Inc., the representative of the underwriters. Additionally, we have granted the representative a 45-day option to purchase up to an additional 300,000 units to cover over-allotments and have agreed to issue to the representative a warrant to purchase 200,000 units.

Paulson Investment Company, Inc.

Investors Capital Corporation

EKN Financial Services, Inc.

The date of this prospectus is                     , 2007.

TABLE OF CONTENTS

PROSPECTUS SUMMARY	1
RISK FACTORS	4
FORWARD-LOOKING STATEMENTS	14
USE OF PROCEEDS	15
DIVIDEND POLICY	16
CAPITALIZATION	17
DILUTION	18
PLAN OF OPERATION	19
PROPOSED BUSINESS	25
MANAGEMENT	36
PRINCIPAL STOCKHOLDERS	41
RELATED PARTY TRANSACTIONS	42
DESCRIPTION OF SECURITIES	42
SHARES ELIGIBLE FOR FUTURE SALE	47
UNDERWRITING	49
LEGAL MATTERS	52
EXPERTS	52
WHERE YOU CAN FIND MORE INFORMATION	52
INDEX TO FINANCIAL STATEMENTS	F-1
Ex-1.1 Form of Underwriting Agreement
Ex-4.1 Form of common stock certificate
Ex-4.4 Form of Unit Certificate
Ex-10.1(C) Form of Amendment to Bridge Loan dated January 19, 2007
Ex-10.4(A) Form of Amendment to Bridge Loan
Ex-10.13 Standard Form of Agreement between Owner and Architect
Ex-10.14 Standard Form of Agreement between Owner and Contractor
Ex-10.15 Standard Form of Agreement Between Owner and Construction Manager
Ex-10.16 Rider and Supplementary Conditions to Armistead Mechanical, Inc. Letter
Ex-10.17 Standard Form of Agreement Between Owner and Contractor
Ex-10.18 Promissory Note to Paulson Investment Company, Inc.
Ex-10.19 Promissory Note to High Capital Funding, LLC
Ex-10.20 Promissory Note to Paulson Investment Company, Inc.
Ex-10.21 Promissory Note to High Capital Funding, LLC
Ex-23.1 Consent of Carlin, Charron & Rosen, LLP

      Until                     , 2007 (the 25th day after the date of this prospectus), all dealers effecting transactions in our units, whether or not participating in this offering, may be required to make available a prospectus. This is in addition to the obligation of dealers to make available a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

      Notice to California investors: Each purchaser of securities in California must meet one of the following suitability standards: (1) annual gross income of at least $65,000, plus liquid net worth (exclusive of home, home furnishings and automobile) of at least $250,000; or (2) liquid net worth of at least $500,000, regardless of annual gross income.

      Notice to Idaho investors: Each purchaser of securities in Idaho must meet one of the following suitability standards: (1) annual gross income of at least $65,000, plus liquid net worth (exclusive of home, home furnishings and automobile) of at least $65,000; or (2) liquid net worth of at least $150,000 (exclusive of home, home furnishings and automobile).

i

PROSPECTUS SUMMARY

      The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus, including but not limited to, the risk factors beginning on page 4. References to “we,” “us,” “our,” “Converted Organics” or the “company” mean Converted Organics Inc. and its wholly owned subsidiary.

Our Company

      Converted Organics is a development stage company seeking to use organic food waste as raw material to manufacture all-natural soil amendment products combining both nutritional and disease suppression characteristics. We plan to sell and distribute our products in the agribusiness, turf management, and retail markets. Our proposed process, which has been demonstrated in a pilot manufacturing facility, uses heat and bacteria to transform food waste into a natural fertilizer.

      A substantial portion of the net proceeds of this offering, together with the net proceeds of an approximately $17.5 million bond issue of the New Jersey Economic Development Authority that is to close simultaneously with the closing of this offering, will be used to develop and construct an organic waste conversion facility in Woodbridge, New Jersey. We expect this facility to be operational approximately 12 to 15 months from the date of the closing of this offering and the bond issue.

      Our revenue will come from two sources: “tip” fees and product sales. Waste haulers will pay us tip fees for accepting food waste generated by food distributors such as grocery stores, produce docks, fish markets and food processors, and by hospitality venues such as hotels, restaurants, convention centers and airports. Revenue will also come from the customers who purchase our products. Our planned products will possess a combination of nutritional, disease suppression and soil amendment characteristics. The products will be sold in both dry and liquid form and will be stable with an extended shelf life compared to other organic fertilizers. Among other uses, the liquid product is expected to be used to mitigate powdery mildew, a leaf fungus that restricts the flow of water and nutrients to the plant. These products can be used either on a stand-alone basis or in combination with more traditional petrochemical-based fertilizers and crop protection products. Based on growth trial performance, increased environmental awareness, trends in consumer food preferences and company-sponsored research, we believe our products will have substantial demand in the agribusiness, turf management and retail markets. We also expect to benefit from increased regulatory focus on organic waste processing and on environmentally friendly growing practices.

      Our initial facility will collect raw material from the New York-Northern New Jersey metropolitan area. It is located near the confluence of two major highways in northern New Jersey, providing efficient access for the delivery of feedstock from throughout this geographic area. The facility is within a special recycling zone and has been approved for inclusion in the Middlesex County New Jersey Solid Waste Management Plan. When fully operational, the Woodbridge facility is expected to process approximately 78,000 tons of organic food waste, which will be diverted from landfills, and produce approximately 7,500 tons of dry product and 6,700 tons of liquid concentrate annually. We are in the process of negotiating options to lease property for additional facilities in Massachusetts, New York and Rhode Island. Completion of these additional facilities will require additional capital.

      Our principal business office is located at 7A Commercial Wharf West, Boston, Massachusetts 02110, and our telephone number is (617) 624-0111. Our website address is www.convertedorganics.com. Information contained on our website or any other website does not constitute part of this prospectus.

1

This Offering

Securities offered	2,000,000 units. Each unit consists of one share of common stock, one redeemable Class A public warrant and one non-redeemable Class B public warrant, each warrant to purchase one share of common stock. The common stock and warrants will trade only as a unit for 30 days following this offering, after which the common stock and warrants will each trade separately.
Class A public warrants	The Class A public warrants included in the units will be exercisable to purchase one share of common stock commencing 30 days after the effectiveness of this offering. The exercise price of each Class A warrant is 150% of the public offering price of the units. The Class A warrants expire on the fifth anniversary of the effective date of this offering, but if the warrants are not exercisable at that time because a current registration statement for the underlying shares is not available, then the expiration date will be extended for 30 days following notice from us that the warrants are again exercisable. Nevertheless, there is a possibility that the warrants will never be exercisable when in-the-money or otherwise, and that warrant holders will never receive shares or payment of cash in settlement of the warrants. See page 12 of “Risk Factors” for more details.
	We will have the right to redeem the Class A warrants issued in this offering at a redemption price of $0.25 per warrant at any time after (i) 180 days from the effective date of this offering and (ii) the date on which the closing price of our common stock, as reported on the Nasdaq Capital Market, has equaled or exceeded 170% of the public offering price of the units for five consecutive trading days. We are required to provide 30 days’ prior written notice to the Class A warrant holders of our intention to redeem the warrants.
Class B public warrants	The Class B public warrants included in the units will be exercisable to purchase one share of common stock commencing 30 days after the effectiveness of this offering. The exercise price of a Class B warrant is 200% of the public offering price of the units. The Class B warrants expire on the fifth anniversary of the effective date of this offering, but if the warrants are not exercisable at that time because a current registration statement for the underlying shares is not available, then the expiration date will be extended for 30 days following notice from us that the warrants are again exercisable. Nevertheless, there is a possibility that the warrants will never be exercisable when in-the-money or otherwise, and that warrant holders will never receive shares or payment of cash in settlement of the warrants. See page 12 of “Risk Factors” for more details.
	The Class B warrants are not redeemable by us.
Stock dividend	Holders of record of our common stock at the end of each calendar quarter, beginning with the first quarter of 2007, will receive a 5% common stock dividend until the Woodbridge facility has commenced commercial operations.
Common stock outstanding after this offering	3,626,969 shares, including shares underlying units issued to certain bridge lenders.

2

Use of proceeds	To purchase capital equipment and pay engineering and design fees for the construction of our first processing line; to repay bridge and shareholder loans; to pay expenses and deferred compensation; to pay fees to the technology licensor; and for working capital purposes.
Proposed Nasdaq Capital Market symbols	Units:                  COINU Common stock:        COIN Class A warrants:      COINW Class B warrants:      COINZ
Proposed Boston Stock Exchange symbols	Units: Common stock: Class A warrants: Class B warrants:
Risk factors	Investing in these units involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus.

      We have 1,333,333 shares of common stock issued and outstanding as of January 1, 2007. Unless the context indicates otherwise, all share and per-share common stock information in this prospectus:

•  assumes an initial public offering price of $5.50 per unit;

•  assumes the issuance of up to 275,455 units to certain bridge lenders and the issuance of up to 18,181 units to High Capital Funding, LLC (“HCF”) as reimbursement for costs incurred by HCF in preparing legal documents in connection with the bridge transaction;

•  assumes no exercise of the warrants underlying the units issued to certain bridge lenders or HCF;

•  assumes no exercise of the Class A and Class B warrants;

•  assumes no exercise of the representative’s over-allotment option to purchase up to 300,000 units;

•  assumes no exercise of the representative’s warrants;

•  assumes no issuance of stock dividends pursuant to our stock dividend program; and

•  excludes 666,667 shares reserved under our 2006 Stock Option Plan.

      Because each unit offered hereby consists of one share of common stock, one Class A public warrant and one Class B public warrant, whenever there is a reference in this prospectus to the “per share price” of the unit sold in this offering, the price refers to the price of the one share of common stock contained in the unit, with no value allocated to the warrants.

Concurrent Bond Issue

      The closing of this offering is dependent upon the closing of an approximately $17.5 million bond issue of the New Jersey Economic Development Authority, which bond issue will be conducted on an all-or-none, best-efforts basis and will close, if at all, simultaneously with the closing of this offering. The net proceeds of the bonds will be used to develop and construct our initial facility in Woodbridge, New Jersey. The 20-year bonds will bear interest at approximately 8.2% and will be secured by a leasehold mortgage and a first lien on equipment at the New Jersey facility and other assets of the company in favor of the bondholders. In connection with the bond issue, the company will establish and maintain: (i) a 15-month capitalized interest reserve; (ii) a debt service reserve fund equal to a minimum of 10% of the bond amount or 12 months maximum annual debt service (which amount shall be set aside and not be made available for development of the facility); (iii) a debt service coverage ratio where earnings before interest, taxes, depreciation and amortization will equal two times the principal and interest payable on the bonds; (iv) an operating reserve fund of approximately 60 days’ cash requirements; and (v) a lease payment reserve equal to $195,000.

3

RISK FACTORS

      An investment in our securities involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below, together with the cautionary statement that follows this section and the other information included in this prospectus, before purchasing our units in this offering. If one or more of the possibilities described as risks below actually occur, our operating results and financial condition would likely suffer and the trading price of our securities could fall, causing you to lose some or all of your investment in the securities we are offering. The following is a description of what we consider the key challenges and material risks to our business and an investment in our securities.

Risks Related to the Development of Our Business

Our auditors have substantial doubt about our ability to continue as a going concern.

      In their report prepared in connection with our 2005 financial statements, our auditors included an explanatory paragraph stating that, because we have not earned any revenue, have incurred net losses and have a working capital deficiency as of December 31, 2005, there is substantial doubt about our ability to continue as a going concern. Our continued existence will depend in large part upon our ability to successfully secure additional financing to fund future operations. This offering is a principal element of our plan to move toward profitable operations. Even after this offering, if in the future we are not able to achieve positive cash flow from operations or to secure additional financing as needed, we may again experience the risk that we will not be able to continue as a going concern. If we cannot successfully continue as a going concern, our stockholders may lose their entire investment. Persons who cannot afford to lose their entire investment should not invest in this offering.

We are an early-stage venture with no operating history, and our prospects are difficult to evaluate.

      We have not operated any facility, nor have we sold any products. Our activities to date have been limited to developing our business, and consequently there is no historical financial information related to operations available upon which you may base your evaluation of our business and prospects. The revenue and income potential of our business is unproven. If we are unable to develop our business, we will not achieve our goals and could suffer economic loss or collapse, in which case you may lose your entire investment.

We expect to incur significant losses until we commence operations and perhaps for some time thereafter, and we may never operate profitably.

      For the period from May 2, 2003 (inception of our predecessor companies) through September 30, 2006, we incurred an accumulated net loss of $5,884,362. We will continue to incur significant losses until we successfully complete construction and commence operations at our proposed Woodbridge, New Jersey facility. There is no assurance that we will be successful in our efforts to build and operate an organic waste conversion facility. Even if we successfully meet our objectives and begin operations at the Woodbridge facility, there is no assurance that we will be able to operate profitably.

If we are unable to manage our transition to an operating company effectively, our operating results will be adversely affected.

      Failure to manage effectively our transition to an operating company will harm our business. To date, substantially all of our activities and resources have been directed at developing our business plan, arranging financing, licensing technology, obtaining permits and approvals, and securing a lease for our first facility and options for additional facilities. The transition to a converter of waste and manufacturer and vendor of fertilizer products will require effective planning and management. Our management does not have extensive experience in operating a manufacturing facility. In addition, future expansion will be expensive and will likely strain our management and other resources. We may not be able to easily transfer our skills to operating a facility or otherwise effectively manage our transition to an operating company.

4

Our plan to develop relationships with strategic partners and vendors may not be successful.

      As part of our business strategy, we will need to develop short- and long-term relationships with strategic partners and vendors to conduct growth trials and other research and development activities, to assess technology, to engage in marketing activities, and to enter into waste collection, real estate development and construction agreements. For these efforts to succeed, we must identify partners and vendors whose competencies complement ours. We must also enter into agreements with them on attractive terms and integrate and coordinate their resources and capabilities with our own. If we are unsuccessful in our collaborative efforts, our ability to develop and market products could be severely limited or delayed.

If we fail to finalize important agreements or the final agreements are unfavorable compared with what we currently anticipate, the development of our business may be harmed in ways that could significantly reduce the value of your investment.

      This prospectus refers to agreements and documents that are not yet final or executed, permits that have not yet been obtained, and plans that have not yet been implemented. In some instances, such agreements or permits are not yet in draft form. The definitive versions of those agreements, permits, plans or proposals may not materialize or, if they do materialize, may not prove profitable to the company, in which case the value of your investment will be reduced.

We may be unable to effectively implement new transaction accounting, operational and financial systems.

      To manage our expected operations, we will be required to implement complex transaction accounting, operational and financial systems, procedures and controls, and to retain personnel experienced in the use of these systems. Deficiencies in the design and operation of our systems, procedures and controls, including internal controls, could adversely affect our ability to record, process, summarize and report material financial information. Our planned systems, procedures and controls may be inadequate to support our future operations.

Our future success is dependent on our existing key employees, and hiring and assimilating new key employees, and our inability to attract or retain key personnel in the future would materially harm our business and results of operations.

      Our success depends on the continuing efforts and abilities of our current management team. In addition, our future success will depend, in part, on our ability to attract and retain highly skilled employees, including management, technical and sales personnel. The loss of services of any of our key personnel, the inability to attract or retain key personnel in the future, or delays in hiring required personnel could materially harm our business and results of operations. We may be unable to identify and attract highly qualified employees in the future. In addition, we may not be able to successfully assimilate these employees or hire qualified personnel to replace them.

Risks Related to Completion of Our Initial Facility

Constructing and equipping our manufacturing facility may take longer and cost more than we expect.

      Equipping and completing our initial facility will require a significant investment of capital and substantial engineering expenditures, and is subject to significant risks, including risks of delays, equipment problems, cost overruns, including the cost of raw materials such as stainless steel, and other start-up and operating difficulties. Our conversion processes will use custom-built, patented equipment that may not be delivered and installed in our facility in a timely manner for many reasons, including but not limited to the inability of the supplier of this equipment to perform. In addition, this equipment may take longer and cost more to debug than planned and may never operate as designed. If we experience any of these or similar difficulties, we may be unable to complete our facilities, and you would lose your entire investment.

5

We have little or no experience in the organic waste or fertilizer industries, which increases the risk of our inability to build and operate our facilities.

      We are currently, and are likely for some time to continue to be, dependent upon our present management team. Most of these individuals are experienced in business generally, but have little experience in raising capital from the public, organizing the construction, equipping and start up of an organic waste conversion facility, and governing and operating a public company. In addition, none of our directors has any experience in the organic waste or fertilizer products industries. As a result, we may not develop our business successfully, in which case you may lose your entire investment.

We will depend on contractors unrelated to us to build our organic waste conversion facility, and their failure to perform could harm our business, hinder our ability to operate profitably and decrease the value of your investment.

      We have entered into guaranteed maximum price contracts with construction, mechanical, and electrical contractors to build our Woodbridge facility. Although we believe each of these companies is qualified, we have no prior experience with any of them. If any company were to fail to perform, there is no assurance that we would be able to obtain a suitable replacement on a timely basis.

We license technology from a third party, and our failure to perform under the terms of the license could result in material adverse consequences.

      We intend to use certain licensed technology and patented pieces of process equipment in our Woodbridge facility that will be obtained from International Bio-Recovery Corporation (“IBRC”). The license contains various performance criteria, and if we fail to perform under the terms of the license, the license may be terminated by the licensor, and we will have to modify our process and employ other equipment that may not be available on a timely basis or at all. If we are unable to use different technology and equipment, we may not be able to operate the Woodbridge facility successfully. If the license agreement is terminated or held invalid for any reason, or if it is determined that IBRC has improperly licensed its process to us, the occurrence of such event would adversely affect our operations and revenues.

The technology we will use to operate our facilities is unproven at the scale we intend to operate.

      While IBRC has operated a facility in British Columbia using the Enhanced Autothermal Thermophilic Aerobic Digestion process, its plant is smaller than our planned Woodbridge facility. IBRC developed the initial drawings for our Woodbridge facility, but neither IBRC nor we have operated a plant of the proposed size.

Our Woodbridge facility site may have unknown environmental problems that could be expensive and time consuming to correct, which may delay construction and delay our ability to generate revenue.

      There can be no assurance that we will not encounter hazardous environmental conditions at the Woodbridge facility site or any additional facility sites that may delay the construction of our organic waste conversion facilities. Upon encountering a hazardous environmental condition, our contractor may suspend work in the affected area. If we receive notice of a hazardous environmental condition, we may be required to correct the condition prior to continuing construction. The presence of a hazardous environmental condition will likely delay construction of the particular facility and may require significant expenditures to correct the environmental condition. If we encounter any hazardous environmental conditions during construction that require time or money to correct, such event could delay our ability to generate revenue and reduce the value of your investment.

6

Risks Related to Operations, Marketing and Sales

We may not be able to successfully operate our manufacturing facility.

      Although we intend to hire a firm with substantial operational experience to operate our Woodbridge facility, we have not developed or operated any manufacturing facilities of any kind. Our Woodbridge facility, if completed, would be the first commercial facility of its kind in the United States and may not function as anticipated. In addition, the control of the manufacturing process will require operators with extensive training and experience which may be difficult to attain.

Our lack of business diversification could result in a decline in the value of your investment.

      We expect to have only two planned products to sell to customers to generate revenue: dry and liquid soil amendment products. We do not expect to have any other products. Although we also expect to receive “tip” fees, our lack of business diversification could cause our stock price to decline or cause you to lose all or some of your investment if we are unable to generate revenues from the sale of our two products.

We may not be able to manufacture our products in commercial quantities or sell them at competitive prices.

      To date, we have not produced any products. We may not be able to manufacture the planned products in commercial quantities or sell them at prices competitive with other similar products.

We may be unable to establish marketing and sales capabilities necessary to commercialize and gain market acceptance for our potential products.

      We currently have no sales and marketing capabilities. We will need to either hire sales personnel with expertise in the markets we intend to address or contract with others to provide sales support. Co-promotion or other marketing arrangements to commercialize our planned products could significantly limit the revenues we derive from our products, and these parties may fail to commercialize these products successfully. Our planned products address different markets and can be offered through multiple sales channels. Addressing each market effectively will require sales and marketing resources tailored to the particular market and to the sales channels that we choose to employ, and we may not be able to develop such specialized marketing resources.

Pressure by our customers to reduce prices and agree to long-term supply arrangements may adversely affect our net sales and profit margins.

      Our potential customers, especially large agricultural companies, are often under budgetary pressure and are very price sensitive. Our customers may negotiate supply arrangements with us well in advance of delivery dates, thereby requiring us to commit to product prices before we can accurately determine our final costs. If this happens, we may have to reduce our conversion costs and obtain higher volume orders to offset lower average sales prices. If we are unable to offset lower sales prices by reducing our costs, our gross profit margins will decline, which could have a material negative effect on the value of your investment.

The fertilizer industry is highly competitive, which may adversely affect our ability to generate and grow sales.

      Chemical fertilizers are manufactured by many companies and are plentiful and relatively inexpensive. In addition, the number of fertilizer products registered as “organic” with the Organic Materials Review Institute increased by approximately 50% from 2002 to 2005. If we fail to keep up with changes affecting the markets that we intend to serve, we will become less competitive, adversely affecting our financial performance.

7

Defects in our products or failures in quality control could impair our ability to sell our products or could result in product liability claims, litigation and other significant events with substantial additional costs.

      Detection of any significant defects in our products or failure in our quality control procedures may result in, among other things, delay in time-to-market, loss of sales and market acceptance of our products, diversion of development resources, and injury to our reputation. The costs we may incur in correcting any product defects may be substantial. Additionally, errors, defects or other performance problems could result in financial or other damages to our customers, which could result in litigation. Product liability litigation, even if we prevail, would be time consuming and costly to defend. We do not presently maintain product liability insurance, and any product liability insurance we may obtain may not be adequate to cover claims.

Energy and fuel cost variations could adversely affect operating results and expenses.

      Energy costs, particularly electricity and natural gas, are expected to constitute a substantial portion of our operating expenses. The price and supply of energy and natural gas are unpredictable and fluctuate based on events outside our control, including demand for oil and gas, weather, actions by OPEC and other oil and gas producers, and conflict in oil-producing countries. Price escalations in the cost of electricity or reductions in the supply of natural gas could increase operating expenses and negatively affect our results of operations. We may not be able to pass through all or part of the increased energy and fuel costs to our customers.

We may not be able to obtain sufficient organic material.

      Competing disposal outlets for organic food waste and increased demand for applications such as biofuels may develop and adversely affect our business. To fully utilize the tip floor and to manufacture our products, we are dependent on a stable supply of organic food waste. Insufficient food waste feedstock will adversely affect our efficiency and may cause us to increase our tip fee discount from prevailing rates, likely resulting in reduced revenues and net income.

Our license agreement with IBRC restricts the territory into which we may sell our planned products and grants a cooperative a right of first refusal to purchase our products.

      We have entered into a license agreement with IBRC which among other terms contains a restriction on our right to sell our planned products outside a territory defined generally as the Eastern Seaboard of the United States. The license agreement also grants a proposed cooperative of which IBRC is a member a right of first refusal to purchase the products sold from our Woodbridge facility under certain circumstances. While we believe that the territory specified in the license agreement is broad enough to easily absorb the amount of product we plan to produce and that the right of first refusal will not impair our ability to sell our products, these restrictions may have a material adverse effect on the volume and price of our product sales. We may in addition become completely dependent on a third party for the sale of our products.

Our fertilizer products will be sold under an unproven name.

      Our licensing agreement with IBRC requires that we market our planned products from our Woodbridge facility under the brand name “Genica.” No fertilizer products have been sold in our geographic market under that name, and the name may not be accepted in our marketplace.

Successful infringement claims by third parties could result in substantial damages, lost product sales and the loss of important proprietary rights.

      We may have to defend ourselves against patent and other infringement claims asserted by third parties regarding the technology we have licensed, resulting in diversion of management focus and additional expenses for the defense of claims. In addition, as a result of a patent infringement suit, we may be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a patent covering a third party’s intellectual property unless that party grants us rights to use its intellectual property. We may be unable to obtain these rights on terms acceptable to us, if at all. If we cannot obtain all necessary licenses on commercially reasonable terms, we may be unable to continue selling such products. Even if we

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are able to obtain rights to a third party’s patented intellectual property, these rights may be non-exclusive, and therefore our competitors may obtain access to the same intellectual property. Ultimately, we may be unable to commercialize our potential products or may have to cease some or all of our business operations as a result of patent infringement claims, which could severely harm our business.

Our license agreement with IBRC imposes obligations on us related to infringement actions that may become burdensome or result in termination of our license agreement.

      If our use of the licensed technology is alleged to infringe the intellectual property of a third party, we may become obligated to defend such infringement action. Although IBRC has agreed to bear the costs of such defense, if the licensed technology is found by a court to be infringing, IBRC may terminate the license agreement, which may prevent us from continuing to operate our conversion facility. In such an event, we may become obligated to find alternative technology or to pay a royalty to a party other than IBRC to continue to operate.

      If a third party is allegedly infringing any of the licensed technology, then either we or IBRC may attempt to enforce the IBRC intellectual property rights. In general, our possession of rights to use the know-how related to the licensed technology will not be sufficient to prevent others from employing similar technology that we believe is infringing. Any such enforcement action against alleged infringers, whether by us or by IBRC, may be required to be maintained at our expense under the terms of the license agreement. The costs of such an enforcement action may be prohibitive, reduce our net income, if any, or prevent us from continuing operations.

Risks Related to Execution of Our Financing Plan

Development of our business is dependent on our ability to obtain additional debt financing which may not be available on acceptable terms.

      We must obtain significant debt financing in order to develop manufacturing facilities and begin production of our products. Each facility will likely be individually financed and require considerable debt. While we believe state government-sponsored debt programs will be available to finance our requirements, market rate or non-government sponsored debt could also be used. However, public or private debt may not be available at all or on terms acceptable to us.

We will need to obtain additional debt and equity financing to complete subsequent stages of our business plan.

      We will need to obtain additional debt and equity financing to complete subsequent phases of our business plan. We may issue additional securities in the future with rights, terms and preferences designated by our Board of Directors, without a vote of stockholders, which could adversely affect your rights. Additional financing will likely cause dilution to our stockholders and could involve the issuance of securities with rights senior to the outstanding shares. There is no assurance that such funds will be sufficient, that the financing will be available on terms acceptable to us and at such times as required, or that we will be able to obtain the additional financing required, if any, for the continued operation and growth of our business. Any inability to raise necessary capital will have a material adverse effect on our ability to meet our projections, deadlines and goals and will have a material adverse effect on our revenues and net income.

Our agreements with our bond investors may hinder our ability to operate our business by imposing restrictive loan covenants, which may prohibit us from paying dividends or taking other actions to manage or expand our business.

      The closing of this offering is contingent upon our obtaining industrial revenue bond financing in connection with the construction of our first facility in Woodbridge, and we plan to obtain similar financing in connection with the construction of our additional facilities. The agreements entered into in connection

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with the debt financing for these facilities and our resulting debt load could place limitations on our ability to operate including our ability to:

•  incur additional indebtedness;

•  pay dividends;

•  make certain types of investments;

•  create liens on our assets;

•  utilize the proceeds of asset sales; and

•  merge, consolidate or sell all or substantially all of our assets.

These restrictions may impair our ability to obtain additional equity capital, refinance all or a portion of our debt, or raise funds through asset sales, all of which could adversely affect our ability to operate our facility or facilities.

Mandatory redemption of our bonds could have a material adverse effect on our liquidity and cash resources.

      The bonds when issued will be subject to mandatory redemption by us if the Woodbridge facility is condemned, we cease to operate the facility, the bonds become taxable, a change in control of the company occurs and under certain other circumstances. Depending upon the circumstances, such an event could require a payment to our bondholders ranging between 100% and 110% of the principal amount of the bonds outstanding, plus interest. If we are unable to obtain additional financing from other sources, the requirement that we pay cash in connection with such mandatory redemption will have a material adverse effect on our liquidity and cash resources, and may impair our ability to continue to operate.

Risks Related to Government Regulation of Our Business

The communities where our facilities may be located may be averse to hosting waste handling and manufacturing facilities.

      Local residents and authorities in communities where our facilities may be located may be concerned about odor, vermin, noise, increased truck traffic, air pollution, decreased property values, and public health risks associated with operating a manufacturing facility in their area. These constituencies may oppose our permitting applications or raise other issues regarding our proposed facilities.

Our facilities will require certain permits to operate, which we may not be able to obtain or obtain on a timely basis.

      For our Woodbridge facility, we must obtain various permits and approvals to operate a recycling center and a manufacturing facility, including among others a Class C recycling permit, land use and site plan approval, an air quality permit, a water discharge permit, a storm water runoff permit, and building construction permits. We may not be able to secure all the necessary permits on a timely basis or at all, which may prevent us from operating the facility according to our business plan.

      For our additional facilities, we may need certain permits to operate solid waste or recycling facilities as well as permits for our sewage connection, water supply, land use, air emission, and wastewater discharge. The specific permit and approval requirements are set by the state and the various local jurisdictions, including but not limited to city, town, county, township and state agencies having control over the specific properties. Lack of permits to construct, operate or maintain our facilities will severely and adversely affect our business.

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Changes in environmental regulations or violations of such regulations could result in increased expense and reduce the value of your investment.

      We will be subject to extensive air, water and other environmental regulations and will need to obtain a number of environmental permits to construct and operate our planned facilities. If for any reason any of these permits are not granted, construction costs for our organic waste conversion facilities may increase, or the facilities may not be constructed at all. Additionally, any changes in environmental laws and regulations, both at the federal and state level, could require us to invest or spend considerable resources in order to comply with future environmental regulations. The expense of compliance could be significant enough to reduce our net income and the value of your investment.

Risks Related to Investment in Our Securities

We have entered into an engagement letter with the underwriter of the bond issue that imposes substantial conditions on the completion of the concurrent bond offering.

      We have entered into an engagement letter dated October 2, 2006 with Ferris, Baker Watts, Inc., a regional investment bank, to purchase or place, on an all-or-none, best-efforts basis, a bond issue of the New Jersey Economic Development Authority. There is no firm commitment to complete the issue, and there are numerous conditions to the offering’s successful completion. These conditions may include, among others, receipt of long-term contract(s) for feedstock at no cost or negative cost to us, a guaranteed maximum price contract with payment and performance bonds for construction of the Woodbridge facility from a contractor acceptable to Ferris, Baker Watts, long-term agreements with third parties to market and sell our production from the Woodbridge facility at market prices and in quantities sufficient to generate net cash flow to pay all operational expenses and total debt service payments with a margin of 1.5 to 1, and evidence of sufficient working capital in the form of equity or a bank line of credit to operate the Woodbridge facility and meet our cash flow needs. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held competitors as well as our larger public competitors.

As a public company, we will be subject to complex legal and accounting requirements that will require us to incur substantial expense and will expose us to risk of non-compliance.

      As a public company, we will be subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is substantial, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence, delisting of our securities, and governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held competitors as well as our larger public competitors.

There currently is no public trading market for our securities, and an active market may not develop or, if developed, be sustained. If a public trading market does not develop, you may not be able to sell any of your securities.

      There is currently no public trading market for our common stock or public warrants, and we can provide no assurance that an active market will develop or be sustained. If an active public trading market for our securities does not develop or is not sustained, it may be difficult or impossible for you to resell your shares or warrants at any price. Even if a public market does develop, the market price could decline below the amount you paid for your units.

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The Class A warrants may be redeemed on short notice, which may have an adverse effect on their price.

      We may redeem the Class A warrants, beginning six months after the closing of this offering, for $0.25 per warrant (subject to adjustment in the event of a stock split, dividend or the like) on 30 days’ notice at any time after the last reported sale price per share of our common stock as reported by the principal exchange or trading facility on which our common stock trades equals or exceeds 170% of the unit price of the securities offered in this offering for five consecutive trading days. If we give notice of redemption, holders of our Class A warrants will be forced to sell or exercise the Class A warrants they hold or accept the redemption price. The notice of redemption could come at a time when, under specific circumstances or generally, it is not advisable or possible for holders of our public warrants to sell or exercise the Class A warrants they hold.

While the Class A and Class B warrants are outstanding, it may be more difficult to raise additional equity capital.

      During the term that the Class A warrants and Class B warrants are outstanding, the holders of those warrants are given the opportunity to profit from a rise in the market price of our common stock. In addition, the Class B warrants are not redeemable by us. We may find it more difficult to raise additional equity capital while these warrants are outstanding. At any time during which these public warrants are likely to be exercised, we may be able to obtain additional equity capital on more favorable terms from other sources.

If we issue shares of preferred stock, your investment could be diluted or subordinated to the rights of the holders of preferred stock.

      Our Board of Directors is authorized by our Certificate of Incorporation to establish classes or series of preferred stock and fix the designation, powers, preferences and rights of the shares of each such class or series without any further vote or action by our stockholders. Any shares of preferred stock so issued could have priority over our common stock with respect to dividend or liquidation rights. Although we have no plans to issue any shares of preferred stock or to adopt any new series, preferences or other classification of preferred stock, any such action by our Board of Directors or issuance of preferred stock by us could dilute your investment in our common stock and warrants or subordinate your holdings to the shares of preferred stock.

Future issuances or sales, or the potential for future issuances or sales, of shares of our common stock may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.

      We have agreed to pay a 5% common stock dividend to holders of record of our common stock at the end of each calendar quarter, beginning with the first quarter of 2007, until the Woodbridge facility has commenced commercial operations. The additional shares of our common stock distributed pursuant to such stock dividends could cause the market price of our common stock to decline and could have an adverse effect on our earnings per share, if and when we become profitable. In addition, future sales of a substantial number of shares of our common stock or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common stock and our Class A and Class B Warrants to decline, and could materially impair our ability to raise capital through the sale of additional securities.

If we do not maintain an effective registration statement or comply with applicable state securities laws, you may not be able to exercise the Class A or Class B warrants.

      For you to be able to exercise the Class A or Class B warrants, the shares of our common stock to be issued to you upon exercise of the Class A or Class B warrants must be covered by an effective and current registration statement and qualify or be exempt under the securities laws of the state or other jurisdiction in which you live. We cannot assure you that we will continue to maintain a current registration statement relating to the shares of our common stock underlying the Class A or Class B warrants. If at their expiration date the warrants are not currently exercisable, the expiration date will be extended for 30 days following notice to the holders of the warrants that the warrants are again exercisable. If we cannot honor the exercise

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of warrants, and the securities underlying the warrants are listed on a securities exchange or if there are three independent market makers for the underlying securities, we may, but are not required to, settle the warrants for a price equal to the difference between the closing price of the underlying securities and the exercise price of the warrants. In summary, the company and you may encounter circumstances in which you will be unable to exercise the Class A or Class B warrants. In those circumstances, we may, but are not required to, redeem the warrants by payment in cash. Consequently, there is a possibility that you will never be able to exercise the Class A or Class B warrants, and that you will never receive shares or payment of cash in settlement of the warrants. This potential inability to exercise the Class A or Class B warrants, and the possibility that we will never elect to settle warrants in shares or cash, may have an adverse effect on demand for the warrants and the prices that can be obtained from reselling them.

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FORWARD-LOOKING STATEMENTS

      We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. In some cases, you may identify forward-looking statements by words such as “may,” “should,” “plan,” “intend,” “potential,” “continue,” “believe,” “expect,” “predict,” “anticipate” and “estimate,” the negative of these words or other comparable words. These statements are only predictions. You should not place undue reliance on these forward-looking statements. The forward-looking statements are qualified by their terms and/or important factors, many of which are outside our control, involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially from the statements made. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, including those events and factors described in “Risk Factors,” not all of which are known to us. Neither we nor any other person assumes responsibility for the accuracy or completeness of these statements. We will update this prospectus only to the extent required under applicable securities laws. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.

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USE OF PROCEEDS

      We estimate that, at a per unit price of $5.50, the net proceeds from the sale of the 2,000,000 units in this offering will be approximately $8.98 million, after deducting the estimated underwriting discount of $770,000 and estimated offering expenses of approximately $1.25 million.

      Approximately $4.5 million of this equity offering, together with $800,000 of previously invested capital, will be used in conjunction with proceeds from a solid waste revenue bond issue by the New Jersey Economic Development Authority to construct the Woodbridge facility. The combined $22.8 million capitalization of the Woodbridge facility will be used as follows:

			Amount		Percent
Sources of Funds
	Bond issue		$	17,500,000		77	%
	Equity offering (including $800,000 of previously invested capital)			5,300,000		23
		Total sources of funds allocated to Woodbridge	$	22,800,000		100	%
Uses of Funds
	Equipment purchase		$	11,862,000		52	%
	General construction, construction management fee and bonding expense			1,908,000		8
	Capitalized interest on bond issue (15 months)			1,794,000		8
	Debt service reserve fund (10% of issue)			1,750,000		8
	Estimated issuance expenses for bonds			983,000		4
	Development expense			800,000		4
	Construction contingency			800,000		3
	Lease payment reserve			195,000		1
	Working capital			2,708,000		12
		Total uses of funds	$	22,800,000		100	%

      The proceeds of the proposed New Jersey solid waste revenue bond offering will be used to purchase equipment and complete construction and rehabilitate certain buildings on the leased property. The debt service reserve fund, which equals 10% of the bond amount, is not available for general operating needs. Capitalized interest for 15 months has been reserved to service the debt during the construction period through the start-up phase.

      The balance of this equity offering, approximately $4.48 million, will be used as follows:

				Percent of
		Amount		Balance
Development capital		$	2,092,000		47	%
Repayment of bridge loan balance and interest (net of offering expenses of $600,000 paid from bridge loan proceeds)			990,000		22
Repayment of shareholder loans			590,000		13
Repayment of short-term loans			306,000		7
Payment of expenses and deferred compensation accrued after April 1, 2006			300,000		7
IBRC fees			202,000		4
	Total	$	4,480,000		100	%

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      The amount allocated to development capital will be used for the development of additional facility sites, as well as general and administrative costs, including salaries, accounting and legal fees, rent and other facilities expenses, and other working capital expenses.

      The bridge loans are owed to a group of lenders who provided us with short-term working capital. These loans, totaling $1.515 million in principal amount, accrued interest at an annual rate of 8% until October 16, 2006 and thereafter accrue interest at 18% until paid. The loans are due and payable on the earlier of (i) the completion of a public offering of equity securities with gross proceeds of at least $5.0 million or (ii) February 19, 2007 with respect to $595,000 of bridge loans and January 19, 2007 with respect to the remaining $920,000 of bridge loans; the January 19, 2007 due date for the $920,000 of bridge loans is expected to be extended to February 19, 2007 prior to the close of this offering.

      The payment of expenses and deferred compensation accrued after April 1, 2006 consists of $50,000 payments to each of the following executive officers, directors and consultants: Thomas R. Buchanan, Edward J. Gildea, William A. Gildea, John E. Tucker, John A. Walsdorf and John P. Weigold.

      The IBRC fees represent amounts payable to International Bio-Recovery Corporation (“IBRC”), the licensor of technology to be used in our Woodridge facility, including a partial pre-payment on a second license and payments for growth trials and product research.

      In 2004, we borrowed $250,000 from Cedar Street Group, LLC, an unrelated third party, at an annual interest rate of 12%. In 2005, we borrowed another $250,000 from, John A. Thomas and Paul F. Reiter, unrelated third parties, at an annual interest rate of 15%. These loans provided working capital.

      In 2006 and 2007, we borrowed a total of $150,000 from Paulson Investment Company, Inc., the representative of the underwriters, and $150,000 from HCF, at an annual interest rate of 10%. These loans provided working capital.

      The foregoing information is an estimate based on our current business plan. Other than repayment of the bridge loans, we may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category of uses to another, and we will have broad discretion in doing so. Pending these uses, we intend to invest the net proceeds of this offering in short-term, interest-bearing securities.

DIVIDEND POLICY

      We have approved the payment of a 5% common stock dividend to all holders of record of our common stock at the end of each calendar quarter, beginning with the first quarter of 2007, until the Woodbridge facility has commenced commercial operations. Pursuant to this stock dividend program, we will not issue fractional shares or shares with respect to the calendar quarter in which we commence commercial operations.

      We have not declared or paid any cash dividends and do not intend to pay any cash dividends in the foreseeable future. We intend to retain any future earnings for use in the operation and expansion of our business. The terms of our New Jersey bond issue will restrict our ability to pay cash dividends. Any future decision to pay cash dividends on common stock will be at the discretion of our board of directors and will depend upon, in addition to the terms of the New Jersey bond financing as well as any future bond or bank financings, our financial condition, results of operations, capital requirements and other factors our board of directors may deem relevant.

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CAPITALIZATION

      The following table is derived from our unaudited financial statements as of September 30, 2006 set forth elsewhere in this prospectus and sets forth our:

•  Actual capitalization as of September 30, 2006;

•  Pro forma capitalization as of September 30, 2006 after giving effect to: (i) the sale of 2,000,000 units at an assumed initial public offering price of $5.50 per unit, less the underwriting discount and offering expenses; (ii) the issuance of 275,455 units to certain bridge lenders and the issuance of 18,181 units to HCF; and (iii) the sale of a $17.5 million bond issue of the New Jersey Economic Development Authority; and

•  Repayment of bridge loan financing and recognition to accumulated deficit of remaining bridge loan discount and deferred financing costs.

			September 30, 2006
						Pro Forma
			Actual			as Adjusted
DEBT
	Term notes		$	500,000		$	0
	Bridge loan, net of unamortized discount of $73,643			1,441,358			0
	New Jersey bonds			0			17,500,000
		Total debt	$	1,941,358		$	17,500,000
STOCKHOLDERS’ EQUITY (DEFICIT)
	Preferred stock, $0.0001 par value: 25,000,000 shares actual authorized; no shares issued and outstanding		$	0		$	0
	Common stock, $0.0001 par value: 75,000,000 shares actual authorized; 1,333,333 shares issued and outstanding September 30, 2006 actual; 3,626,969 shares issued and outstanding pro forma as adjusted			133			363
	Additional paid-in capital			4,113,385			13,093,385
	Accumulated deficit			5,884,362			5,884,362
		Total capitalization	$	(1,770,844	)	$	7,209,386

      This table should be considered in conjunction with the sections of this prospectus captioned “Use of Proceeds” and “Plan of Operation” as well as the financial statements and related notes included elsewhere in this prospectus.

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DILUTION

      If you invest in our units, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our capital stock after this offering. For purposes of the dilution computation and the following tables, we have allocated the full purchase price of a unit to the share of common stock included in the unit and nothing to the warrants included in the unit; allocation of value to the warrants would result in less dilution to the new investors who purchase units in this offering. Our net tangible book value as of September 30, 2006 was a negative $(1,770,844), or a deficiency of $(1.33) per share of outstanding common stock. Without giving effect to any changes in the net tangible book value after September 30, 2006 other than (i) the sale of 2,000,000 units in this offering at the initial public offering price of $5.50 per unit, and (ii) the issuance of 293,636 units and the common stock and warrants to purchase common stock underlying such units, issued to bridge investors and HCF concurrently with this offering, our pro forma net tangible book value as of September 30, 2006 was $7,209,386, or $1.99 per share of outstanding capital stock. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of our units in this offering and the net tangible book value per share of our capital stock immediately afterwards. This represents an immediate increase of $3.32 per share of capital stock to existing stockholders and an immediate dilution of $3.51 per share of common stock to the new investors, or approximately 64% of the assumed initial public offering price of $5.50 per share. The following table illustrates this per share dilution:

Initial price to public							$	5.50
Net tangible book value (deficiency) as of September 30, 2006				$	(1.33	)
Increase in net tangible book value per share attributable to:
	Bridge investor conversion	$	0.02
	New investors		3.30
Increase in net tangible book value per share to existing stockholders					3.32
As adjusted net tangible book value per share after this offering								1.99
Dilution in net tangible book value per share to new investors							$	3.51

      If the underwriters’ over-allotment option is exercised in full, dilution per share to new investors would be $3.66 per share of common stock.

      The following table summarizes the differences between the existing stockholders and the new investors with respect to the number of shares of common stock purchased, the total consideration paid, and the average price per share paid:

		Shares Purchased				Total Consideration
										Average Price
		Number		Percent		Amount		Percent		Per Share
Existing stockholders			1,333,333		36.76%	$	133		0.001%	$	0.00
Bridge investors			293,636		8.10%		—		—		—
	Subtotal		1,626,696		44.86%		—		—		—
New investors			2,000,000		55.14%		11,000,000		99.99%		5.50
	Total		3,626,969		100.00%	$	11,000,133		100.00%	$	3.03

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PLAN OF OPERATION

      The following discussion of our plan of operation should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Risk Factors” and those included elsewhere in this prospectus.

Introduction

      Converted Organics is a development stage company that seeks to construct processing facilities that will use organic food waste as raw material to manufacture all-natural soil amendment products combining nutritional and disease suppression characteristics. We plan to sell and distribute our products in the agribusiness, turf management, and retail markets. We have obtained a long-term lease for a site in a portion of an industrial building in Woodbridge, New Jersey that we will modify and equip as our initial organic waste conversion facility. We currently have no operations and do not expect to generate any revenue until the facility is completely operational.

      This offering is dependent upon the closing of an offering of tax-exempt New Jersey Economic Development Authority Solid Waste Revenue Bonds in the principal amount of approximately $17.5 million, which debt offering will close simultaneously with the closing of this offering. The proceeds of the bonds will be used to develop and construct our initial facility in Woodbridge. The bonds are expected to bear interest at approximately 8.2% annually and will be secured by a leasehold mortgage and a first lien on equipment and other assets of the company at the New Jersey facility in favor of the bondholders. Although the terms of the bonds have not been set, it is anticipated that terms will provide for: (i) a 15-month capitalized interest reserve; (ii) a debt service reserve fund equal to a minimum of 10% of the bond amount or 12 months maximum annual debt service (which amount shall be set aside and not be made available for development of the facility); (iii) a debt service coverage ratio where earnings before interest, taxes, depreciation and amortization will equal two times the principal and interest payable on the bonds; (iv) an operating reserve fund of approximately 60 days cash requirements; and (v) a lease payment reserve equal to $195,000. The borrower under the bond issue will be Converted Organics of Woodbridge, LLC, a New Jersey limited liability company of which we are the sole member. Converted Organics of Woodbridge, LLC will develop and operate the New Jersey facility.

      When fully operational, the Woodbridge facility is expected to process approximately 78,000 tons of organic food waste and produce approximately 7,500 tons of dry product and 6,700 tons of liquid concentrate annually. We expect that it will take approximately 12 to 15 months from the closing of this offering to complete construction and begin start-up operations. The total cash required to reach stabilized operations, including various reserves required under the terms of the bond issue and $800,000 of previously invested capital, is approximately $22.8 million.

      We were incorporated under the laws of the state of Delaware in January 2006. In February 2006, the company merged with its predecessor organizations, Mining Organics Management, LLC and Mining Organics Harlem River Rail Yard, LLC, in transactions accounted for as a recapitalization.

Development Period

      Since the formation of one of our predecessors on May 2, 2003 through September 30, 2006, we and our predecessor organizations have spent approximately $3.2 million of seed capital and $826,000 of bridge loan proceeds to accomplish the following:

•  acquire the technology license;

•  develop engineering plans;

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•  identify appropriate sites for development;

•  enter into a lease for the site for our Woodbridge facility;

•  contract for third-party evaluation and validation of the technology;

•  contract for two third-party studies analyzing the pricing and market demand for our products;

•  pursue various environmental permits and licenses;

•  negotiate a long-term supply contract for source-separated organic waste;

•  garner public/ community support;

•  develop markets for our products by meeting with distributors of organic products, wholesalers, and prior users of similar products; and

•  sponsor growth and efficacy trials for products produced by the licensor.

      These activities have been funded through a combination of contributions of capital by our founders, private sales of interests in our predecessor companies, and borrowings. Weston Solutions, Inc. contributed approximately $2.3 million in cash; ECAP, LLC, a boutique investment firm, of which William A. Gildea, a director of the company, is the managing member, contributed $300,000 in cash; and the balance came from borrowings of $250,000 in 2004 and again in 2005 from individual lenders at annual interest rates of 12% and 15%, respectively. These notes were due on December 30, 2006 and continue to accrue interest. We plan to repay these notes from the proceeds of this equity offering.

      We have begun plant pre-construction activities. Our process engineers, Weston Solutions, Inc., have substantially completed the design, mass balance, energy balance, and process flow drawings for the Woodbridge facility. This work formed the basis for soliciting bids for a guaranteed maximum price contracts for the construction of the Woodbridge facility; these contracts place responsibility on the contractors for delivering a turnkey project within 12 to 15 months.

Construction and Start-up Period

      Upon completion of this offering, management will initially focus primarily on constructing the Woodbridge facility, conducting start-up trials and bringing operations to full-scale production as quickly as practicable. We have budgeted approximately $14.6 million for the design, building, and testing of our facility, including related non-recurring engineering costs, according to the following development calendar. The capital outlays shown in the following table represent an estimated schedule of payments to be made in connection with the construction of the Woodbridge facility. The amounts shown below include the related portions of construction management, engineering and design, contingency, bonding and similar fees.

Development Stage		Milestone		Estimated Cost
Award GMP (design & non-recurring engineering costs)			Q1 2007	$	415,000
Order “long-lead time” equipment			Q1 2007		2,055,000
General construction			Q2 2007		1,157,000
Install equipment			Q3 2007		4,452,000
Install mechanical, electrical and piping			Q1 2008		6,490,000
	Total			$	14,569,000

      During the construction and start-up period, we plan to negotiate and execute a plant management agreement prior to commencement of facility operations. We will continue to develop relationships and negotiate purchase agreements for our end products in the agribusiness, turf management, and retail markets. We have discussed our products with manufacturer’s representatives that sell products to “big box” retailers as well as other appropriate retail outlets. We are developing a comprehensive retail-marketing plan that will likely also include electronic marketing and Internet sales sites as distribution channels. Alternatively, we may elect to join a proposed marketing cooperative called Genica, established to support IBRC plant licensees

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who, like us, intend to produce all-natural soil amendment products using the IBRC process. IBRC plans to form Genica to serve as the marketing, sales, distribution, research and development organization for products produced globally using IBRC’s technology.

Full-scale Operations

      Operations will begin by processing 50 tons of organic waste per day, with the expectation that initial design capacity of 250 tons per day will be reached within four-to-six weeks. Upon commencement of operations, there will be two revenue streams: (i) tip fees that in our potential markets range from $50 to $100 per ton, and (ii) product sales. Tip fees are paid to the company to receive the organic waste stream from the waste hauler; the hauler pays the company, instead of a landfill, to take the waste. If the haulers source separate and pay in advance, they will be charged tip fees that are up to 20% below market. Operations are expected to be stabilized at design capacity within three-to-six months of commencement. After stabilization, operating cash flow should be available to invest in the development of future projects.

Future Development

      Subject to the availability of development capital, we intend to commence development and construction of other facilities while completing construction of our Woodbridge facility. The timing of our next facility is dependent on many factors, including locating property suited for our use, negotiating favorable terms for lease or purchase, obtaining regulatory approvals, and procuring raw material at favorable prices.

      We anticipate that our next facility will be located in Massachusetts, New York or Rhode Island. We have commenced negotiation of a lease and services agreement with the Rhode Island Resource Recovery Agency for a proposed facility in Johnston, Rhode Island. Other locations may be considered as determined by management.

      In each contemplated market, we have started development activity to secure a facility location. We have also held preliminary discussions with state and local regulatory officials and raw material suppliers. We believe that this preliminary development work will allow the company to develop and operate a second facility within 24 months from the closing of this offering, subject to the availability of debt financing. We will be able to use much of the engineering and design work done for our first facility for subsequent facilities, thus reducing both the time and costs associated with these activities. We expect to form a separate wholly owned subsidiary for each facility to facilitate necessary bond financing and manage risk. We anticipate the contribution to gross revenue and coverage of expenses with respect to future facilities to be approximately the same as the Woodbridge facility.

Trends and Uncertainties Affecting our Operations

      We will be subject to a number of factors that may affect our operations and financial performance. These factors include, but are not limited to, the available supply and price of organic food waste, the market for liquid concentrate and organic fertilizer in the Eastern United States, increasing energy costs, the unpredictable cost of compliance with environmental and other government regulation, and the time and cost of obtaining USDA, state or other product labeling designations. Demand for organic fertilizer and the resulting prices customers are willing to pay also may not be as high as our market studies suggest. In addition, supply of organic fertilizer products from the use of other technologies or other competitors may adversely affect our selling prices and consequently our overall profitability.

Liquidity and Capital Resources

      At September 30, 2006, we had total assets of $1,071,234, consisting primarily of cash, deferred financing and issuance costs, intangible assets and prepaid and other assets, and current liabilities of $2,842,078, consisting primarily of accounts payable, accrued expenses, term notes payable, and bridge loan

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payable. The company has accumulated a net loss from inception through September 30, 2006 of $5,884,362. Stockholder’s equity (deficit) at September 30, 2006 was $(1,770,844). Since inception, we have generated no revenue from operations, and for the year ended December 31, 2005 and the nine-month period ended September 30, 2006, we had operating losses of $628,681 and $3,320,710, respectively, primarily due to our start-up costs and stock option expenses.

      In view of our working capital deficiency, accumulated deficit and absence of revenues, our auditors have added an explanatory paragraph to their report on our financial statements at December 31, 2005 stating that there is substantial doubt about our ability to continue as a going concern. In this regard, management has adopted a plan for the development of our manufacturing process and Woodbridge facility, completed our bridge financing and undertaken this offering and the debt offering. There is no assurance that this offering and the debt offering will be completed or that we will achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

      We currently do not have manufacturing capabilities or other means to generate revenues or cash. The net proceeds from this offering, in conjunction with the net proceeds of the proposed debt offering, will be used to build our Woodbridge facility, which is expected to be completed in the first quarter of 2008. We believe that the net proceeds from this offering and from the bond issue will be sufficient to sustain our operations until then.

      Subsequent to the closing of this offering and the concurrent bond issue, we plan to pay approximately $2.4 million in current liabilities from the proceeds of the equity offering. These current liabilities include payment of principal and interest to certain bridge lenders, repayment of shareholder loans and short-term loans, payment of expenses and deferred compensation and payment of fees to a technology licensor. After payment of these current liabilities, our principal commitments will then consist of approximately $17.5 million of the New Jersey Economic Development Authority bonds, involving annual payments of approximately $1.8 million in principal and interest and maturing in 2026, and our 10-year lease (with one 10-year option) for the Woodbridge facility site calling for initial monthly payments of $32,500 subject to annual increases after the first five years. During years 2 through 10 of the lease, we will pay an additional $45,401 per month for the cost of the buildout of the space. In addition, we estimate we will spend approximately $14.6 million to build the Woodbridge facility.

      We also expect to enter into a lease for a site for a second conversion facility in Massachusetts, New York or Rhode Island in the first half of 2007.

Critical Accounting Policies and Estimates

      The Plan of Operation is based, in part, upon the company’s financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of expenses during the periods. A summary of accounting policies that have been applied to the historical financial statements can be found in the notes to financial statements.

      We evaluate our estimates on an on-going basis. The most significant estimates relate to intangible assets, deferred financing and issuance costs, and the fair value of financial instruments. We base our estimates on historical company and industry experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

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      The following is a brief discussion of the critical accounting policies and methods, and the judgments and estimates used by us in their application:

Other Long-Lived Assets

      We account for our long-lived assets (excluding goodwill) in accordance with SFAS No. 144, “Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of,” which requires that long-lived assets and certain intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, such as technological changes or significant increased competition. If undiscounted expected future cash flows are less than the carrying value of the assets, an impairment loss is to be recognized based on the fair value of the assets, calculated using a discounted cash flow model. There is inherent subjectivity and judgments involved in cash flow analyses such as estimating revenue and cost growth rates, residual or terminal values and discount rates, which can have a significant impact on the amount of any impairment.

      Other long-lived assets, such as identifiable intangible assets, are amortized over their estimated useful lives. These assets are reviewed for impairment whenever events or circumstances provide evidence that suggests that the carrying amount of the assets may not be recoverable, with impairment being based upon an evaluation of the identifiable undiscounted cash flows. If impaired, the resulting charge reflects the excess of the assets’ carrying cost over its fair value. As described above, there is inherent subjectivity involved in estimating future cash flows, which can have a significant impact on the amount of any impairment. Also, if market conditions become less favorable, future cash flows (the key variable in assessing the impairment of these assets) may decrease and as a result we may be required to recognize impairment charges in the future.

Deferred Issuance Costs

      Deferred expenditures for offering costs are dependent upon the successful completion of the equity and debt offerings. We defer the costs incurred to raise equity until that event occurs. At the time we issue new equity, we will net these costs against the equity proceeds received. Alternatively, if the equity event does not occur, we will expense the offering costs. This estimate is likely to change in the near term.

Deferred Financing Costs

      Deferred financing and broker fees are amortized over the life of the respective loans.

Fair Value of Financial Instruments

      We have issued various debt and equity instruments, some of which have required a determination of their fair value, where quoted market prices were not published or readily available. We base our determinations on valuation techniques that require judgments and estimates, including discount rates used in applying present value analyses, the length of historical look-back used in determining the stock volatility, expected future interest rate assumptions and probability assessments. From time to time, we may hire independent valuation specialists to perform and/or assist in the fair value determination of such instruments. Actual results may differ from our estimates and assumptions which may require adjustments to the fair value carrying amounts and result in a charge or credit to our statement of operations.

Stock-based Compensation

      In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) is effective for public companies for interim or annual periods beginning after June 15, 2005, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.

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      SFAS No. 123(R) requires all share-based payments, including grants of stock options and issuances of stock to employees, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. We adopted the new standard effective January 1, 2006, which had no significant impact on the company.

      In connection with the valuation of our stock on January 13, 2006, we followed guidance provided by the American Institute of Certified Public Accountants (“AICPA”) Task Force’s Audit and Accounting Practice Aid — Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “AICPA Practice Aid”). As a development stage company without significant resources and no current revenue-generating operations, we concluded that the expenditure of limited available funds to engage an outside valuation specialist to perform contemporaneous and comprehensive valuations on January 13, 2006 was not an appropriate use of our financial resources. We instead derived relevant valuations internally using the AICPA Practice Aid and evaluated those figures in light of Generally Accepted Accounting Principles to establish book values for our accounting and book purposes.

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PROPOSED BUSINESS

Overview

      Converted Organics is a development stage company seeking to use organic food waste as raw material to manufacture all-natural soil amendment products combining both disease suppression and nutrition characteristics. We plan to sell and distribute our products in the agribusiness, turf management, and retail markets. Our proposed process, which has been demonstrated in a pilot manufacturing facility, uses heat and bacteria to transform food waste into a natural fertilizer.

      A substantial portion of the net proceeds of this offering, together with the net proceeds of an approximately $17.5 million bond issue of the New Jersey Economic Development Authority that is to close simultaneously with the closing of this offering, will be used to develop and construct an organic waste conversion facility in Woodbridge, New Jersey. We expect this facility to be operational approximately 12 to 15 months from the date of the closing of this offering and the bond issue.

      Our revenue will come from two sources: “tip” fees and product sales. Waste haulers will pay us tip fees for accepting food waste generated by food distributors such as grocery stores, produce docks, fish markets and food processors, and by hospitality venues such as hotels, restaurants, convention centers and airports. Revenue will also come from the customers who purchase our products. Our planned products will possess a combination of nutritional, disease suppression and soil amendment characteristics. The products will be sold in both dry and liquid form and will be stable with an extended shelf life compared to other organic fertilizers. Among other uses, the liquid product is expected to be used to mitigate powdery mildew, a leaf fungus that restricts the flow of water and nutrients to the plant. These products can be used either on a stand-alone basis or in combination with more traditional petrochemical-based fertilizers and crop protection products. Based on growth trial performance, increased environmental awareness, trends in consumer food preferences and company-sponsored research, we believe our products will have substantial demand in the agribusiness, turf management and retail markets. We also expect to benefit from increased regulatory focus on organic waste processing and on environmentally friendly growing practices.

      Our initial facility will collect raw material from the New York-Northern New Jersey metropolitan area. It is located near the confluence of two major highways in northern New Jersey, providing efficient access for the delivery of feedstock from throughout this geographic area. The facility is within a special recycling zone and has been approved for inclusion in the Middlesex County New Jersey Solid Waste Management Plan. When fully operational, the Woodbridge facility is expected to process approximately 78,000 tons of organic food waste, which will be diverted from landfills, and produce approximately 7,500 tons of dry product and 6,700 tons of liquid concentrate annually. We are in the process of negotiating options to lease property for additional facilities in Massachusetts, New York and Rhode Island. Completion of these additional facilities will require additional capital.

Environmental Impact of Our Business Model

      Organic food waste, the raw material of our manufacturing process, comes from a variety of sources. Prior to preparation, food must be grown or raised, harvested, packaged, shipped, unpacked, sorted, selected and repackaged before it finds its way into markets, restaurants or home kitchens. Currently, this process creates a large amount of food waste, particularly in densely populated metropolitan areas such as New York City, Northern New Jersey, and Eastern Massachusetts. Traditionally, the majority of food waste is disposed of in either landfills or incinerators that do not produce a product from this recyclable resource. We intend to use a demonstrated technology that is environmentally benign to convert waste into valuable all-natural soil amendment products.

      Food waste comprises 15 to 20% of the nation’s waste stream. Disposing of or recycling food waste should be simple, since organic materials grow and decompose readily in nature. However, the high concentrations of food wastes and the lack of available land near most urban areas to be used for traditional recycling methods, such as composting, pose challenges to disposal of food wastes. Waste is most commonly disposed of in landfills and incinerators. Landfill capacity is a significant concern, particularly in densely populated areas. In addition, landfills may create negative environmental effects including liquid wastes

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migrating into groundwater, landfill gas, consumption of open space, and air pollution associated with trucking waste to more remote sites. The alternative of incineration may produce toxic air pollutants and climate-changing gases, as well as ash containing heavy metals. Incineration also fails to recover the useful materials from organic wastes that can be recycled. The composting alternative is a slow process to complete, requires considerable land to locate a high volume facility, may generate offensive odors, and may attract vermin. In addition, composting usually creates an inconsistent product with lower economic value than the fertilizer products we will produce.

      Our proposed process uses heat and bacteria to convert waste into all-natural soil amendment products with nutritional and disease suppression characteristics. The process occurs in enclosed “digestors” housed within a building that will use effective emissions control equipment, resulting in minimal amounts of dust, odor, and noise. By turning food waste into a fertilizer product using an environmentally benign process, we anticipate that we will be able to reduce the total amount of solid waste that goes to landfills and incinerators, which may in turn reduce the release of greenhouse gases such as methane and carbon dioxide.

      The following table summarizes some of the advantages of our proposed process compared with currently available methods employed to dispose of organic food waste:

Comparison of Methods for Managing Food Waste
Method	Environmental Impacts	Products
Landfilling	Loss of land Groundwater threat Methane gas Air pollution from trucks Useful materials not recycled Undesirable land use	Landfill gas (minimal energy generation at some landfills)
Incineration	Air pollution Toxic emissions Useful materials not recycled Disposal of ash still required	Electricity (only at some facilities)
Composting	Groundwater threat Odor Vermin Slow Substantial land required	Low value compost
Converted Organics	No air pollution or solid waste No harmful by-products Removal of waste from waste stream Consumption of electricity and   natural gas Discharge of treated wastewater into   sewage system	Natural fertilizer

      Environmental regulators and other governmental authorities in our target markets have also focused more recently on the potential benefits of recycling increased amounts of food waste. For example, the New Jersey Department of Environmental Protection (the “NJDEP”) estimates nearly 1.5 million tons, or just over 15% of the state’s total waste stream, is food waste. In 2003, only 221,000 tons, or 15%, of the estimated 1,466,000 tons of food waste generated in the state were recycled. The 2005 NJDEP Statewide Solid Waste Management Plan focuses particularly on the “food waste” recycling stream as one of the most effective ways to create significant increases in recycling tonnages and rates. In New York, state and local environmental agencies are taking measures to encourage the diversion of organics from landfills and are actively seeking processes consistent with health and safety codes. The goal is to further reduce the amount of waste going to landfills and other traditional disposal facilities, particularly waste that is hauled great distances, especially in densely populated areas in the Northeast. In 2005, the Rhode Island Resource Recovery Corporation began an examination of the bulk food waste processing technology of our technology licensor to determine whether using our licensed technology would be economically feasible, cost-effective,

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practicable, and an appropriate application in Rhode Island. In Massachusetts, the State Solid Waste Master Plan has also identified a need for increased organics-processing capacity within the state and has called for a streamlined regulatory approval path.

The Fertilizer Industry

      Fertilizers are classified as either chemical or organic. While chemical, or synthetic, fertilizers continue to dominate the market, an increased realization of the economic benefits of organic fertilizers coupled with increased growth in the demand for organic foods has expanded the market for high-quality organic fertilizers.

•  Chemical fertilizers: Chemical fertilizers dominate the conventional farming, landscaping and gardening markets because of their high nutrient content and low cost. Chemical fertilizers are made from mined or synthetic chemicals such as urea, ammonium nitrate, super phosphate and potash, and have a high content of the nutrients nitrogen, phosphorous and potassium (NPK). They are produced in large quantities and are generally less expensive than organic fertilizers. In the conventional approach to plant fertilization, a soil scientist prescribes the amount of each nutrient necessary per unit of growing area and then selects combinations of chemical fertilizers to provide these nutrient levels at the lowest cost.

•  Organic fertilizers: Organic fertilizers include compost and products derived from animal and vegetable proteins. Compost results from the natural decomposition of organic materials such as animal manure, plants, fruits and vegetables. Compost is inexpensive relative to chemical fertilizers but does not have the high nutrient concentration of chemical fertilizers. Protein-based organic fertilizers, such as bone meal, fish meal, cottonseed meal and blood meal, can be used alone or mixed with chemical additives to create highly formulated fertilizer blends that target specific soil and crop needs. Organic fertilizers tend to be more expensive than chemical fertilizers.

      Chemical fertilizers have several significant disadvantages compared with organic fertilizers. The nutrients found in chemical fertilizers tend to become highly soluble, and runoff water can remove them from the soil. Organic fertilizers release nutrients into the soil at a slower rate, making them less likely to be leached from the soil system by rainwater. In addition, chemical fertilizers do not contain organic matter. Organic matter builds soil structure, which allows more air to reach plant roots and increases the soil’s ability to retain water, resulting in healthier crops. In addition, organic fertilizers provide nutrients for soil microorganisms, which in turn make mineral nutrients available to plants.

      Concern among farmers, gardeners and landscapers about nutrient runoff, soil health and other long-term effects of conventional chemical fertilizers has resulted in growth in the organic fertilizer market. The number of fertilizer products registered as “organic” with the Organic Materials Review Institute has increased by approximately 50% from 2002 to 2005. Demand for organic food has also driven the demand for organic fertilizers. Following the release of the U.S. Department of Agriculture’s organic certification standards and labeling program in 2002, the market for organic foods reached over $10 billion by 2003. With major agribusiness companies now carrying organic food lines, farms across the country are converting acreage to organic. To maximize yields, managers of organic farms are looking to fertilizer options that are more sophisticated than compost and are beginning to use commercially produced organic fertilizers.

Our Proposed New Jersey Facility

      Converted Organics of Woodbridge, LLC (“Woodbridge”), a New Jersey limited liability company and wholly owned subsidiary of the company, was formed for the purpose of owning, constructing and operating the Woodbridge, New Jersey facility. Woodbridge has had no assets, liabilities or operations to date.

      We have entered into a 10-year lease with one 10-year renewal option for approximately 60,000 square feet of space in a portion of an existing building. The existing building will be upgraded to accommodate the conversion process and will house our processing equipment. The fertilizer products produced at the facility are expected to be delivered by truck and rail to customers. The property has been recently surveyed and does not lie within any special flood hazard area.

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      Our process engineer, Weston Solutions, Inc., has substantially completed the design for the Woodbridge facility. We have entered into guaranteed maximum price contracts to build the processing facility with construction, mechanical and electrical contractors. A guaranteed maximum price contract is a contract to construct the facility that is guaranteed by a bond obtained by the contractor.

      We have entered into an agreement with Royal Waste Services, Inc. of Hollis, New York to provide up to 200 tons of organic food waste per day to the facility. We have also had discussions with several other solid waste-hauling companies and numerous waste generators regarding additional feedstock for the facility. The property is and will be able to receive feedstock by truck over local roads.

      Our conversion process has been approved for inclusion in the Middlesex County New Jersey Solid Waste Management Plan. We have submitted our application for a Class C recycling permit, which is the primary environmental permit for this project. The remaining required permits are primarily those associated with the construction and operation of any manufacturing business.

      The facility is expected to use significant amounts of electricity, natural gas and steam. We will use the services of an energy management firm to purchase natural gas and electricity, and water will be provided by the Town of Woodbridge. Wastewater will be treated and discharged by permit into the local sewage system.

      We expect the Woodbridge facility to be completed 12 to 15 months from the closing of this offering. During that time, we will spend approximately $14.6 million on structural improvements and equipment.

Business Strategy

      In addition to our Woodbridge facility, we intend to develop and construct facilities in Massachusetts, Rhode Island and New York. To operate these facilities using the licensed process, we will require additional licenses from IBRC and additional capital. We anticipate that we will be able to use much of the engineering and design work done for the Woodbridge facility for subsequent facilities, thus reducing both the time and cost required to develop additional facilities.

      In each of our contemplated locations, we have:

•  Engaged a local businessperson well acquainted with the community to assist us in the permitting process and develop support from community groups;

•  Participated in numerous meetings with state, county and local regulatory bodies as well as environmental and economic development authorities; and

•  Identified potential facility sites.

As new facilities commence production, we also anticipate we will achieve economies of scale in marketing and selling our fertilizer products as the cost of these activities is spread over a larger volume of product. As the overall volume of production increases, we also believe we may be able to more effectively approach larger agribusiness customers who may require larger quantities of fertilizer in order to efficiently utilize their distribution systems.

      To date, we have undertaken the following activities in the following markets to prepare to develop additional facilities:

•  In Massachusetts, we have performed initial development work in connection with construction of a proposed 15,000-ton per year manufacturing facility to serve the eastern Massachusetts market. Our proposal to develop this facility is currently under review by the property owner. The Massachusetts Strategic Envirotechnology Partnership Program has completed a favorable review of our technology.

•  In Rhode Island, we have proposed to construct a 10,000-ton per year manufacturing facility to service the entire Rhode Island market. We are working with the Rhode Island Resource Recovery Corporation, the agency responsible for managing solid waste in the state, to build a facility on state-owned and operated landfill, thereby greatly reducing the time associated with permitting and construction. The Rhode Island Resource Recovery Corporation has reviewed the technology we have

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	licensed and has included it as an option in the 2006 update to its solid waste plan. We are negotiating a term sheet with the Rhode Island Resource Recovery Corporation for a facility and expect to reach an agreement during the first quarter of 2007.
•	In New York City, we have proposed to construct a 15,000-ton per year manufacturing facility in the South Bronx to service the New York City market. We have held discussions with both the New York City Department of Environmental Protection and the New York State Department of Environmental Conservation, and we are currently negotiating with the landlord for the proposed site.

Conversion Process

      The process that converts food waste into our solid and liquid fertilizer products is based on technology called “Enhanced Autothermal Thermophilic Aerobic Digestion” (“EATAD”). The EATAD process was developed by International Bio Recovery Corporation (“IBRC”), a British Columbia company which possesses technology in the form of know-how integral to the process and which has licensed to us their technology for organic waste applications in certain locations. In simplified terms, EATAD means that once the prepared feedstock is heated to a certain temperature, it self-generates additional heat (autothermal), rising to very high, pathogen-destroying temperature levels (thermophilic). Bacteria added to the feedstock consume vast amounts of oxygen (aerobic) converting the food waste (digestion) to a rich blend of nutrients and single cell proteins. Foodstock selection and preparation, digestion temperature, rate of oxygen addition, acidity and inoculation of the microbial regime are carefully controlled to produce a product that is highly consistent from batch to batch.

      The conversion process technology works as follows:

•  Organic food wastes arrive at a facility using the technology and any remaining inorganic contaminants are removed.

•  A macerator machine pulps and screens the organic food wastes, and adjusts its water content, acidity level (pH) and temperature, as needed for optimal digestion of the resulting pulp.

•  The resulting pulp is fed into a digester where it remains for three to four days. During that time, high temperatures and bacterial microbes convert the pulp to simple nutrients and proteins. The technology uses a patented aeration device (a shearator) that allows operation at higher temperatures than similar processes. The higher operating temperature accelerates the digestion process and destroys potential pathogens.

•  The digested material is then placed in a press that separates its solid and liquid components. The solids are dried and pelletized; the liquids are concentrated in a solution. On average, the process produces approximately 20 tons — in roughly equal proportions of liquid and solid components — for every 100 tons of organic waste feedstock input into the system.

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      The following diagram describes the EATAD process as it is expected to be applied in our conversion facilities:

Fertilizer Products

      The products we plan to manufacture using our process will be positioned as:

•  A stand-alone fertilizer with plant nutrition, disease suppression and soil enhancements (amendment) benefits. The solid and liquid forms have a nutrient composition of approximately 3% nitrogen, 2% phosphorous and 1% potassium (3-2-1 NPK); or

•  A blend to be added to conventional fertilizers and various soil enhancements to improve the soil as required by the end users.

      The efficacy of our products has been demonstrated both in university laboratories and multi-year growth trials funded by us and by IBRC. These field trials have been conducted on more than a dozen crops including potatoes, tomatoes, squash, blueberries, grapes, cotton and turf grass. The results of these trials are available at no charge by contacting us at 7A Commercial Wharf West, Boston, Massachusetts 02110. These studies have not been published, peer-reviewed or otherwise subject to third-party scrutiny. Based on these trials and other data, we believe our solid and liquid products will have several valuable attributes:

•  Plant nutrition. Historically, growers have focused on the nitrogen (N), phosphorous (P) and potassium (K) content of fertilizers. As agronomists have gained a better understanding of the importance of soil culture, they have turned their attention to humic and fulvic acids, phytohormones and other micronutrients and growth regulators not present in petrochemical-based fertilizers. Our products will have NPK content of approximately 3-2-1 and will be rich in micronutrients. Both products can be modified or fortified to meet specific user requirements.

•  Disease suppression. Based on field trials using product produced by the licensed technology, we believe our products will combine nutrition with disease suppression characteristics to eliminate or significantly reduce the need for fungicides and other crop protection products. The products’ disease suppression properties have been observed under controlled laboratory conditions and in documented field trials. We also have other field reports that have shown the liquid concentrate to be effective in reducing the severity of powdery mildew on grapes, reducing verticillium pressure on tomatoes and reducing scab in potatoes.

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•  Soil amendment. As a result of their slow-release nature, our dry fertilizer product increases the organic content of soil, improving granularity and water retention and thus reducing NPK leaching and run-off.

•  Pathogen-free. Due to high processing temperatures, our products are virtually pathogen-free and have extended shelf life.

      Nexant ChemSystems, Inc., a process engineering and strategic marketing research firm, evaluated our products’ projected economic yield — the market value of the crop less the costs of production — to the end user and concluded based on review of various growth trials that the economic yield of crops grown with fertilizer produced by our licensor using the EATAD process increased by an average of 11.3% with respect to the liquid product and 16.4% with respect to the dry product compared with control groups. With respect to cotton, potatoes and blueberries, economic yield increased by 16%, 19% and 30%, respectively, compared with control groups.

      We plan to apply to the U.S. Department of Agriculture (the “USDA”) and various state agencies to have our products labeled as an organic fertilizer or separately as an organic fungicide. We expect organic labeling, if obtained, to have a significant positive impact on pricing. Unlike many organic fertilizers, our products will be fully converted during the EATAD process and therefore have consistent quality, be stable, odor-free and convenient for storage and shipping. They will also have a relatively high nutrient content and will be free of pathogens. Our products will be positioned for the commercial market as a fertilizer supplement or as a material to be blended into traditional nutrition and disease suppression applications.

Marketing and Sales

Target Markets

      The concern of farmers, gardeners and landscapers about nutrient runoffs, soil health and other long-term effects of conventional chemical fertilizers has increased demand for organic fertilizer. We have identified three target markets for our products:

•  Agribusiness: horticulture, hydroponics and aquaculture;

•  Turf management: golf courses, sod farms and commercial, institutional and government facilities; and

•  Retail sales: home improvement outlets, garden supply stores, nurseries, Internet sales and shopping networks.

      Agribusiness: Today, the focus is on reducing the use of chemical pesticides and at the same time meeting the demand for cost-effective, environmentally responsible alternatives. This change in focus is the result of:

•  Consumer demand for safer, higher quality food.

•  The restriction on use of registered chemical pesticides. Several U.S. government authorities, including the Environmental Protection Agency, the Food and Drug Administration, and the USDA, regulate the use of pesticide. There are more than 14 separate regulations governing the use of pesticides.

•  Environmental concerns and the demand for sustainable technologies.

•  Demand for more food for the growing world population.

•  The cost effectiveness and efficacy of non-chemical based products to growers.

      Consumer demand for organic food products increased throughout the 1990s at approximately 20% or more per annum. In the wake of USDA’s implementation of national organic standards in October 2002, the organic food industry has continued to grow. According to the Nutrition Business Journal, annual sales of organic foods have expanded almost four-fold from $3.6 billion in 1997 and averaged annual growth of 19.4% over the six-year period of 1998 to 2003. Organic foods were 61% of the $22.8 billion natural and organic foods market in 2005 and 2.5% of the $557 billion U.S. foods market (excluding food service), up from a penetration rate of 0.8% of the U.S. food market in 1997.

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      Farmers are facing pressures to change from conventional production practices to more environmentally friendly practices. U.S. agricultural producers are turning to certified organic farming methods as a potential way to lower production costs, decrease reliance on nonrenewable resources such as chemical fertilizers, increase market share with an “organically grown” label and capture premium prices, thereby boosting farm income.

      Turf management: We believe golf courses will continue to reduce their use of chemicals and chemical-based fertilizers to limit potentially harmful effects, such as chemical fertilizer runoff. The United States Golf Association (“USGA”) provides guidelines for effective environmental course management. These guidelines include using nutrient products and practices that reduce the potential for contamination of ground and surface water. Strategies include using slow-release fertilizers and selected organic products and the application of nutrients through irrigation systems. Further, the USGA advises that the selection of chemical control strategies should be utilized only when other strategies are inadequate. We believe that our all-natural, slow-release fertilizer products will be well received in this market.

      Retail sales: According to The Freedonia Group, a business research company, the $6 billion US market for packaged lawn and garden consumables will grow 4.5% annually through 2008. Fertilizers, mulch and growing media will lead gains, especially rubber mulch, colored mulch and premium soils. The growth of organic consumables is expected to be nearly double the rate of growth of conventional products but remain a small segment.

Product Distribution

      Products manufactured at our Woodbridge facility will be sold under the names Genica SG-100 for the solid fertilizer and Genica LC-200 for the liquid fertilizer. Our license with IBRC restricts the sale of products from this facility to the Eastern Seaboard states, including Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, District of Columbia, North Carolina, South Carolina, Georgia and Florida.

      We plan to sell and distribute our products in the agribusiness, turf management, and retail markets, by creating a sales organization or joining a proposed marketing cooperative. Our sales organization will target large purchasers of fertilizer products for distribution in our target geographic and product markets. Key activities of the sales organization will include introduction of the company and our products and the development of relationships with targeted clients. In addition, we have had preliminary discussions with manufacturers’ representatives to explore sales of our products in appropriate retail outlets.

      IBRC is planning to form a marketing cooperative called Genica which is proposed to support IBRC’s plant licensees. Genica is designed to serve as the marketing, sales, distribution, research and development organization for products produced using the IBRC technology. As a plant licensee, we are eligible to join Genica. The cooperative may offer several strategic advantages. The cooperative would allow us to sell our end products through proposed marketing, sales and distribution channels. If we join, we expect to benefit from research and development functions performed by the cooperative as well as from what IBRC has accomplished in the past.

IBRC License

      Pursuant to a know-how license agreement dated July 15, 2003, as amended, IBRC granted us an exclusive license for a term of 40 years to use its proprietary EATAD technology for the design, construction and operation of facilities within a 31.25 mile radius from City Hall in New York City for the conversion of organic waste into solid and liquid organic material. The license permits us to use the technology at our Woodbridge facility site; restricts the ability of IBRC and an affiliated company, Shearator Corporation, to grant another know-how or patent license related to the EATAD technology within the exclusive area; and restricts our ability to advertise or contract for a supply of organic waste originating outside the same exclusive area. The licensed know-how relates to machinery and apparatus used in the EATAD process.

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      We are obligated to pay to IBRC an aggregate royalty equal to nine percent of the gross revenues from the sale of our products produced by the facility. In addition, we are obligated to pay Cdn$238,000 to IBRC upon the closing of this offering for a non-refundable deposit on a second plant license agreement and for growth trials, and pay Cdn$264,000 to IBRC in equal monthly installments over the twelve months following this offering for market analysis and other services. The license agreement may be terminated at IBRC’s option if we do not commence continuous operation of the Woodbridge facility, as defined in the license agreement, by July 1, 2008. We are also obligated to purchase IBRC’s patented macerators and shearators as specified by or supplied by IBRC or Shearator Corporation. If we can demonstrate sufficient demand in the area of exclusivity for the construction of additional plants, we may build the plants, assuming certain completion dates are met, upon payment of license fees for each plant based on dollar-per-ton of capacity of the proposed plants at the then current IBRC initial license fee.

      The license agreement restricts the sale of products from the facilities covered by the license to the Eastern Seaboard. Also, pursuant to the license agreement, we have granted a proposed cooperative called Genica, which has yet to be formed and of which IBRC will be a member, a right of first refusal to market all of our products in accordance with the terms and upon payment to us of the price listed on our then current price list. If we propose to sell end products to a third party for a price lower or otherwise on terms more favorable than such published price and terms, Genica also has the first right of refusal to market such products on the terms and upon payment to us of the price proposed to the third party. The license agreement does not specify the duration of such rights.

Competition

      We believe we will be operating in a very competitive environment in our business’s three dimensions — organic wastestream feedstock, technology and end products — each of which is quickly evolving. We believe we will nevertheless be able to compete effectively because of the abundance of the supply of food waste in our proposed geographic markets, the pricing of our tip fees and the quality of our proposed products and technology.

      Organic Wastestream. Competition for the organic waste stream feedstock includes landfills, incinerators and traditional composting operations. Organic waste streams are generally categorized as pre- and post-consumer food waste, lawn and garden waste, and bio-solids, including sewage sludge or the by product of wastewater treatment. Some states, including New Jersey, have begun to regulate the manner in which food waste may be composted. New Jersey has created specific requirements for treatment in tanks, and we believe our proposed Woodbridge facility will be the first approved in-vessel processing facility in the state. In Massachusetts, state regulators are considering a ban on the disposal of organic materials at landfills and incinerators once sufficient organic processing capacity exists within the state, which if adopted would provide a competitive advantage for our process.

      Technology. There are a variety of technologies used to treat organic wastes including composting, digestion, hydrolysis and thermal processing. Companies using these technologies may compete with us for organic material.

      Composting is a natural process of decomposition that can be enhanced by mounding the waste into windrows to retain heat, thereby accelerating decomposition. Large-scale compost facilities require significant amounts of land for operations that may not be readily available or that may be only available at significant cost in major metropolitan areas. Given the difficulties in controlling the process or the consistent ability to achieve germ-killing temperatures, the resulting compost is often inconsistent and generally would command a lower market price than our product.

      Digestion may be either aerobic, like the EATAD process, or anaerobic. Anaerobic digestion is, in simple terms, mechanized in-vessel composting. In addition to compost, most anaerobic digestion systems are designed to capture the methane generated. While methane has value as a source of energy, it is generally limited to on-site use, as it is not readily transported.

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      Hydrolysis is an energy-intensive chemical process that produces a byproduct, most commonly ethanol. Thermal technologies extract the Btu content of the waste to generate electricity. Food waste, which is typically 75-90% water, is generally not a preferred feedstock. Absent technological breakthroughs, neither hydrolysis nor thermal technologies are expected to be accepted for organic foodwaste processing on a large-scale in the near term.

      End Products. The organic fertilizer business is relatively new, highly fragmented, under-capitalized and growing rapidly. We are not aware of any dominant producers or products currently in the market. There are a number of single input, protein-based products, such as fish, bone and cottonseed meal, that can be used alone or mixed with chemical additives to create highly formulated fertilizer blends that target specific soil and crop needs. In this sense they are similar to our products but have odor, stability and shelf life or seasonality problems.

      Most of the 50 million tons of fertilizer consumed annually in North America is mined or derived from petroleum. These petroleum-based products generally have higher nutrient content (NPK) and cost less than organic fertilizers. However, as agronomists better understand how soil, root and stem/leaf systems interact, the importance of micronutrients is more highly valued. Petrochemical additives have been shown to deaden the soil, which ironically contributes to higher nutritional requirements. Traditional petrochemical fertilizers are highly soluble and readily leach from the soil. Slow release products that are coated or specially processed command a premium. However, the economic value offered by petrochemicals, especially for field crops including corn, wheat, hay and soybeans, will not be supplanted in the foreseeable future.

      Despite a large number of new products in the end market, we believe that our products have a unique set of characteristics. Positioning and branding the combination of nutrition and disease suppression characteristics will differentiate our products from other organic fertilizer products to develop market demand, while maintaining or increasing pricing. In view of the barriers to entry created by the supply of organic waste, regulatory controls and the cost of constructing facilities, we do not foresee a dominant manufacturer or product emerging in the near term.

Government Regulation

      Our end products may be regulated or controlled by state, county and local governments as well as various agencies of the Federal government, including the Food and Drug Administration and the Department of Agriculture.

      In addition to the regulations governing the sale of our end products, our facilities will be subject to extensive regulation. We will need certain permits to operate solid waste or recycling facilities as well as permits for our sewage connection, water supply, land use, air emission, and wastewater discharge. The specific permit and approval requirements are set by the state and the various local jurisdictions, including but not limited to city, town, county, and township and state agencies having control over the specific properties.

      For our Woodbridge facility, we must obtain various permits and approvals to operate a recycling center and a manufacturing facility, including among others a Class C recycling permit, land use and site plan approval, an air quality permit, a discharge permit, treatment works approval and a storm water runoff permit, building construction permits and a soil conservation district permit.

      Environmental regulations will also govern the operation of our facilities. Our facilities will most likely be located in urban industrial areas where contamination may be present. Regulatory agencies may require us to remediate environmental conditions at our locations.

Employees

      As of January 1, 2007, we had four full-time employees, all of whom were in management and administration. Once the Woodbridge facility reaches its initial design capacity of 250 tons per day, we expect to have approximately 17 full-time employees at the facility, working in the areas of general plant management, equipment operation, quality control, maintenance, laborers, and administrative support.

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Property

      We have entered into a 10-year lease, with an option to renew for an additional 10 years, for property located in a recycling center in Woodbridge, New Jersey. This is the site upon which our initial plant will be constructed. The lease covers 60,000 square feet of a 300,000 square foot building. The rent is $32,500 per month for the first 5 years of the 10-year term. In year 6, the rent is increased by 5% and will increase 2% a year in years 7 through 10. During years 2 through 10, we will pay an additional $45,401 per month for the cost of the buildout of the space. In year 11, if we exercise our option to renew, the rent would increase by 5% and would increase an additional 2% per year in years 12 through 15. The rent would increase 5% in year 16 and thereafter would increase 2% per year through the remainder of the term. We are responsible for payment of common area maintenance fees and taxes based upon our percentage of use relative to the whole facility and for our separately metered utilities.

      We currently lease, on a month-to-month basis, approximately 2,500 square feet of office space for our headquarters in Boston, Massachusetts. We pay rent of $2,500 per month and a shared services fee of $1,000 per month. We may terminate the office lease at any time upon 30 days advance written notice.

Legal Proceedings

      We do not know of any pending or threatened legal proceedings to which we are or would be a party or any proceedings being contemplated by governmental authorities against us, or any of our executive officers or directors relating to their services on our behalf.

Company History

      Converted Organics Inc. was incorporated in January 2006 under the laws of the state of Delaware. In February 2006, the company merged with its predecessor organizations, Mining Organics Management, LLC (“MOM”) and Mining Organics Harlem River Rail Yard, LLC (“HRRY”). MOM and HRRY were organized as Massachusetts limited liability companies in May 2003 and July 2003, respectively.

      The members of MOM included a limited liability company the managing member of which is the company’s current director William A. Gildea, another limited liability company the sole member of which is consultant John E. Tucker and the company’s current Chief Financial Officer Thomas R. Buchanan. Weston Solutions, Inc. and MOM were equal members of HRRY. Each of MOM and HRRY was formed to promote the principal business objective of Converted Organics — that is, to implement licensed technology to facilitate the conversion of organic food waste into solid and liquid fertilizer products. MOM was originally intended to be the principal operating entity, and HRRY was a location-specific entity that was formed to develop business opportunities in New York City.

      Thereafter, to consolidate the various related entities, Converted Organics was formed and each of HRRY and MOM was merged into it. As a result of the merger of Converted Organics and HRRY, each of the members of HRRY received 300,000 shares of Converted Organics common stock. MOM subsequently distributed the 300,000 shares that it received as a result of the merger to its members; as a result, Messrs. William Gildea and Tucker each received 135,000 shares of Converted Organics common stock and Mr. Buchanan received 30,000 shares. No shares of Converted Organics common stock were issued in connection with the merger between Converted Organics and MOM because MOM did not contribute any value as of the date of the merger.

      Converted Organics of Woodbridge, LLC, a New Jersey limited liability company, was formed for the purpose of owning, constructing and operating the Woodbridge, New Jersey facility. This company has had no assets, liabilities or operations to date.

      Our principal executive offices are located at 7A Commercial Wharf West, Boston, Massachusetts 02110. Our telephone number is (617) 624-0111. Our website address is www.convertedorganics.com. The information on, or that can be accessed through, our website is not a part of this prospectus.

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MANAGEMENT

Directors and Executive Officers

      Our directors and executive officers, and their ages as of January 1, 2007, are as follows:

Name	Age		Position
Edward J. Gildea		55	Chairman, President and Chief Executive Officer
Thomas R. Buchanan		56	Vice President and Chief Financial Officer
John A. Walsdorf		59	Vice President and Chief Operating Officer
John P. Weigold		39	Vice President — Development/Operations
David R. Allen		52	Director
Robert E. Cell		38	Director
John P. DeVillars		57	Director
William A. Gildea		51	Director

      Edward J. Gildea has been our Chairman, President and Chief Executive Officer since January 2006. From 2001 to 2005, he held several executive positions including Chief Operating Officer, Executive Vice President, Strategy and Business Development, and General Counsel of QualityMetric Incorporated, a private health status measurement business. During that period, Mr. Gildea was also engaged in the private practice of law representing business clients and held management positions in our predecessor companies. He holds an A.B. degree from the College of the Holy Cross and a J.D. degree from Suffolk University Law School. Mr. Gildea is William A. Gildea’s brother.

      Thomas R. Buchanan has been our Vice President and Chief Financial Officer since January 2006. Until 2001, Mr. Buchanan was Director of Merchant Banking at Dilmun Investments, Inc., a registered securities advisor. Since 2001, he has consulted to our predecessor companies and to several non-profit organizations. He holds a B.A. degree from the University of Virginia.

      John A. Walsdorf has been our Vice President and Chief Operating Officer since January 2006. He joined one of our predecessor companies in 2003. From November 2001 to June 2003, he was responsible for the development of select real estate markets for Amerada Hess Corporation, a regional energy company. Until 2001, Mr. Walsdorf held a similar position with Trammell Crow Company, a commercial real estate company. Mr. Walsdorf has a degree in Finance from Southern Illinois University and an M.B.A. from Loyola University of Chicago.

      John P. Weigold has been our Vice President — Development/ Operations since January 2006. He joined one of our predecessor companies in 2003. From September 1997 to March 2002, Mr. Weigold served as a vice president of State Street Bank. Mr. Weigold holds a B.S. degree from the State University of New York at Geneseo and an M.B.A. from Northeastern University.

      David R. Allen has been a director since June 2006. Until 2004, he was the Chief Executive Officer and the Chief Financial Officer of Millbrook Press Inc., a publicly held publisher of children’s books. Millbrook Press Inc. filed for bankruptcy in the District of Connecticut in February 2004 in a liquidation proceeding in which all creditors were paid in full. Since 2004, Mr. Allen has acted as a management consultant and advisor to small public companies. Mr. Allen holds a B.S. degree and an M.S. degree from Bentley College in Waltham, Massachusetts. Mr. Allen is a Certified Public Accountant.

      Robert E. Cell has been a director since June 2006. In 2006, he became the President and Chief Executive Officer of RubiconSoft, a preferenced-based marketing company. From 2004 to 2005, he was the Chief Executive Officer of Cool Sign Media Inc., a provider of digital advertising and signage. From 2000 to 2004, he held several executive positions, including Chief Operating Officer and Chief Financial Officer, at Blue Martini Software, Inc., a publicly held provider of client relationship management software applications. Since 2005, Mr. Cell has acted as a consultant to several public and private companies. Mr. Cell holds a B.S. degree and an M.B.A. from the University of Michigan.

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      John P. DeVillars has been a director since June 2006. He is a founder and managing partner of BlueWave Strategies LLC, an environmental and renewable energy consulting firm established in 2003, and is a managing partner of its affiliated investment group, BlueWave Capital. Until 2003, Mr. DeVillars held the position of Lecturer in Environmental Policy in the Department of Urban Studies and Planning at the Massachusetts Institute of Technology; he continues to lecture at MIT, the Harvard Graduate School of Design and the Kennedy School of Government. From 2000 to 2003, Mr. DeVillars was Executive Vice President of Brownfields Recovery Corporation, a real estate investment and development firm focused on environmentally impacted properties known as “brownfields.” Mr. DeVillars holds a B.A. degree from the University of Pennsylvania and an M.P.A. from Harvard University.

      William A. Gildea has been a director since January 2006. From 2000 to present, he has managed ECAP, LLC, a boutique investment firm that specializes in the funding and development of clean technologies, and held management positions in our predecessor companies. Mr. Gildea has also held positions at Connecticut Bank and Trust and Phoenix Investment Council. He earned a B.A. degree from Westfield State College in Westfield, Massachusetts and an M.B.A. from Rensselaer Polytechnic Institute in Troy, New York. Mr. Gildea is Edward J. Gildea’s brother.

Board of Directors

      Our Bylaws provide that the authorized size of our Board of Directors, which currently is five members, is to be determined from time to time by resolution of the Board of Directors, but shall consist of at least two and no more than eight members. Our Board of Directors is divided into three classes as nearly equal in number as possible. Each year the shareholders elect the members of one of the three classes to three-year terms of office. Currently, Messrs. Allen and Cell serve as Class 1 directors, whose terms expire in 2007, Messrs. DeVillars and William Gildea serve as Class 2 directors, whose terms expire in 2008, and Mr. Edward Gildea serves as a Class 3 director, whose term expires in 2009. We intend to maintain at least two independent directors on our Board of Directors.

Committees of the Board of Directors

      Our Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee.

      Audit Committee. Our Audit Committee oversees our accounting and financial reporting processes, internal systems of accounting and financial controls, relationships with independent auditors, and audits of financial statements. Specific responsibilities include the following:

•  selecting, hiring and terminating our independent auditors;

•  evaluating the qualifications, independence and performance of our independent auditors;

•  approving the audit and non-audit services to be performed by our independent auditors;

•  reviewing the design, implementation, adequacy and effectiveness of our internal controls and critical accounting policies;

•  overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

•  with management and our independent auditors, reviewing any earnings announcements and other public announcements regarding our results of operations; and

•  preparing the audit committee report that the Securities and Exchange Commission requires in our annual proxy statement.

      Our Audit Committee is comprised of Messrs. Allen, Cell and DeVillars. Mr. Allen serves as Chairman of the Audit Committee. The Board has determined that all members of the Audit Committee are independent under the rules of the Securities and Exchange Commission and the Nasdaq Stock Market and that Mr. Allen qualifies as an “audit committee financial expert,” as defined by the rules of the Commission.

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      Compensation Committee. Our Compensation Committee assists our Board of Directors in determining the development plans and compensation of our officers, directors and employees. Specific responsibilities include the following:

•  approving the compensation and benefits of our executive officers;

•  reviewing the performance objectives and actual performance of our officers; and

•  administering our stock option and other equity compensation plans.

      Our Compensation Committee is comprised of Messrs. Allen, Cell and DeVillars. Mr. Cell serves as Chairman of the Compensation Committee. The Board has determined that all members of the Compensation Committee are independent under the rules of the Nasdaq Stock Market.

      Nominating and Governance Committee. Our Nominating and Governance Committee assists the Board by identifying and recommending individuals qualified to become members of our Board of Directors, reviewing correspondence from our stockholders, and establishing, evaluating and overseeing our corporate governance guidelines. Specific responsibilities include the following:

•  evaluating the composition, size and governance of our Board of Directors and its committees and making recommendations regarding future planning and the appointment of directors to our committees;

•  establishing a policy for considering shareholder nominees for election to our Board of Directors; and

•  evaluating and recommending candidates for election to our Board of Directors.

      Our Nominating and Governance Committee is comprised of Messrs. Allen, Cell and DeVillars. Mr. DeVillars serves as Chairman of our Nominating and Governance Committee. The Board has determined that all members of the Nominating and Governance Committee are independent under the rules of the Nasdaq Stock Market.

Compensation Committee Interlocks and Insider Participation

      None of the members of our Compensation Committee will be one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.

Director Compensation

      Each non-employee director is expected to receive an annual fee of $5,000 for service on the Board and its committees, plus $1,000 for each meeting of the Board of Directors or board committee that the director attends in person and $1,000 for each meeting attended by telephone or videoconference. Each non-employee director also will receive reimbursement of travel and other expenses incurred to attend a meeting in person. Upon election or appointment to the Board, each non-employee independent director will be granted an option to purchase 10,000 shares of our common stock at the then-current market price as compensation for service on the Board.

Executive Compensation

      Our Chief Executive Officer received no compensation from us or any of our predecessors in the fiscal years ended December 31, 2003, 2004 or 2005. Also, none of our executive officers has earned more than $100,000 in total compensation from us or any of our predecessors during any of the three years. For information about a current annual compensation arrangements with our executive officers, see “Employment Agreements.”

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Option Grants in 2005

      No stock options were granted to our Chief Executive Officer in the year ended December 31, 2005. For information about later option grants, see “Employment Agreements.”

Option Exercises and Holdings

      As of December 31, 2005, our Chief Executive Officer did not hold any exercisable or unexercisable stock options. During the fiscal year ended December 31, 2005, our Chief Executive Officer did not receive any shares of common stock upon exercise of options.

Employment Agreements

      We have executive employment agreements with Edward J. Gildea, our President and Chief Executive Officer, Thomas R. Buchanan, our Vice President and Chief Financial Officer, John A. Walsdorf, our Vice President and Chief Operating Officer, and John P. Weigold, our Vice President — Development/ Operations. The executive employment agreements become effective upon the closing of this offering. Each executive employment agreement has a term of three years. Under the terms of his agreement, Mr. Gildea will receive base salary of $220,000 per year and has been granted an option to purchase 100,000 shares of common stock. Mr. Buchanan will receive base salary of $180,000 per year and has been granted an option to purchase 100,000 shares of common stock. Mr. Walsdorf will receive base salary of $180,000 per year and has been granted an option to purchase 100,000 shares of common stock. Mr. Weigold will receive base salary of $180,000 per year and has been granted an option to purchase 95,000 shares of common stock. All such stock options have been granted with an exercise price per share equal to the fair value of our common stock on the date of grant, as determined by our Board of Directors. If, during the term of the executive officers’ employment, the Board of Directors approves any company bonus plan, each executive officer shall be eligible to receive a bonus under such plan. Each agreement may be terminated by the company for, or without, cause or upon the executive officer’s death or disability. Further, if any executive officer is terminated without cause, or as the result of his death or disability, he will be entitled to receive severance pay consisting of twelve months base salary and benefits, and all of the shares of common stock and options held by such executive officer shall become fully vested. In the case of a termination due to a change in control, the executive officer shall be entitled to severance pay consisting of 36 months of base salary and benefits, in addition to any bonus which would have been payable in the year of such termination, and all shares of common stock and options held by such executive officer shall become fully vested.

Stock Option Plan

      In June 2006, our Board of Directors and stockholders approved our 2006 Stock Option Plan. The option plan authorizes the grant and issuance of options and other equity compensation to employees, officers and consultants. A total of 666,667 shares of common stock are reserved for issuance under the option plan.

      The option plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the option plan, the Committee determines who will receive the options, the number of options granted, the manner of exercise and the exercise price of the options. The term of incentive stock options granted under the option plan may not exceed ten years, or five years for options granted to an optionee owning more than 10% of our voting stock. The exercise price of an incentive stock option granted under the option plan must be equal to or greater than the fair market value of the shares of our common stock on the date the option is granted. The exercise price of a non-qualified option granted under the option plan must be equal to or greater than 85% of the fair market value of the shares of our common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of our voting stock must have an exercise price equal to or greater than 110% of the fair market value of our common stock on the date the option is granted.

      As of January 1, 2007, there were outstanding options to purchase 643,000 shares of common stock under the option plan at an average exercise price of $3.75 per share and an average term of five years. The options vested on the date of grant.

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Limitation of Liability and Indemnification

      Our certificate of incorporation, as amended (“Certificate of Incorporation”), contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our shareholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:

•  Any breach of their duty of loyalty to our company or our stockholders.

•  Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.

•  Unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law.

•  Any transaction from which the director derived an improper personal benefit.

      Our Bylaws provide that we are required to indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by Delaware law. Our Bylaws also provide that we shall advance expenses incurred by a director or officer before the final disposition of any action or proceeding upon receipt of an undertaking from or on behalf of that director or officer to repay the advance if it is ultimately determined that he or she is not entitled to be indemnified. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by the Board of Directors. These agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We intend to obtain directors’ and officers’ liability insurance.

      The limitation of liability and indemnification provisions in our Certificate of Incorporation and Bylaws may discourage shareholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

      Insofar as we may permit indemnification for liabilities arising under the Securities Act to directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy, as expressed in the Securities Act and is, therefore, unenforceable.

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PRINCIPAL STOCKHOLDERS

      Set forth below is information regarding the beneficial ownership of our common stock, as of January 1, 2007 and as adjusted to reflect the sale of 2,000,000 units in this offering and the issuance of 293,636 units to bridge lenders and HCF, by (i) each person whom we know owned, beneficially, more than 5% of the outstanding shares of our common stock, (ii) each of our directors, (iii) our Chief Executive Officer, and (iv) all of the current directors and executive officers as a group. We believe that, except as otherwise noted below, each named beneficial owner has sole voting and investment power with respect to the shares listed. Unless otherwise indicated herein, beneficial ownership is determined in accordance with the rules of the Commission, and includes voting or investment power with respect to shares beneficially owned. Shares of common stock to be received upon conversion of preferred stock, or subject to options or warrants currently exercisable or exercisable within 60 days of January 1, 2007, are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

	No. of Shares		Before This
Name of Beneficial Owner	Beneficially Owned		Offering(1)			After This Offering
Officers and Directors (2)
William A. Gildea(3)		354,551		25.0	%		9.6	%
John A. Walsdorf(4)		210,000		14.7			5.6
Edward J. Gildea(4)		200,000		14.0			5.4
Thomas R. Buchanan(4)		200,000		14.0			5.4
John P. Weigold(5)		195,000		13.7			5.2
David R. Allen(6)		10,000		*			*
Robert E. Cell(6)		10,000		*			*
John P. DeVillars(6)		10,000		*			*
All directors and officers as a group (eight persons)(7)		1,189,551		64.6	%		28.8	%
5% Stockholders
Weston Solutions, Inc.(8)		300,000		22.5	%		8.3	%
John E. Tucker(2)(3)		314,851		22.2			8.5

*  Less than 1%

(1)	Assumes 1,333,333 shares outstanding prior to this offering.
(2)	Address of those listed is c/o Converted Organics Inc., 7A Commercial Wharf West, Boston, MA 02110.
(3)	Includes options to purchase 83,000 shares that are exercisable within 60 days of January 1, 2007.
(4)	Includes options to purchase 100,000 shares that are exercisable within 60 days of January 1, 2007.
(5)	Includes options to purchase 95,000 shares that are exercisable within 60 days of January 1, 2007.
(6)	Includes options to purchase 10,000 shares that are exercisable within 60 days of January 1, 2007.
(7)	Includes options to purchase 508,000 shares that are exercisable within 60 days of January 1, 2007.
(8)	Address is One Weston Way, West Chester, PA 19830. Arnold Borish, Sr. Vice President - General Counsel of Weston Solutions, Inc., has the power to vote and dispose of the shares.

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RELATED PARTY TRANSACTIONS

      As payment for compensation accrued and not paid since April 1, 2006 and expenses incurred but not reimbursed since April 1, 2006, we intend to distribute a total of $300,000 of the proceeds of this offering among the following executive officers, directors and consultants, each of whom will receive $50,000: Edward J. Gildea, Thomas R. Buchanan, John A. Walsdorf, John P. Weigold, William A. Gildea and John E. Tucker.

      We have entered into a services agreement dated May 29, 2003, as modified October 6, 2004, with one of our principal stockholders, Weston Solutions, Inc. Weston has been engaged to provide engineering and design services in connection with the construction of the Woodbridge organic waste conversation facility. The total amounts invoiced by Weston for services provided to the company were $70,000 in 2003, $434,454 in 2004, $90,888 in 2005, $0 for the nine months ended September 30, 2005 and $46,490 for the nine months ended September 30, 2006. We paid Weston $75,376 in 2003 and $80,000 in the first nine months of 2006.

      The company is renting its premises at 7A Commercial Wharf West, Boston, Massachusetts under an agreement with ECAP, LLC. The managing member of ECAP, LLC is a director and shareholder of the company and is also the brother of the company’s President and Chief Executive Officer. The rental agreement provides for rent, as agreed between the company and ECAP, LLC and for reimbursement of expenses by the company for office and other expenses. The total amounts paid by the company to ECAP, LLC for rental and reimbursement expenses were $125,500 in 2003, $42,496 in 2004, $71,711 in 2005, $40,212 for the nine months ended September 30, 2005 and $27,500 for the nine months ended September 30, 2006.

      We have executive employment agreements with Edward J. Gildea, our President and Chief Executive Officer, Thomas R. Buchanan, our Vice President and Chief Financial Officer, John A. Walsdorf, our Vice President and Chief Operating Officer, and John P. Weigold, our Vice President — Development/ Operations. Please see “Employment Agreements” for a summary of these employment agreements.

      We believe the transactions described above were made on terms at least as favorable as those generally available from unaffiliated third parties. The transactions have been ratified by a majority of the members of our Board of Directors who are independent directors. Future transactions with our officers, directors or greater than five percent stockholders will be on terms no less favorable to us than could be obtained from unaffiliated third parties, and all such transactions will be reviewed and subject to approval by our Audit Committee, which will have access, at our expense, to our or independent legal counsel.

DESCRIPTION OF SECURITIES

      Our authorized capital stock consists of 75,000,000 shares of common stock, $0.0001 par value, and 25,000,000 shares of preferred stock, $0.0001 par value. As of January 1, 2007, we had 1,333,333 shares of common stock and no shares of preferred stock outstanding. After this offering, we will have 3,636,333 shares of common stock outstanding, including shares issued to our bridge lenders. If the over-allotment option is exercised in full, we will have 3,936,333 shares outstanding.

      The following is a summary of the rights of our capital stock as provided in our Certificate of Incorporation and Bylaws, as they will be in effect upon the closing of this offering. For more detailed information, please see our Certificate of Incorporation and Bylaws, which have been filed as exhibits to the registration statement of which this prospectus is a part.

Units

      Each unit consists of one share of common stock, one redeemable Class A warrant and one non-redeemable Class B warrant, each warrant to purchase one share of common stock. The public warrants will trade only as part of a unit for 30 days following the closing of this offering, unless the representative of the underwriters determines that separate trading of the public warrants should occur earlier. After separation of

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the units, the common stock and public warrants will trade as separate securities, and trading of the units shall cease.

      At the closing of this offering, we will deliver certificates representing the units to the representative of the underwriters through the facilities of the Depository Trust Company. Thereafter, investors may request physical delivery of unit certificates at any time before the public warrants begin trading separately from the common stock included in the units. An investor also may request delivery of separate physical certificates for the public warrants and the common stock comprising the units, but we will not be obligated to make delivery of the separate certificates until after the public warrants begin trading separately from the common stock. Until the common stock and public warrants begin trading separately, investors will be unable to make separate delivery of certificates for the public warrants and common stock comprising a unit and will be unable to settle trades in those securities.

Class A Warrants

      General. The Class A warrants issued in this offering may be exercised after they become separately tradable until the expiration date, which is the fifth anniversary of the effective date of this offering. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $           per share, which is 150% of the public offering price of the units. This exercise price will be adjusted if specific events, summarized below, occur. A holder of warrants will not be deemed a holder of the underlying stock for any purpose until the warrant is exercised. If at their expiration date the Class A warrants are not currently exercisable, the expiration date will be extended for 30 days following notice to the holders of the warrants that the warrants are again exercisable. If we cannot honor the exercise of Class A warrants and the securities underlying the warrants are listed on a securities exchange or if there are three independent market makers for the underlying securities, we may, but are not required to, settle the warrants for a price equal to the difference between the closing price of the underlying securities and the exercise price of the warrants. Because we are not required to settle the warrants by payment of cash, and because there is a possibility that warrant holders will not be able to exercise the warrants when they are in-the-money or otherwise, there is a risk that the warrants will never be settled in shares or payment of cash. This may have an adverse effect on the demand for the warrants and the prices that can be obtained from reselling them.

      Redemption. We will have the right to redeem the Class A warrants at a price of $0.25 per warrant, after providing 30 days prior written notice to the Class A warrantholders, at any time after the closing price of our common stock, as reported on Nasdaq, equals or exceeds $          , which is 170% of the public offering price of the units, for five consecutive trading days. We will send a written notice of redemption by first class mail to holders of the Class A warrants at their last known addresses appearing on the registration records maintained by the transfer agent. No other form of notice or publication will be required. If we call the warrants for redemption, the holders of the warrants will then have to decide whether to sell warrants, exercise them before the close of business on the business day preceding the specified redemption date or hold them for redemption.

Class B Warrants

      General. The Class B warrants issued in this offering may be exercised after they become separately tradable until the expiration date, which is the fifth anniversary of the effective date of this offering. Each Class B warrant entitles the holder to purchase one share of common stock at an exercise price of $           per share, which is 200% of the public offering price of the units. This exercise price will be adjusted if specific events, summarized below, occur. A holder of warrants will not be deemed a holder of the underlying stock for any purpose until the warrant is exercised. If at their expiration date the Class B warrants are not currently exercisable, the expiration date will be extended for 30 days following notice to the holders of the warrants that the warrants are again exercisable. If we cannot honor the exercise of Class B warrants and the securities underlying the warrants are listed on a securities exchange or if there are three independent market makers for the underlying securities, we may, but are not required to, settle the warrants for a price equal to the difference between the closing price of the underlying securities and the exercise price of the warrants. Because we are not required to settle the warrants by payment of cash, and because there is a possibility that

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warrant holders will not be able to exercise the warrants when they are in-the-money or otherwise, there is a risk that the warrants will never be settled in shares or payment of cash. This may have an adverse effect on the demand for the warrants and the prices that can be obtained from reselling them.

      No Redemption. The Class B warrants are non-redeemable.

Provisions Applicable to the Class A and Class B Warrants

      Exercise. The holders of the warrants may exercise them only if an appropriate registration statement is then in effect. To exercise a warrant, the holder must deliver to our transfer agent the warrant certificate on or before the expiration date or the redemption date, as applicable, with the form on the reverse side of the certificate executed as indicated, accompanied by payment of the full exercise price for the number of warrants being exercised. Fractional shares of common stock will not be issued upon exercise of the warrants.

      Adjustments in Certain Events. We will make adjustments to the terms of the warrants if certain events occur. If we distribute to our stockholders additional shares of common stock through a dividend or distribution, or if we effect a stock split of our common stock, we will adjust the total number of shares of common stock purchasable on exercise of a warrant so that the holder of a warrant thereafter exercised will be entitled to receive the number of shares of common stock the holder would have owned or received after such event if the warrant holder had exercised the warrant before the event causing the adjustment. The aggregate exercise price of the warrant will remain the same in that circumstance, but the effective purchase price per share of common stock purchasable upon exercise of the warrant will be proportionately reduced because a greater number of common stock shares will then be purchasable upon exercise of the adjusted warrant. We will make equivalent changes in warrants if we effect a reverse stock split.

      In the event of a capital reorganization or reclassification of our common stock, the warrants will be adjusted so that thereafter each warrant holder will be entitled to receive upon exercise the same number and kind of securities that such holder would have received if the warrant had been exercised before the capital reorganization or reclassification of our common stock.

      If we merge or consolidate with another corporation, or if we sell our assets as an entirety or substantially as an entirety to another corporation, we will make provisions so that warrant holders will be entitled to receive upon exercise of a warrant the kind and number of securities, cash or other property that would have been received as a result of the transaction by a person who was our stockholder immediately before the transaction and who owned the same number of shares of common stock for which the warrant was exercisable immediately before the transaction. No adjustment to the warrants will be made, however, if a merger or consolidation does not result in any reclassification or change in our outstanding common stock.

Preferred Stock

      Our Board of Directors is authorized by our Certificate of Incorporation to establish classes or series of preferred stock and fix the designation, powers, preferences and rights of the shares of each such class or series and the qualifications, limitations or restrictions thereof without any further vote or action by our stockholders. Any shares of preferred stock so issued would have priority over our common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in our control without further action by our stockholders and may adversely affect the voting and other rights of the holders of our common stock. At present we have no plans to issue any additional shares of preferred stock or to adopt any new series, preferences or other classification of preferred stock.

      The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable a holder to block such a transaction. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of holders of our common stock. Although our Board of Directors is required to make any determination to issue preferred stock based on its judgment as to the best interests of our stockholders, our Board could act in a manner that would discourage an acquisition attempt or other

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transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which such stockholders might receive a premium for their stock over the then market price of such stock. Our Board presently does not intend to seek stockholder approval prior to the issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange rules.

Securities Issued in Connection with Bridge Loans

      In June 2006, we completed a $1.515 million bridge loan from lenders to help us meet our working capital needs. The loans accrued interest at an annual rate of 8% until October 16, 2006 and thereafter accrue interest at 18% until paid. Under the terms of the bridge notes as amended effective October 16, 2006, the loans are due and payable on the earlier of the completion of a public offering of equity securities with gross proceeds of at least $5.0 million or January 19, 2007. At the closing of a public offering on or before January 19, 2007, bridge lenders will be entitled to receive units identical to the units being offered in this offering. Each bridge lender will be entitled to receive that number of units equal to the principal of the lender’s note divided by the initial public offering price of the units. As of January 24, 2007, we had entered into amendments of bridge notes totaling $595,000 extending the January 19, 2007 due date to February 19, 2007; we expect to enter into the same amendment of notes representing the remaining $920,000 of bridge loans prior to the closing of this offering. The amended notes also provide that, at the company’s option, each bridge lender will be entitled to receive that number of units equal to the interest that has accrued on the lender’s note from October 17, 2006 until the closing of the offering divided by the initial public offering price of the units. If a public offering with gross proceeds of at least $5.0 million is not completed by the applicable due date, then each bridge lender has the right to convert the unpaid principal into the number of shares that can be obtained by dividing the principal amount of the note by $3.00 per share plus an equal number of non-callable warrants exercisable at $3.00 per share for a period of five years.

2006 Stock Option Plan

      Our 2006 Stock Option Plan currently authorizes the grant of up to 666,667 shares of common stock (subject to adjustment for stock splits and similar capital changes) in connection with restricted stock awards, incentive stock option grants and non-qualified stock option grants. Employees and, in the case of nonqualified stock options, directors, consultants or any affiliate are eligible to receive grants under our plans. As of October 1, 2006, there were outstanding options to purchase 643,000 shares under our Option Plan.

Authorized but Unissued Shares

      The authorized but unissued shares of common and preferred stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares could hinder or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws

      Our Certificate of Incorporation and Bylaws contain a number of provisions that could make our acquisition by means of a tender or exchange offer, a proxy contest or otherwise more difficult. These provisions are summarized below.

      Removal of Directors. Our Bylaws provide that our directors may only be removed by the affirmative vote of the shares entitled to vote at an election of directors; provided, however, that if less than the entire board of directors is to be removed, no one director may be removed if the vote cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. Although our Bylaws do not give the Board the power to approve or disapprove stockholder nominations for the election of directors or of any other business stockholders desire to conduct at an annual or any other meeting, the Bylaws may have the effect of precluding a nomination for the election of directors or precluding the conduct of business at a particular annual meeting if the proper procedures are not followed, or discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of

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directors or otherwise attempting to obtain control, even if the conduct of that solicitation or attempt might be beneficial to our stockholders.

      Staggered Board. Staggered terms tend to protect against sudden changes in management and may have the effect of delaying, deferring or preventing a change in our control without further action by our stockholders. Our Board of Directors is divided into three classes, with one class of directors elected at each year’s annual stockholder meeting.

      Special Meetings. Our Bylaws provide that special meetings of stockholders can be called by the President, at the request of a majority of the Board of Directors at the written request of holders of at least 50% of the shares outstanding and entitled to vote.

      Undesignated Preferred Stock. The ability to authorize undesignated preferred stock makes it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. The ability to issue preferred stock may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.

      Delaware Anti-Takeover Statute. We will be subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging under certain circumstances in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

•  Prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder.

•  Upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer.

•  On or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66²/3% of the outstanding voting stock which is not owned by the interested stockholder.

      Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our Board of Directors does not approve in advance. We also anticipate that Section 203 may also discourage attempted acquisitions that might result in a premium over the market price for the shares of common stock held by stockholders.

      The provisions of Delaware law, our Certificate of Incorporation and our Bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Transfer Agent, Warrant Agent and Registrar

      The transfer agent and registrar for our common stock and warrant agent for the public warrants is Computershare Investor Services, 250 Royal Street, Canton, Massachusetts 02021.

Listing

      We have applied to list our units, common stock, Class A warrants and Class B warrants on the Nasdaq Capital Market and the Boston Stock Exchange.

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SHARES ELIGIBLE FOR FUTURE SALE

      Prior to this offering, there has been no public market for our stock. Sales of our common stock in the public market after the restrictions lapse as described below, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.

This Offering

      Upon completion of this offering, we expect to have 3,626,969 shares of common stock outstanding. This number assumes no exercise of the underwriters’ over-allotment option, the public warrants, the representative’s warrants or any other outstanding options and warrants. We expect to have 3,926,969 shares of common stock outstanding if the underwriters’ over-allotment is exercised in full.

      The 2,000,000 shares of common stock issued as part of the units sold in this offering, together with the up to 4,000,000 shares issued upon exercise of the Class A warrants and Class B warrants comprising part of the units sold in this offering, will be freely tradable, except by any of our “affiliates” as defined in Rule 144 under the Securities Act, without restriction or registration under the Securities Act. After completion of this offering, we intend to register the 293,636 shares, 293,636 Class A warrants and 293,636 Class B warrants underlying the units to be issued to certain bridge lenders. All remaining shares, and all shares subject to outstanding options and warrants, were issued and sold by us in private transactions and are eligible for public sale if registered under the Securities Act or sold in accordance with Rule 144 or Rule 701 under the Securities Act. These 1,333,333 remaining shares are considered “restricted” within the meaning of Rule 144.

Restricted Stock, Lock-Up Agreements and Rule 144

      The 1,333,333 shares of restricted stock may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption from registration offered by Rule 144. The holders of these shares have agreed not to sell or otherwise dispose of any of their shares of common stock (or any securities convertible into shares of common stock) for a period of one year after completion of this offering, without the prior written consent of Paulson Investment Company, Inc., the representative of the underwriters, subject to certain limited exceptions. After the expiration of this lock-up period, or earlier with the prior written consent of Paulson Investment Company, Inc., all of the outstanding restricted shares subject to the lock-up may be sold in the public market pursuant to Rule 144.

      In general, under Rule 144, as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned restricted shares for at least one year, including a person who may be deemed to be our affiliate, may sell within any three-month period a number of shares of common stock that does not exceed a specified maximum number of shares. This maximum is equal to the greater of 1% of the then outstanding shares of our common stock or the average weekly trading volume in the common stock during the four calendar weeks immediately preceding the sale. Sales under Rule 144 are also subject to restrictions relating to manner of sale, notice and availability of current public information about us. In addition, under Rule 144(k) of the Securities Act, a person who is not our affiliate, has not been an affiliate of ours within three months prior to the sale and has beneficially owned shares for at least two years would be entitled to sell such shares immediately without regard to volume limitations, manner of sale provisions, notice or other requirements of Rule 144.

Stock Options

      As of October 1, 2006, we had granted and had outstanding stock options to purchase 643,000 shares of common stock under our Option Plan. A total of 666,667 shares of common stock currently are reserved for issuance under our Option Plan, and we intend to file a registration statement on Form S-8 to register these shares under the Securities Act. However, none of the shares registered on Form S-8 will be eligible for resale until expiration of the lock-up agreements to which they are subject.

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Bridge Securities

      In June 2006, we completed a $1.515 million bridge loan from lenders to help us meet our working capital needs. The loans accrued interest at an annual rate of 8% until October 16, 2006 and thereafter accrue interest at 18% until paid. Under the terms of the bridge notes as amended effective October 16, 2006, the loans are due and payable on the earlier of the completion of a public offering of equity securities with gross proceeds of at least $5.0 million or January 19, 2007. At the closing of a public offering on or before January 19, 2007, bridge lenders will be entitled to receive units identical to the units being offered in this offering. Each bridge lender will be entitled to receive that number of units equal to the principal of the lender’s note divided by the initial public offering price of the units. As of January 24, 2007, we had entered into amendments of bridge notes totaling $595,000 extending the January 19, 2007 due date to February 19, 2007; we expect to enter into the same amendment of notes representing the remaining $920,000 of bridge loans prior to the closing of this offering. The amended notes also provide that, at the company’s option, each bridge lender will be entitled to receive that number of units equal to the interest that has accrued on the lender’s note from October 17, 2006 until the closing of the offering divided by the initial public offering price of the units. If a public offering with gross proceeds of at least $5.0 million is not completed by the applicable due date, then each bridge lender has the right to convert the unpaid principal of the lender’s note into the number of shares that can be obtained by dividing the principal amount of the note by $3.00 per share plus an equal number of non-callable warrants exercisable at $3.00 per share for a period of five years from such issuance. These warrants will have a cashless exercise feature applicable at any time after one year from the first closing when the underlying shares of common stock are not covered by an effective registration statement with a current prospectus available. We have agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the units being issued to the bridge lenders within 180 days of the closing of this offering and cause it to be effective no later than 270 days after the closing. The units received by the bridge lenders will subject to a 180-day lock-up agreement with the representative of the underwriters.

Representative’s Warrants

      In connection with this offering, we have agreed to issue to the representative of the underwriters warrants to purchase 200,000 units. The representative’s warrants will be exercisable for units at any time beginning one year after the effective date of this offering until the fifth anniversary of the effective date. However, neither the representative’s warrants nor the underlying securities may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of one year immediately following the date of effectiveness or commencement of sales of this offering, except to any member participating in the offering and the officers or partners thereof, and only if all securities so transferred remain subject to the one-year lock-up restriction for the remainder of the lock-up period. We have agreed to file one registration statement to register the securities underlying the warrants during the period commencing on the first anniversary of the effective date of the offering and ending on the fifth anniversary of the effective date of the offering. The common stock and public warrants issued to the representative upon exercise of these representative’s warrants will be freely tradable.

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UNDERWRITING

      Paulson Investment Company, Inc. is acting as the representative of the underwriters. We and the underwriters named below have entered into an underwriting agreement with respect to the units being offered. In connection with this offering and subject to the terms and conditions of the underwriting agreement, each of the underwriters named below has severally agreed to purchase, and we have agreed to sell, the number of units set forth opposite the name of each underwriter.

Underwriters		Number of Units
Paulson Investment Company, Inc.
Investors Capital Corporation
EKN Financial Services, Inc.
	Total		2,000,000

      The underwriting agreement provides that the underwriters are obligated to purchase all of the units offered by this prospectus, other than those covered by the over-allotment option, if any units are purchased. The underwriters are offering the units when, as and if issued to and accepted by them, subject to a number of conditions, including:

•  the closing of the concurrent bond issue of the New Jersey Economic Development Authority;

•  receipt by the underwriters of an auditor’s letter and officer’s certificate;

•  no stop order suspending the effectiveness of the registration statement in effect and no proceedings for such purpose instituted or threatened;

•  approval of legal matters by counsel for the underwriters, including the validity of the shares; and

•  the underwriters’ right to reject orders in whole or in part.

      The representative has advised us that the underwriters propose to offer our units to the public initially at the offering price set forth on the cover page of this prospectus and to selected dealers at that price less a concession of not more than $           per unit. The underwriters and selected dealers may reallow a concession to other dealers, including the underwriters, of not more than $           per unit. After completion of the public offering of the units, the offering price, the concessions to selected dealers and the reallowance to their dealers may be changed by the underwriters.

      The underwriters have informed us that they do not expect to confirm sales of our units offered by this prospectus on a discretionary basis.

      We have been advised by the representative that the underwriters intend to make a market in our securities but that they are not obligated to do so and may discontinue making a market at any time without notice.

      In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.

Over-allotment Option

      Pursuant to the underwriting agreement, we have granted the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional 300,000 units on the same terms as the other units being purchased by the underwriters from us. The underwriters may exercise the option solely to cover over-allotments, if any, in the sale of the units that the underwriters have agreed to purchase. If the over-allotment option is exercised in full, the total public offering price, underwriting discount and proceeds to us before offering expenses will be $          , $ and $          , respectively.

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Stabilization

      The rules of the SEC generally prohibit the underwriters from trading in our securities on the open market during this offering. However, the underwriters are allowed to engage in some open market transactions and other activities during this offering that may cause the market price of our securities to be above or below that which would otherwise prevail in the open market. These activities may include stabilization, short sales and over-allotments, syndicate covering transactions and penalty bids.

•  Stabilizing transactions consist of bids or purchases made by the managing underwriter for the purpose of preventing or slowing a decline in the market price of our securities while this offering is in progress.

•  Short sales and over-allotments occur when the managing underwriter, on behalf of the underwriting syndicate, sells more of our units than it purchases from us in this offering. In order to cover the resulting short position, the managing underwriter may exercise the over-allotment option described above or may engage in syndicate covering transactions. There is no contractual limit on the size of any syndicate covering transaction. The underwriters will make available a prospectus in connection with any such short sales. Purchasers of units sold short by the underwriters are entitled to the same remedies under the federal securities laws as any other purchaser of units covered by the registration statement.

•  Syndicate covering transactions are bids for or purchases of our securities on the open market by the managing underwriter on behalf of the underwriters in order to reduce a short position incurred by the managing underwriter on behalf of the underwriters.

•  A penalty bid is an arrangement permitting the managing underwriter to reclaim the selling concession that would otherwise accrue to an underwriter if the common stock originally sold by the underwriter was later repurchased by the managing underwriter and therefore was not effectively sold to the public by such underwriter.

      If the underwriters commence these activities, they may discontinue them at any time without notice. The underwriters may carry out these transactions on the Nasdaq Capital Market, the Boston Stock Exchange or otherwise.

Indemnification

      The underwriting agreement provides for indemnification between us and the underwriters against specified liabilities, including liabilities under the Securities Act, and for contribution by us and the underwriters to payments that may be required to be made with respect to those liabilities. We have been advised that, in the opinion of the SEC, indemnification for liabilities under the Securities Act is against public policy as expressed in the Securities Act and is therefore unenforceable.

Underwriters’ Compensation

      We have agreed to sell the units to the underwriters at the initial offering price of $           per unit, which represents the initial public offering price of the units set forth on the cover page of this prospectus less the      % underwriting discount. The underwriting agreement also provides that Paulson Investment Company, Inc. will be paid a non-accountable expense allowance equal to 3% of the gross proceeds from the sale of the units offered by this prospectus, excluding any units purchased on exercise of the over-allotment option. We have paid Paulson Investment Company, Inc. a $35,000 advance against the non-accountable expense allowance which, if the offering is terminated, will be returned to us to the extent it is not applied to expenses actually incurred by the underwriters.

      On completion of this offering, we will issue to the representative of the underwriters warrants to purchase up to 200,000 units at a price of per unit equal to 120% of the initial offering price of the units. The representative’s warrants will be exercisable for units at any time beginning one year after the effective date of this offering, and will expire on the fifth anniversary of the effective date. However, neither the

50

representative’s warrants nor the underlying securities may be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of one year immediately following the date of effectiveness or commencement of sales of the offering, except to any member participating in the offering and the officers or partners thereof, and only if all securities so transferred remain subject to the one year lock-up restriction for the remainder of the lock-up period.

      The holder of these warrants will have, in that capacity, no voting, dividend or other stockholder rights. Any profit realized on the sale of the units issuable upon exercise of these warrants may be deemed to be additional underwriting compensation. The securities underlying these warrants are being registered pursuant to the registration statement of which this prospectus is a part. During the term of these warrants, the holder thereof is given the opportunity to profit from a rise in the market price of our common stock. We may find it more difficult to raise additional equity capital while these warrants are outstanding. At any time at which these warrants are likely to be exercised, we may be able to obtain additional equity capital on more favorable terms.

      The following table summarizes the underwriting discount we will pay to the underwriters and the non-accountable expense allowance we will pay to the representative of the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

	Total
		Without Over-	With Over-
	Per Unit	Allotment	Allotment
Underwriting discount
Non-accountable expense allowance

Lock-Up Agreements

      Our officers, directors and all stockholders (including holders of securities convertible into common stock) have agreed that for a period of one year from the date this registration statement becomes effective they will not sell, contract to sell, grant any option for the sale or otherwise dispose of any of our equity securities, or any securities convertible into or exercisable or exchangeable for our equity securities, other than through existing Rule 10b5-1 trading plans, intra-family transfers or transfers to trusts for estate planning purposes, without the consent of Paulson Investment Company, Inc., as the representative of the underwriters, which consent will not be unreasonably withheld. Paulson Investment Company, Inc. may consent to an early release from the one-year lock-up period if, in its opinion, the market for the common stock would not be adversely affected by sales and in cases of an officer, director or other stockholder’s financial emergency. We are unaware of any officer, director or current stockholder who intends to ask for consent to dispose of any of our equity securities during the lock-up period.

Determination of Offering Price

      The public offering price of the units offered by this prospectus and the exercise price of the public warrants have been determined by negotiation between us and the underwriters. Among the factors considered in determining the public offering price of the units and the exercise price of the warrants were:

•  our history and our prospects;

•  the industry in which we operate;

•  the status and development prospects for our proposed products;

•  the previous experience of our executive officers; and

•  the general condition of the securities markets at the time of this offering.

      The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the units. That price is subject to change as a result of market conditions and other

51

factors, and we cannot assure you that the units, or the common stock and warrants contained in the units, can be resold at or above the initial public offering price.

LEGAL MATTERS

      Holland & Knight LLP, Portland, Oregon will pass upon the validity of the common stock offered by this prospectus on our behalf. The underwriters have been represented by Tonkon Torp LLP, Portland, Oregon.

EXPERTS

      Our financial statements for the period ended December 31, 2003 and the years ended December 31, 2004 and 2005 included in this prospectus have been audited by Carlin, Charron & Rosen, LLP, independent registered public accountants, to the extent set forth in their report, and are set forth in this prospectus in reliance upon such report given upon the authority of them as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

      In connection with the units offered by this prospectus, we have filed a registration statement on Form SB-2 under the Securities Act with the SEC. This prospectus, filed as part of the registration statement, does not contain all of the information included in the registration statement and the accompanying exhibits and schedules. For further information with respect to our units, shares and warrants, and us you should refer to the registration statement and the accompanying exhibits and schedules. Statements contained in this prospectus regarding the contents of any contract or any other document are not necessarily complete, and you should refer to the copy of the contract or other document filed as an exhibit to the registration statement. You may inspect a copy of the registration statement and the accompanying exhibits and schedules without charge at the SEC’s public reference facility, 100 F Street, N.E., Washington, D.C. 20549, and you may obtain copies of all or any part of the registration statement from this office for a fee. You may obtain information on the operation of the public reference facility by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically. The address of the site is http://www.sec.gov.

      You should rely only on the information contained in this prospectus and in any free writing prospectus that states that it has been provided with our approval. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Information contained on our website does not constitute a part of this prospectus. The information in this prospectus may only be accurate as of the date appearing on the cover page of this prospectus, regardless of the time this prospectus is delivered or our units are sold.

      We are not, and the underwriters are not, making an offer to sell the units in any jurisdiction where the offer or sale is not permitted. No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or the possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside of the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable in that jurisdiction.

      We own no registered trademarks. Brand names or trademarks appearing in this prospectus are the property of their respective owners.

52

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			F-2
CONSOLIDATED FINANCIAL STATEMENTS
	Consolidated Balance Sheets, December 31, 2003 (Audited), December 31, 2004 (Audited), December 31, 2005 (Audited), and September 30, 2006 (Unaudited)		F-3
	Consolidated Statements of Operations, May 2, 2003 (inception) through December 31, 2003 (Audited), January 1, 2004 through December 31, 2004 (Audited), January 1, 2005 through December 31, 2005 (Audited), May 2, 2003 (inception) through December 31, 2005 (Audited), January 1, 2005 through September 30, 2005 (Unaudited), January 1, 2006 through September 30, 2006 (Unaudited), and May 2, 2003 (inception) through September 30, 2006 (Unaudited)		F-4
	Consolidated Statements of Changes in Owners’ Equity (Deficiency), May 2, 2003 (inception) through December 31, 2003 (Audited), January 1, 2004 through December 31, 2004 (Audited), January 1, 2005 through December 31, 2005 (Audited), and January 1, 2006 through September 30, 2006 (Unaudited)		F-5
	Consolidated Statements of Cash Flows, May 2, 2003 (inception) through December 31, 2003 (Audited), January 1, 2004 through December 31, 2004 (Audited), January 1, 2005 through December 31, 2005 (Audited), May 2, 2003 (inception) through December 31, 2005 (Audited), January 1, 2005 through September 30, 2005 (Unaudited), January 1, 2006 through September 30, 2006 (Unaudited), and May 2, 2003 (inception) through September 30, 2006 (Unaudited)		F-6
	Notes to Consolidated Financial Statements		F-8

F-1

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
Converted Organics Inc.

      We have audited the accompanying consolidated balance sheets of Converted Organics Inc. (a development stage company) as of December 31, 2003, December 31, 2004, and December 31, 2005 and the related consolidated statements of operations, changes in owners’ equity (deficiency) and cash flows for the periods from May 2, 2003 (inception) through December 31, 2003, January 1, 2004 through December 31, 2004, January 1, 2005 through December 31, 2005, and cumulative from May 2, 2003 (inception) through December 31, 2005. These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Converted Organics Inc. (a development stage company) as of December 31, 2003, December 31, 2004, and December 31, 2005, and the results of its operations and its cash flows for the periods from May 2, 2003 (inception) through December 31, 2003, January 1, 2004 through December 31, 2004, January 1, 2005 through December 31, 2005, and cumulative from May 2, 2003 (inception) through December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

      The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As shown in the accompanying consolidated financial statements, the company has a working capital deficiency of $845,162 as of December 31, 2005, has not earned any revenues, and has incurred a net loss since its inception totaling $2,563,652 through December 31, 2005. These factors raise substantial doubt about the company’s ability to continue as a going concern. Management’s plans regarding these matters are described in Note 1. These consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

/s/ Carlin, Charron & Rosen, LLP

Glastonbury, Connecticut

June 2, 2006, except for Note 10, as to which the date is June 15, 2006

F-2

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

			December 31,			December 31,			December 31,			September 30,
			2003			2004			2005			2006
			(Audited)			(Audited)			(Audited)			(Unaudited)
ASSETS
CURRENT ASSETS
	Cash		$	75,403		$	7,366		$	371		$	27,940
	Prepaid rent			—			—			—			35,000
	Prepaid insurance			—			—			—			20,625
	Deferred financing and issuance costs, net			—			—			64,110			316,294
		Total current assets		75,403			7,366			64,481			399,859
OTHER ASSETS
	Other — security deposit			—			—			—			65,000
	Intangible asset — license			660,000			660,000			660,000			660,000
	Less: accumulated amortization			(8,250	)		(24,750	)		(41,250	)		(53,625	)
				651,750			635,250			618,750			671,375
		Total assets	$	727,153		$	642,616		$	683,231		$	1,071,234
LIABILITIES AND OWNERS’ EQUITY (DEFICIENCY)
LIABILITIES
	Accounts payable and other accrued expenses		$	23,063		$	151,829		$	324,843		$	481,357
	Accrued compensation — officers, directors and consultants			—			—			—			300,000
	Accrued legal fees			—			—			29,110			48,755
	Accrued interest			—			10,518			55,690			70,608
	Term notes payable			—			250,000			500,000			500,000
	Bridge loan payable, net of discount			—			—			—			1,441,358
		Total current liabilities		23,063			412,347			909,643			2,842,078
OWNERS’ EQUITY (DEFICIENCY)
	Preferred stock, $.0001 par value, authorized
		25,000,000 shares; no shares issued and outstanding		—			—			—			—
	Common stock, $.0001 par value, authorized
		75,000,000 shares		—			—			—			133
	Additional paid-in capital			—			—			—			4,113,385
	Members’ equity			2,092,040			2,165,240			2,337,240			—
	Deficit accumulated during the development stage			(1,387,950	)		(1,934,971	)		(2,563,652	)		(5,884,362	)
		Total owners’ equity (deficiency)		704,090			230,269			(226,412	)		(1,770,844	)
		Total liabilities and owners’ equity (deficiency)	$	727,153		$	642,616		$	683,231		$	1,071,234

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

												Cumulative									Cumulative
												from									from
			May 2, 2003									May 2, 2003									May 2, 2003
			(Inception)			January 1,			January 1,			(Inception)			January 1,			January 1,			(Inception)
			through			2004 through			2005 through			through			2005 through			2006 through			through
			December 31,			December 31,			December 31,			December 31,			September 30,			September 30,			September 30,
			2003			2004			2005			2005			2005			2006			2006
			(Audited)			(Audited)			(Audited)			(Audited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES			$	—		$	—		$	—		$	—		$	—		$	—		$	—
COSTS AND EXPENSES
	Research and development costs			964,975			377,239			154,598			1,496,812			142,893			170,337			1,667,149
	General and administrative expenses			414,725			142,764			394,411			951,900			243,370			2,256,052			3,207,952
	Amortization of intangible asset — license			8,250			16,500			16,500			41,250			12,375			12,375			53,625
	Amortization of deferred financing fees			—			—			—			—			—			73,599			73,599
	Interest expense			—			10,518			50,172			60,690			26,803			798,547			859,237
	Bad debt expense			—			—			13,000			13,000			9,800			9,800			22,800
				1,387,950			547,021			628,681			2,563,652			435,241			3,320,710			5,884,362
		Loss before provision for income taxes		(1,387,950	)		(547,021	)		(628,681	)		(2,563,652	)		(435,241	)		(3,320,710	)		(5,884,362	)
PROVISION FOR INCOME TAXES				—			—			—			—			—			—			—
		Net loss	$	(1,387,950	)	$	(547,021	)	$	(628,681	)	$	(2,563,652	)	$	(435,241	)	$	(3,320,710	)	$	(5,884,362	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY (DEFICIENCY)

	Common Stock
					Additional		Deficit Accumulated
	Shares Issued				Paid-In		During the			Members’			Total Owners’
	and Outstanding		Amount		Capital		Development Stage			Equity			Equity(Deficiency)
Balance, May 2, 2003 (Inception)		—	$	—	$	—	$	—		$	—		$	—
Members’ contributions		—		—		—		—			2,099,500			2,099,500
Members’ distributions		—		—		—		—			(7,460	)		(7,460	)
Net loss		—		—		—		(1,387,950	)		—			(1,387,950	)
Balance, December 31, 2003 (Audited)		—		—		—		(1,387,950	)		2,092,040			704,090
Members’ contributions		—		—		—		—			73,200			73,200
Net loss		—		—		—		(547,021	)		—			(547,021	)
Balance, December 31, 2004 (Audited)		—		—		—		(1,934,971	)		2,165,240			230,269
Members’ contributions		—		—		—		—			172,000			172,000
Net loss		—		—		—		(628,681	)		—			(628,681	)
Balance, December 31, 2005 (Audited)		—		—		—		(2,563,652	)		2,337,240			(226,412	)
Recapitalization of members’ equity (Unaudited)		600,000		60		2,337,180		—			(2,337,240	)		—
Issuance of common stock to founders (Unaudited)		733,333		73		—		—			—			73
Stock options issued as compensation (Unaudited)		—		—		1,018,705		—			—			1,018,705
Bridge loan rights (Unaudited)		—		—		757,500		—			—			757,500
Net loss (Unaudited)		—		—		—		(3,320,710	)		—			(3,320,710	)
Balance, September 30, 2006 (Unaudited)		1,333,333	$	133	$	4,113,385	$	(5,884,362	)	$	—		$	(1,770,844	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

														Cumulative									Cumulative
														from									from
					May 2, 2003			January 1,			January 1,			May 2, 2003			January 1,			January 1,			May 2, 2003
					(Inception)			2004			2005			(Inception)			2005			2006			(Inception)
					through			through			through			through			through			through			through
					December 31,			December 31,			December 31,			December 31,			September 30,			September 30,			September 30,
					2003			2004			2005			2005			2005			2006			2006
					(Audited)			(Audited)			(Audited)			(Audited)			(Unaudited)			(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(1,387,950	)	$	(547,021	)	$	(628,681	)	$	(2,563,652	)	$	(435,241	)	$	(3,320,710	)	$	(5,884,362	)
	Adjustments to reconcile net loss to net cash used in operating activities:
			Amortization of intangible asset — license			8,250			16,500			16,500			41,250			12,375			12,375			53,625
			Amortization of deferred financing fees			—			—			—			—			—			73,599			73,599
			Amortization of discount on bridge loan			—			—			—			—			—			683,858			683,858
			Stock option compensation expense			—			—			—			—			—			1,018,705			1,018,705
			Compensation expense pursuant to common stock issued to founders at incorporation			—			—			—			—			—			73			73
	Changes in assets and liabilities:
		(Increase) decrease in:
			Prepaid expenses and other assets			—			—			—			—			—			(100,000	)		(100,000	)
			Prepaid insurance			—			—			—			—			—			(20,625	)		(20,625	)
		Increase (decrease) in:
			Accounts payable and other accrued expenses			23,063			128,766			173,014			324,843			134,579			176,159			501,002
			Accrued compensation — officers, directors and consultants			—			—			—			—			—			300,000			300,000
			Accrued interest			—			10,518			45,172			55,690			26,803			14,918			70,608
				Net cash used in operating activities		(1,356,637	)		(391,237	)		(393,995	)		(2,141,869	)		(261,484	)		(1,161,648	)		(3,303,517	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of license					(660,000	)		—			—			(660,000	)		—			—			(660,000	)
				Net cash used in investing activities		(660,000	)		—			—			(660,000	)		—			—			(660,000	)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

												Cumulative								Cumulative
			May 2, 2003									from Inception								from Inception
			(Inception)			January 1,			January 1,			(May 2, 2003)			January 1,		January 1,			(May 2, 2003)
			through			2004 through			2005 through			through			2005 through		2006 through			through
			December 31,			December 31,			December 31,			December 31,			September 30,		September 30,			September 30,
			2003			2004			2005			2005			2005		2006			2006
			(Audited)			(Audited)			(Audited)			(Audited)			(Unaudited)		(Unaudited)			(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
	Members’ contributions			2,099,500			73,200			172,000			2,344,700			172,000		—			2,344,700
	Proceeds from term notes payable			—			250,000			250,000			500,000			250,000		—			500,000
	Proceeds from bridge loan, net			—			—			—			—			—		1,434,250			1,434,250
	Members’ distributions			(7,460	)		—			—			(7,460	)		—		—			(7,460	)
	Payments made for deferred issuance costs			—			—			(35,000	)		(35,000	)		—		(245,033	)		(280,033	)
		Net cash provided by financing activities		2,092,040			323,200			387,000			2,802,240			422,000		1,189,217			3,991,457
NET INCREASE (DECREASE) IN CASH				75,403			(68,037	)		(6,995	)		371			160,516		27,569		$	27,940
CASH, beginning of period				—			75,403			7,366			—			7,366		371			—
CASH, end of period			$	75,403		$	7,366		$	371		$	371		$	167,882	$	27,940		$	27,940
NON-CASH FINANCING ACTIVITIES:
	Deferred legal fees			—			—		$	29,110		$	29,110		$	—	$	245,033		$	274,143
	Discount — bridge equity notes			—			—			—			—			—		757,500			757,500

The accompanying notes are an integral part of these consolidated financial statements.

F-7

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS

      Converted Organics Inc. (a development stage company) (the “company”) is seeking to use organic waste as a feedstock to manufacture, sell and distribute all-natural soil amendment products combining disease suppression and nutrition characteristics. Converted Organics of Woodbridge, LLC (“Woodbridge”), a New Jersey limited liability company and wholly owned subsidiary of the company, was formed for the purpose of owning constructing and operating the Woodbridge, New Jersey facility. Woodbridge has had no assets, liabilities or operations to date.

      The company was incorporated in the State of Delaware on January 4, 2006. On February 21, 2006, the company merged with Mining Organics Management LLC (“MOM”) and Mining Organics Harlem River Rail Yard LLC (“HRRY”). As discussed in Note 6, the mergers were accounted for as a recapitalization. MOM and HRRY had been previously organized as Massachusetts limited liability companies on May 2, 2003 and July 29, 2003, respectively. The members of MOM included a limited liability company, the managing member of which is the company’s current director William A. Gildea, another limited liability company, the sole member of which is consultant John E. Tucker, and the company’s current Chief Financial Officer Thomas R. Buchanan. Weston Solutions, Inc. and MOM were equal members of HRRY. Each of MOM and HRRY was formed to promote the principal business objective of Converted Organics Inc. — that is, to implement licensed technology to facilitate the conversion of organic food waste into solid and liquid fertilizer products. MOM was originally intended to be the principal operating entity, and HRRY was a location-specific entity that was formed to develop business opportunities in New York. Thereafter, to consolidate the various related entities, Converted Organics Inc. was formed and each of HRRY and MOM was merged into it. As a result, the historical financial results of MOM and HRRY have been reflected in the company’s consolidated financial statements. As a result of the merger of Converted Organics Inc. and HRRY, each of the members of HRRY received 300,000 shares of Converted Organics Inc. common stock. MOM subsequently distributed the 300,000 shares that it received as a result of the merger to its members; as a result, Mr. William Gildea and Mr. Tucker each received 135,000 shares of Converted Organics common stock and Mr. Buchanan received 30,000 shares. No shares of Converted Organics Inc. common stock were issued in connection with the merger between Converted Organics Inc. and MOM because MOM did not contribute any value as of the date of the merger.

     DEVELOPMENT STAGE COMPANY

      The company is considered a development stage company as defined by Statement of Financial Accounting Standards (SFAS) No. 7, as it has no principal operations or revenue from any source. Operations from the company’s inception have been devoted primarily to strategic planning, raising capital and developing revenue-generating opportunities.

     GOING CONCERN/ MANAGEMENT’S PLAN

      The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As shown in the accompanying consolidated financial statements, the company has a working capital deficiency of $845,162 and $2,442,219 as of December 31, 2005 (Audited) and September 30, 2006 (Unaudited), respectively, has not earned any revenues, and has incurred a net loss since its inception totaling $2,563,652 and $5,884,362 as of December 31, 2005 (Audited) and September 30, 2006 (Unaudited), respectively. These factors raise substantial doubt about the company’s ability to continue as a going concern. These consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty.

F-8

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The company is contemplating an initial public offering of 2,000,000 units. Each unit consists of one share of common stock, one redeemable Class A warrant and one non-redeemable Class B warrant, each warrant to purchase one share of common stock. A portion of the contemplated initial public offering, together with the proceeds of an approximately $17.5 million solid waste revenue bond offering that is expected to close simultaneously with the closing of this offering, will be used principally to develop and construct a facility in Woodbridge, New Jersey that will convert organic food waste into soil amendment products. The company expects this facility to be operational approximately one year from the date of the closing of these contemplated offerings.

      The company’s revenues are expected to come from two sources: tip fees and product sales. Waste haulers will pay the company “tip” fees for accepting food waste generated by food distributors such as grocery stores, produce docks and fish markets, food processors, and hospitality venues such as hotels, restaurants, convention centers and airports. Revenue will also come from the sale of the company’s fertilizer products. The company’s products will possess a combination of nutritional, disease suppression and soil amendment characteristics. The company’s initial facility is designed to service the New York-Northern New Jersey metropolitan area.

     USE OF ESTIMATES

      The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates.

     UNAUDITED INTERIM FINANCIAL INFORMATION

      The accompanying interim financial information as of September 30, 2006 and for the nine month periods ended September 30, 2006 and 2005 and the period from inception (May 2, 2003) through September 30, 2006 was taken from the company’s books and records without audit. However, in the opinion of management, such information includes all adjustments (consisting only of normal recurring accruals) which are necessary to properly reflect the financial position of the company as of September 30, 2006 and the results of operation for the nine month periods ended September 30, 2006 and 2005 and the period from inception (May 2, 2003) through September 30, 2006. The results of operations for the nine months ended September 30, 2006 are not necessarily indicative of those to be expected for the year ended December 31, 2006.

     CASH AND CASH EQUIVALENTS

      The company considers financial instruments with a maturity date of three months or less from the date of purchase to be cash equivalents. The company had no cash equivalents at December 31, 2003 (Audited), December 31, 2004 (Audited), December 31, 2005 (Audited) and September 30, 2006 (Unaudited).

     RESEARCH AND DEVELOPMENT COSTS

      Research and development costs include the costs of engineering, design, feasibility studies, outside services, personnel and other costs incurred in development of the company’s manufacturing facilities. All such costs are charged to expense as incurred.

F-9

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     INCOME TAXES

      The company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Differences between the financial statement and tax bases of assets, liabilities, and other transactions did not result in a provision for current or deferred income taxes for the periods from January 4, 2006 through September 30, 2006 (Unaudited).

      No provision for federal or state income taxes is recognized for MOM and HRRY as those entities are limited liability companies. As such, taxable income, losses, deductions and credits pass through to the members to be reported on their tax returns.

     RECENT ACCOUNTING PRONOUNCEMENTS

      In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections — a replacement of APB opinion No. 20 and FASB Statement No 3.” In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment.” In December 2004, the FASB issued SFAS No. 153, “Exchange of Non-monetary Assets, an Amendment of APB Opinion No 29.” In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions — an amendment of APB opinion No. 29.” The company is not significantly impacted by these statements and does not expect their implementation to have a material impact on the company’s consolidated financial statements.

NOTE 2 — FAIR VALUE OF FINANCIAL INSTRUMENTS

     CONCENTRATIONS OF CREDIT RISK

      The company’s financial instrument that is exposed to a concentration of credit risk is cash. The company places its cash with a high credit quality institution. At December 31, 2005 (Audited), the company’s cash balance on deposit did not exceed federal depository insurance limits. At September 30, 2006 (Unaudited), the company’s cash balance on deposit did not exceed federal depository insurance limits.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statement of Financial Accounting Standards (SFAS) No. 107, Fair Value of Financial Instruments, requires disclosure of the fair value of financial instruments for which the determination of fair value is practicable. SFAS No. 107 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amount of the company’s financial instruments consisting of cash, accounts payable, and accrued expenses approximate their fair value because of the short maturity of those instruments. The fair value of the term notes payable was estimated by discounting the future cash flows using current rates offered by lenders for similar borrowings with similar credit ratings. The fair value of term notes payable approximated their carrying value. The company’s financial instruments are held for other than trading purposes.

NOTE 3 — DEFERRED FINANCING AND ISSUANCE COSTS, NET

      In October 2005, the company capitalized prepaid financing costs in the amount of $35,000 that were paid to an underwriter in anticipation of a proposed public offering and has capitalized legal costs totaling

F-10

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$29,110 and $274,143 at December 31, 2005 (Audited), and September 30, 2006 (Unaudited), respectively, in anticipation of a proposed public offering (see Note 1).

      The company also paid $80,750 in financing and broker fees during 2006 in connection with its bridge financing. The deferred financing and broker fees are being amortized over the life of the bridge loan (Note 5). Amortization of deferred financing fees totaled $73,599 for the nine months ended September 30, 2006 (Unaudited).

NOTE 4 — INTANGIBLE ASSET — LICENSE

      Pursuant to a license agreement with an effective date of July 15, 2003 and amended effective February 9, 2006, the company entered into an exclusive license to use its enhanced Autogenous Thermophylic Aerobic Digestion process (EATAD) technology for the design, construction and operation of facilities for the conversation of organic waste into solid and liquid organic material. The license is stated at cost. Amortization is provided using the straight-line method over the life of the license. Amortization expense for the periods from May 2, 2003 (inception) through December 31, 2003 (Audited), January 1, 2004 through December 31, 2004 (Audited), January 1, 2005 through December 31, 2005 (Audited), January 1, 2005 through September 30, 2005 (Unaudited) and January 1, 2006 through September 30, 2006 (Unaudited) was $8,250, $16,500, $16,500, $12,375 and $12,375, respectively. The company expects the license’s annual amortization expense to be $16,500 until fully amortized at the end of the 40 year license period.

      Intangible assets are reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. An impairment charge is recognized if a reporting unit’s intangible asset carrying amount exceeds its implied fair value.

NOTE 5 — DEBT

     TERM NOTES

      The company has two term notes payable: (1) unsecured term note dated August 27, 2004 in the amount of $250,000 due on demand (with a stated maturity date of September 30, 2006 — also see Note 12), plus accrued interest at 12%, and (2) unsecured term note dated September 6, 2005 in the amount of $250,000 due on demand (with a stated maturity date of September 15, 2006 — also see Note 12), plus accrued interest at 15%.

      A schedule of outstanding principal amounts of the term notes is as follows:

	December 31,		December 31,			December 31,			September 30,
	2003		2004			2005			2006
	(Audited)		(Audited)			(Audited)			(Unaudited)
Term note dated August 27, 2004	$	—	$	250,000		$	250,000		$	250,000
Term note dated September 6, 2005		—		250,000			250,000			250,000
		—		250,000			500,000			500,000
Less: current portion		—		(250,000	)		(500,000	)		(500,000	)
	$	—	$	—		$	—		$	—

     BRIDGE FINANCING

      On March 2, 2006, the company completed a $500,000 bridge loan (“Bridge Financing”) from lenders (“Bridge Noteholders”) to help meet the company’s working capital needs. The loans (“Bridge Loans”) accrue interest at an annual rate of 8%, which is payable in arrears quarterly, and are due and payable on the

F-11

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

earlier of October 16, 2006 (also see Note 12) or the completion of a public offering of equity securities (“Qualified Public Offering”). If a Qualified Public Offering is not completed by October 16, 2006, the company shall issue to the Bridge Noteholders alternative bridge equity units consisting of that number of shares of common stock of the company as shall equal the principal amount of the bridge notes divided by $3.00 plus an equal number of non-callable warrants exercisable at $3.00 per share for a period of five years from such issuance, and which have a cashless exercise feature applicable at any time after one year from the first closing when the underlying shares of common stock are not covered by an effective registration statement with a current prospectus available. The placement agent for the Bridge Financing received a commission equal to 5% of the gross proceeds from the Bridge Financing. The company received the $500,000 Bridge Financing net of the commission to the placement agent of $25,000. The company has classified this cost as deferred financing costs.

      In April, May and June 2006, the company received additional proceeds totaling $1,015,000 (net of a $50,750 commission to the placement agent) from a series of promissory notes issued under the terms of the Financing Terms Agreement dated March 2, 2006.

      In connection with the Bridge Loans, the company issued bridge notes (“Bridge Notes”) and securities of the company (“Bridge Equity Units”) to the Bridge Noteholders. If a Qualified Public Offering occurs before October 16, 2006, the Bridge Noteholders will be entitled to receive Bridge Equity Units consisting of securities identical in form to the securities being offered in the Qualified Public Offering. Each Bridge Noteholder will be entitled to receive Bridge Equity Units equal to the principal of the Bridge Noteholder’s bridge loan divided by the initial public offering price of the securities comprising the Bridge Equity Unit.

      The Bridge Loans and the Bridge Equity Units were allocated for accounting purposes based on the relative fair values at the time of issuance of (i) the Bridge Loans without the Bridge Equity Units and (ii) the Bridge Equity Units themselves. The fair value of the Bridge Loans and the Bridge Equity Units was computed at $1,515,000 (Unaudited) each, for a total value of $3,030,000 (Unaudited). The $1,515,000 fair value of the Bridge Equity Units was computed as follows: in June 2006, the company completed a $1,515,000 bridge loan from lenders. At the closing of a public offering on or before October 16, 2006, bridge lenders will be entitled to receive units identical to the units being offered in the company’s initial public offering. Each bridge lender will be entitled to receive that number of units equal to the principal of the lender’s note divided by the initial public offering price. Stated differently, upon closing of an initial public offering on or before October 16, 2006, the company will be obligated to issue to the bridge lenders a number of units with a market value of $1,515,000. Since they were of equal value, the $1,515,000 of cash proceeds was allocated 50% to the Bridge Loans and 50% to the Bridge Equity Units. The Bridge Equity Units of $757,500 were accounted for as paid-in capital (Unaudited). The Bridge Loans of $1,515,000 are reflected on the balance sheet net of the $757,500 discount on the Bridge Loans (Unaudited). The discount for the Bridge Equity Units ($757,500) is being amortized into interest expense over the life of the Bridge Loans. For the nine months ended September 30, 2006 (Unaudited), the company recorded $683,858 in interest expense related to this discount.

      The company has not yet issued any Bridge Equity Units. The future issuance of any Bridge Equity Units would not serve as an exchange for the Bridge Loans or Bridge Notes, and would be incremental to those securities.

     BOND FINANCING (unaudited)

      In 2006, the company entered into a non-binding letter of intent to place an offering of approximately $17.5 million of tax exempt New Jersey Economic Development Authority Solid Waste Revenue Bonds. The proceeds of these bonds are to be used to fund the construction and equipping of an approximately

F-12

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

60,000 square foot plant for the production of agricultural supplements to be located in Woodbridge, New Jersey.

NOTE 6 — OWNERS’ EQUITY (DEFICIT)

      The company is authorized to issue 75,000,000 shares of $0.0001 par value common stock. Of the authorized shares, 733,333 of the authorized shares were issued to the founders of the company (“founders’ shares”) on January 13, 2006 (Unaudited). The company did not receive any consideration for the founders’ shares. Because the company had a negative estimated value on January 13, 2006, the company recognized compensation expense at par value totaling $73 in connection with the issuance of the founders’ shares as par value represents the statutory minimum share value in the state of Delaware.

      On February 21, 2006 (Unaudited), the company merged with MOM and HRRY. At that time, MOM was a fifty-percent owner of HRRY. The mergers were accounted for as a recapitalization of the company. As a result of the recapitalization, 600,000 shares were issued to the members of HRRY, with 300,000 shares distributed to Weston Solutions, Inc. and 300,000 shares distributed among the individual members of MOM, each of whom was a founder of the company.

NOTE 7 — INCOME TAXES

      At September 30, 2006 (Unaudited), the company had start-up costs of approximately $3,000,000 (Unaudited) that may be offset against future taxable income, if any, ratably through 2026.

      The company has fully reserved the approximate $1,200,000 (Unaudited) tax benefit of these costs by a valuation allowance of the same amount, because the likelihood of realization of the tax benefit cannot be determined.

      There is no current or deferred tax provision for the period from January 4, 2006 to September 30, 2006 (Unaudited). No provision for federal or state income taxes is recognized for MOM and HRRY as those entities are limited liability companies. As such, taxable income, losses, deductions and credits pass through to the members to be reported on their tax returns.

NOTE 8 — SEGMENT REPORTING

      In June 1997, SFAS 131, “Disclosure about Segments of an Enterprise and Related Information” was issued, which amends the requirements for a public enterprise to report financial and descriptive information about its reportable operating segments. Operating segments, as defined in the pronouncement, are components of an enterprise about which separate financial information is available that is evaluated regularly by the company in deciding how to allocate resources and in assessing performance. The financial information is required to be reported on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. The company has no reportable segments at December 31, 2003 (Audited), December 31, 2004 (Audited), December 31, 2005 (Audited), September 30, 2005 (Unaudited) and September 30, 2006 (Unaudited).

NOTE 9 — RELATED PARTY TRANSACTIONS

      The company is located at 7A Commercial Wharf West, Boston, Massachusetts. The company is renting the premises under a verbal agreement with ECAP, LLC. The managing member of ECAP, LLC is a director and shareholder of the company and is also the brother of the company’s President and CEO. The rental agreement provides for rent and support, as agreed between the company and ECAP, LLC and for reimbursement of expenses by the company for office and other expenses. These expenses totaled $125,500 in

F-13

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2003 (Audited), $42,496 in 2004 (Audited), $71,711 in 2005 (Audited), $40,212 for the nine months ended September 30, 2005 (Unaudited) and $27,750 for the nine months ended September 30, 2006 (Unaudited).

      The company has entered into a services agreement dated May 29, 2003, as modified October 6, 2004, with one of its principal stockholders, Weston Solutions, Inc. (“Weston”). Weston has been engaged to provide engineering and design services in connection with the construction of the Woodbridge organic waste conversation facility. The total amounts recorded by the company for services provided by Weston were $70,000 in 2003 (Audited), $434,454 in 2004 (Audited), $90,888 in 2005 (Audited), $-0- for the nine months ended September 30, 2005 (Unaudited) and $46,490 for the nine months ended September 30, 2006 (Unaudited).

      During the years ended December 31, 2003 (Audited) and 2004 (Audited), the company incurred legal fees totaling $9,352 and $10,875, respectively, to a law firm affiliated with the company’s President and CEO and partially owned by a brother of the company’s CEO. Fees of $10,875 remained unpaid at September 30, 2006 (Unaudited) and are included in the balance sheets in accounts payable and other accrued expenses. The fees of $9,352 were paid in 2003 (Audited).

      As payment for compensation accrued and not paid for the period April 1, 2006 to September 30, 2006 and expenses incurred but not reimbursed since April 1, 2006, the company has agreed to distribute a total of $300,000 of the proceeds of this offering among the following executive officers, directors and consultants, each of whom will receive $50,000: Edward J. Gildea, Thomas R. Buchanan, John A. Walsdorf, John P. Weigold, William A. Gildea and John E. Tucker. The company has recorded accrued compensation and expenses — officers, directors and consultants totaling $300,000 in the consolidated balance sheets at September 30, 2006 (Unaudited) which represents management’s estimate of compensation earned and expenses incurred but not reimbursed at September 30, 2006 (Unaudited).

NOTE 10 — STOCK OPTION PLAN

      In June 2006, the company’s Board of Directors and stockholders approved the 2006 Stock Option Plan (the “Option Plan”). The Option Plan authorizes the grant and issuance of options and other equity compensation to employees, officers and consultants. A total of 666,667 shares of common stock are reserved for issuance under the Option Plan.

      The Option Plan is administered by the Compensation Committee of the Board of Directors. Subject to the provisions of the Option Plan, the Committee determines who will receive the options, the number of options granted, the manner of exercise and the exercise price of the options. The term of incentive stock options granted under the Option Plan may not exceed ten years, or five years for options granted to an optionee owning more than 10% of our voting stock. The exercise price of an incentive stock option granted under the Option Plan must be equal to or greater than the fair market value of the shares of our common stock on the date the option is granted. The exercise price of a non-qualified option granted under the Option Plan must be equal to or greater than 85% of the fair market value of the shares of our common stock on the date the option is granted. An incentive stock option granted to an optionee owning more than 10% of our voting stock must have an exercise price equal to or greater than 110% of the fair market value of our common stock on the date the option is granted.

      On June 15, 2006, the Compensation Committee of the Board of Directors granted 643,000 options to purchase shares of the company’s common stock. The options vested on the grant date, have an exercise price of $3.75 (Unaudited) per share and expire five years from the grant date. The exercise price was based on an assumed public offering price of $5.00 per unit less the fair value for the two warrants included in the unit (Class A warrant fair value of $0.75 (Unaudited), Class B warrant fair value of $0.50 (Unaudited)). The fair value of the Class A and B warrants was estimated on June 15, 2006 for purposes of valuing the individual

F-14

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

components of the unit so that the options could be valued. The fair value of the warrants was estimated using a Black-Scholes pricing model with the following assumptions: risk-free interest rate of 5.07%; no dividend yield; volatility factor of 38.816%; and an expiration period of 1,825 days.

STOCK OPTIONS — VALUATION (UNAUDITED)

      The fair value for the stock options was estimated at the date of grant using a Black-Scholes pricing model with the following assumptions: risk-free interest rate of 5.07%; no dividend yield; volatility factor of 38.816%; and an expiration period of five years. The company’s stock option compensation expense determined under the fair value based method totaled $1,018,705 and has been included in general and administrative expenses in the statement of operations for the period January 1, 2006 through September 30, 2006.

      Stock option activity for the period January 1, 2006 through September 30, 2006 is as follows:

							Weighted
			Exercise		Weighted		Average
	Stock		Price per		Average		Remaining
	Options		Share		Exercise Price		Life (Years)
Outstanding at January 1, 2006		-0-
Granted		643,000	$	3.75	$	3.75		5.00
Expired		-0-
Exercised		-0-
Outstanding at September 30, 2006		643,000	$	3.75	$	3.75		4.95

NOTE 11 — LEASE (UNAUDITED)

      In June 2006, the company signed a lease for its New Jersey operations. The lease term is for ten years with an option to renew for an additional ten years. Future minimum lease payments under this lease are approximately: $97,500 from September 30, 2006 to December 31, 2006; $390,000 in 2007, 2008, 2009 and 2010; $398,000 in 2011; $413,000 in 2012; $421,000 in 2013; $430,000 in 2014; $438,000 in 2015; and $259,000 from January 1, 2016 to July 31, 2016.

NOTE 12 — SUBSEQUENT EVENTS (UNAUDITED)

TERM NOTES

      The maturity dates of the term notes (Note 5) have been extended to December 30, 2006. The company plans to repay these notes from the proceeds of its equity offering.

BRIDGE FINANCING

      In June 2006, the company completed a $1.515 million bridge loan from lenders to help us meet our working capital needs. The loans accrued interest at an annual rate of 8% until October 16, 2006 and thereafter accrue interest at 18% until paid. Under the original terms of the bridge notes, the loans are due and payable on the earlier of the completion of a public offering of equity securities with gross proceeds of at least $5.0 million or October 16, 2006. At the closing of a public offering on or before October 16, 2006, bridge lenders will be entitled to receive units identical to the units being offered in this offering. Each bridge lender will be entitled to receive that number of units equal to the principal of the lender’s note divided by the initial public offering price of the units. As of October 24, 2006, the company had entered into amendments of bridge notes totaling $1.465 million extending the October 16, 2006 due date to January 19, 2007; the company expects to enter into the same amendment of notes representing the remaining $50,000 of bridge loans prior to the closing of this

F-15

CONVERTED ORGANICS INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

offering. The amended notes also provide that, at the company’s option, each bridge lender will be entitled to receive that number of units equal to the interest that has accrued on the lender’s note from October 17, 2006 until the closing of the offering divided by the initial public offering price of the units. If a public offering with gross proceeds of at least $5.0 million is not completed by the applicable due date, then each bridge lender has the right to convert the unpaid principal into the number of shares that can be obtained by dividing the principal amount of the note by $3.00 per share plus an equal number of non-callable warrants exercisable at $3.00 per share for a period of five years.

F-16

2,000,000 Units

PROSPECTUS

Paulson Investment Company, Inc.

Investors Capital Corporation

EKN Financial Services, Inc.

                    , 2007

PART II — Information Not Required In Prospectus

Item 24. Indemnification of Directors and Officers.

      Our certificate of incorporation, as amended (“Certificate of Incorporation”), contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our shareholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:

•  Any breach of their duty of loyalty to our company or our stockholders.

•  Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.

•  Unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law.

•  Any transaction from which the director derived an improper personal benefit.

      Our Bylaws provide that we are required to indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by Delaware law. Our Bylaws also provide that we shall advance expenses incurred by a director or officer before the final disposition of any action or proceeding upon receipt of an undertaking from or on behalf of that director or officer to repay the advance if it is ultimately determined that he or she is not entitled to be indemnified. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by the Board of Directors. These agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

      The limitation of liability and indemnification provisions in our Certificate of Incorporation and Bylaws may discourage shareholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

      Insofar as we may permit indemnification for liabilities arising under the Securities Act to directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy, as expressed in the Securities Act and is, therefore, unenforceable.

II-1

Item 25. Other Expenses of Issuance and Distribution.

      The estimated expenses of the offering, all of which are to be borne by the Registrant, are as follows:

SEC Registration Fee		$	7,248
NASD Filing Fee			7,274
Nasdaq Capital Market Listing Fee			50,000
Boston Stock Exchange Listing Fee			20,500
Underwriters’ Non-Accountable Expense Allowance			330,000
Printing and Engraving*			150,000
Accounting Fees and Expenses*			125,000
Legal Fees and Expenses*			425,000
Blue Sky Fees and Expenses (including related legal fees)*			85,000
Transfer Agent Fees*			10,000
Miscellaneous*			39,978
	Total	$	1,250,000

*  Estimated

Item 26. Recent Sales of Unregistered Securities.

      In the last three years, the Registrant has sold securities which were not registered as follows:

      In connection with the Registrant’s merger with Mining Organics Harlem River Railyard, LLC (“HRRY”) in February 2006, the Registrant issued 600,000 shares to HRRY. These securities were issued in reliance upon an exemption under Section 4(2) of the Securities Act.

      In February 2006, the Registrant issued 733,333 shares of its common stock to certain members of its management and other founders of the company for no cash or other non-monetary consideration. These securities were issued in reliance upon an exemption under Section 4(2) of the Securities Act.

      In June 2006, the Registrant completed a $1.515 million bridge loan from lenders to help us meet our working capital needs. The loans accrued interest at an annual rate of 8% until October 16, 2006 and thereafter accrue interest at 18% until paid. Under the terms of the bridge notes as amended effective October 16, 2006, the loans are due and payable on the earlier of the completion of a public offering of equity securities with gross proceeds of at least $5.0 million or January 19, 2007. At the closing of a public offering on or before January 19, 2007, bridge lenders will be entitled to receive units identical to the units being offered in this offering. Each bridge lender will be entitled to receive that number of units equal to the principal of the lender’s note divided by the initial public offering price of the units. As of January 24, 2007, the Registrant had entered into amendments of bridge notes totaling $595,000 extending the January 19, 2007 due date to February 19, 2007; the Registrant expects to enter into the same amendment of notes representing the remaining $920,000 of bridge loans prior to the closing of this offering. The amended notes also provide that, at the company’s option, each bridge lender will be entitled to receive that number of units equal to the interest that has accrued on the lender’s note from October 17, 2006 until the closing of the offering divided by the initial public offering price of the units. If a public offering with gross proceeds of at least $5.0 million is not completed by the applicable due date, then each bridge lender has the right to convert the unpaid principal into the number of shares that can be obtained by dividing the principal amount of the note by $3.00 per share plus an equal number of non-callable warrants exercisable at $3.00 per share for a period of five years. These securities were issued solely to accredited investors in reliance upon the exemption specified in Rule 506 of Regulation D, promulgated under the Securities Act, and under Section 4(2) of the Securities Act.

      As of January 1, 2007, the Registrant had granted stock options to eleven of our employees, directors and consultants to purchase 643,000 shares of common stock under our 2006 Stock Option Plan. Insofar as

II-2

these grants did not involve a public offering, but instead were made as part of a compensatory plan to insiders and other service providers sharing a pre-existing relationship with the Registrant, the grants were exempt under Section 4(2) of the Securities Act.

Item 27. Exhibits.

      The following exhibits are filed as part of Registrant’s registration statement on Form SB-2:

Exhibit
No.			Description
	1	.1	Form of Underwriting Agreement
	3	.1	Certificate of Incorporation**
	3	.2	Bylaws**
	4	.1	Form of common stock certificate
	4	.2	Form of Class A warrant (included in Exhibit 4.5)**
	4	.3	Form of Class B warrant (included in Exhibit 4.5)**
	4	.4	Form of unit certificate
	4	.5	Form of Warrant Agreement between the Registrant and Computershare Investor Services**
	4	.6	Form of Representative’s Purchase Warrant**
	5	.1	Form of Opinion of Holland & Knight LLP**
	10	.1	Form of bridge loan documents dated March 2, 2006**
	10	.1A	Form of bridge loan documents dated April 11, 2006**
	10	.1B	Form of amendment to bridge loan dated October 16, 2006**
	10	.1C	Form of amendment to bridge loan dated January 19, 2007
	10	.2	2006 Stock Option Plan and Form of Stock Option Agreement**
	10	.3	Service Agreement with ECAP, LLC**
	10	.4	Lease Agreement with Recycling Technology Development, LLC**
	10	.4A	First Amendment to Lease Agreement with Recycling Technology Development, LLC
	10	.5	Employment Agreement with Edward J. Gildea**
	10	.6	Employment Agreement with Thomas R. Buchanan**
	10	.7	Employment Agreement with John A. Walsdorf**
	10	.8	Employment Agreement with John P. Weigold**
	10	.9	Agreement with Weston Solutions, Inc. dated May 29, 2003 and modification dated October 6, 2004**
	10	.10	IBR Plant License Agreement dated July 15, 2003CTR**
	10	.11	Revision dated February 9, 2006 to IBR Plant License Agreement dated July 15, 2003**
	10	.12	Engagement Letter with Ferris, Baker, Watts, Inc. dated October 2, 2006**
	10	.13	Standard Form of Agreement Between Owner and Architect between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.14	Standard Form of Agreement Between Owner and Contractor between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.15	Standard Form of Agreement Between Owner and Construction Manager between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.16	Rider and Supplementary Conditions to Armistead Mechanical, Inc. Proposal Letter dated November 13, 2006 to Converted Organics of Woodbridge, LLC and the Standard Form of Agreement Between Owner and Contractor dated November 30, 2006 between Armistead Mechanical, Inc. and Converted Organics of Woodbridge, LLC
	10	.17	Standard Form of Agreement Between Owner and Contractor between Converted Organics of Woodbridge, LLC and Hatzel and Buehler, Inc. dated December 19, 2006
	10	.18	Promissory Note to Paulson Investment Company, Inc. dated October 27, 2006
	10	.19	Promissory Note to High Capital Funding, LLC dated October 30, 2006
	10	.20	Promissory Note to Paulson Investment Company, Inc. dated December 29, 2006

II-3

Exhibit
No.			Description
	10	.21	Promissory Note to High Capital Funding, LLC dated January 3, 2007
	23	.1	Consent of Carlin, Charron & Rosen, LLP
	23	.2	Consent of Holland & Knight LLP (included in Exhibit 5.1)**
	24		Power of Attorney. Reference is made to the signature page of this registration statement

**  Previously filed.

^CTR  Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

Item 28. Undertakings.

      Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

      The undersigned registrant hereby undertakes to:

      (1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

      (i) Include any prospectus required by Section 10(a)(3) of the Securities Act);

      (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

      (iii) Include any additional or changed material information on the plan of distribution.

      (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

      (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

      (4) For determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by

II-4

means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

      (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

      (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

      (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

      (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

      In addition, the undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-5

SIGNATURES

      In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has authorized this Amendment No. 5 to Form SB-2 registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Massachusetts, on January 25, 2007.

Converted Organics Inc.

By:  /s/ Edward J. Gildea

Edward J. Gildea, Chairman, President and Chief Executive Officer

      Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 5 to Form SB-2 registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Edward J. Gildea Edward J. Gildea	Chairman, President and Chief Executive Officer, (Principal Executive Officer)	January 25, 2007
/s/ Thomas R. Buchanan* Thomas R. Buchanan	Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)	January 25, 2007
/s/ William A. Gildea* William A. Gildea	Director	January 25, 2007
/s/ David R. Allen* David R. Allen	Director	January 25, 2007
/s/ Robert E. Cell* Robert E. Cell	Director	January 25, 2007
/s/ John P. DeVillars* John P. DeVillars	Director	January 25, 2007
*By: /s/ Edward J. Gildea Edward J. Gildea, Attorney-in-Fact

II-6

Exhibit
No.			Description
	1	.1	Form of Underwriting Agreement
	3	.1	Certificate of Incorporation**
	3	.2	Bylaws**
	4	.1	Form of common stock certificate
	4	.2	Form of Class A warrant (included in Exhibit 4.5)**
	4	.3	Form of Class B warrant (included in Exhibit 4.5)**
	4	.4	Form of unit certificate
	4	.5	Form of Warrant Agreement between the Registrant and Computershare Investor Services**
	4	.6	Form of Representative’s Purchase Warrant**
	5	.1	Form of Opinion of Holland & Knight LLP**
	10	.1	Form of bridge loan documents dated March 2, 2006**
	10	.1A	Form of bridge loan documents dated April 11, 2006**
	10	.1B	Form of amendment to bridge loan dated October 16, 2006**
	10	.1C	Form of amendment to bridge loan dated January 19, 2007
	10	.2	2006 Stock Option Plan and Form of Stock Option Agreement**
	10	.3	Service Agreement with ECAP, LLC**
	10	.4	Lease Agreement with Recycling Technology Development, LLC**
	10	.4A	First Amendment to Lease Agreement with Recycling Technology Development, LLC
	10	.5	Employment Agreement with Edward J. Gildea**
	10	.6	Employment Agreement with Thomas R. Buchanan**
	10	.7	Employment Agreement with John A. Walsdorf**
	10	.8	Employment Agreement with John P. Weigold**
	10	.9	Agreement with Weston Solutions, Inc. dated May 29, 2003 and modification dated October 6, 2004**
	10	.10	IBR Plant License Agreement dated July 15, 2003CTR**
	10	.11	Revision dated February 9, 2006 to IBR Plant License Agreement dated July 15, 2003**
	10	.12	Engagement Letter with Ferris, Baker, Watts, Inc. dated October 2, 2006**
	10	.13	Standard Form of Agreement Between Owner and Architect between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.14	Standard Form of Agreement Between Owner and Contractor between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.15	Standard Form of Agreement Between Owner and Construction Manager between Converted Organics of Woodbridge, LLC and The Construction Partnership, Inc., dated December 19, 2006
	10	.16	Rider and Supplementary Conditions to Armistead Mechanical, Inc. Proposal Letter dated November 13, 2006 to Converted Organics of Woodbridge, LLC and the Standard Form of Agreement Between Owner and Contractor dated November 30, 2006 between Armistead Mechanical, Inc. and Converted Organics of Woodbridge, LLC
	10	.17	Standard Form of Agreement Between Owner and Contractor between Converted Organics of Woodbridge, LLC and Hatzel and Buehler, Inc. dated December 19, 2006
	10	.18	Promissory Note to Paulson Investment Company, Inc. dated October 27, 2006
	10	.19	Promissory Note to High Capital Funding, LLC dated October 30, 2006
	10	.20	Promissory Note to Paulson Investment Company, Inc. dated December 29, 2006
	10	.21	Promissory Note to High Capital Funding, LLC dated January 3, 2007
	23	.1	Consent of Carlin, Charron & Rosen, LLP
	23	.2	Consent of Holland & Knight LLP (included in Exhibit 5.1)**
	24		Power of Attorney. Reference is made to the signature page of this registration statement.

**  Previously filed.

^CTR  Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

II-7 EX-1.1 2 b61186a5exv1w1.txt EX-1.1 FORM OF UNDERWRITING AGREEMENT EXHIBIT 1.1 Form of Converted Organics Inc. UNDERWRITING AGREEMENT dated ____________, 2007 PAULSON INVESTMENT COMPANY, INC. UNDERWRITING AGREEMENT [______________], 2007 Paulson Investment Company, Inc. 811 SW Naito Parkway Portland, Oregon 97204 Ladies and Gentlemen: Introductory. Converted Organics Inc., a Delaware corporation (the "Company") proposes to issue and sell to the several underwriters named in Schedule A (the "Underwriters") an aggregate of [___] Units, each Unit consisting of (i) one share of the Company's common stock ("Common Stock"), (ii) one Class A warrant to purchase one share of Common Stock (each a "Class A Warrant" and, collectively, the "Class A Warrants"), and (iii) one Class B warrant, to purchase one share of Common Stock (each a "Class B Warrant" and, collectively, the "Class B Warrants" and, together with the Class A Warrants, the "Warrants"). The Warrants are to be issued under the terms of a Warrant Agreement (the "Warrant Agreement") by and between the Company and Computershare Investor Services, as warrant agent (the "Warrant Agent"), substantially in the form most recently filed as an exhibit to the Registration Statement (hereinafter defined). The [___] Units to be sold by the Company are collectively called the "Firm Units." In addition, the Company has granted to the Underwriters an option to purchase up to an additional [___] Units (the "Optional Units"), as provided in Section 2. The Firm Units and, if and to the extent such option is exercised, the Optional Units, are collectively called the "Units." Paulson Investment Company, Inc. has agreed to act as representative of the several Underwriters (in such capacity, the "Representative") in connection with the offering and sale of the Units. The Company confirms its agreement with the Underwriters as follows: SECTION 1. Representations and Warranties of the Company. The Company represents, warrants and covenants to each Underwriter as follows: (a) Filing of the Registration Statement. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form SB-2 (File No. 333-135174), which contains a form of prospectus to be used in connection with the public offering and sale of the Units. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto, and the documents incorporated by reference in the prospectus contained in the registration statement at the time such registration statement became effective, in the form in which it was declared effective by the Commission under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the "Securities Act"), and including any required information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A, Rule 430B or Rule 430C under the Securities Act, or pursuant to the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (collectively, the "Exchange Act"), is called the "Registration Statement." Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b) Registration Statement," and from and after the date and time of filing of the Rule 462(b) Registration Statement the term "Registration Statement" shall include the Rule 462(b) Registration Statement. Such prospectus, in the form first filed pursuant to Rule 424(b) under the Securities Act after the date and time that this Agreement is executed and delivered by the parties hereto (the "Execution Time"), or, if no filing pursuant to Rule 424(b) under the Securities Act is required, the form of final prospectus relating to the Units included in the Registration Statement at the effective date of the Registration Statement, is called the "Prospectus." All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, the Company's preliminary prospectus included in the Registration Statement (each a "preliminary prospectus"), the Prospectus, or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). Any reference herein to any preliminary prospectus or the Prospectus or any supplement or amendment to either thereof shall be deemed to refer to and include any documents incorporated by reference therein as of the date of such reference. (b) Compliance with Registration Requirements. The Registration Statement has been declared effective by the Commission under the Securities Act. The Company has complied to the Commission's satisfaction with all requests of the Commission for additional or supplemental information. No stop order preventing or suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission. Each preliminary prospectus and the Prospectus when filed complied or will comply in all material respects with the Securities Act and, if filed by electronic transmission pursuant to EDGAR (except as may be permitted by Regulation S-T under the Securities Act), was identical in content to the copy thereof delivered to the Underwriters for use in connection with the offer and sale of the Units other than with respect to any artwork and graphics that were not filed. Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto, at the time it became effective and at all subsequent times until the expiration of the prospectus delivery period required under Section 4(3) of the Securities Act, complied and will comply in all material respects with the Securities Act and did not and will 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. The Prospectus (including any Prospectus wrapper), as amended or supplemented, as of its date and at all subsequent times until the Underwriters have completed their distribution of the offering of the Units, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto, made in 2 reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by the Representative expressly for use therein, it being understood and agreed that the only such information furnished by the Representative consists of the information described as such in Section 8 hereof. There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement that have not been described or filed as required. (c) Disclosure Package. The term "Disclosure Package" shall mean (i) the preliminary prospectus, as amended or supplemented, (ii) the issuer free writing prospectuses as defined in Rule 433 of the Securities Act (each, an "Issuer Free Writing Prospectus"), if any, identified in Schedule B hereto, (iii) the pricing terms set forth in Schedule C to this Agreement, and (iv) any other free writing prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package. As of ____ _.m. (Eastern time) on the date of this Agreement (the "Initial Sale Time"), the Disclosure Package did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by any Underwriter through the Representative specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof. (d) Company Not Ineligible Issuer. (i) At the time of filing the Registration Statement and (ii) as of the date of the execution and delivery of this Agreement (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 of the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 of the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer. (e) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus includes any information that conflicts with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by any Underwriter through the Representative specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 8 hereof. (f) Offering Materials Furnished to Underwriters. The Company has delivered to the Representative five complete manually signed copies of the Registration Statement and of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and preliminary prospectuses and the Prospectus, as amended or supplemented, in such quantities and at such places as the Representative have reasonably requested for each of the Underwriters. (g) Distribution of Offering Material by the Company. The Company has not distributed and will not distribute, prior to the later of each Subsequent Closing Date (as defined 3 below) and the completion of the Underwriters' distribution of the Units, any offering material in connection with the offering and sale of the Units other than a preliminary prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the Representative, and the Registration Statement. (h) The Underwriting Agreement. This Agreement has been duly authorized (to the extent applicable), executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (i) Authorization of the Common Stock; Validity of Warrants and Warrant Agreement. (i) The Common Stock included in the Units to be purchased by the Underwriters from the Company (including units purchasable on exercise of the Underwriters' overallotment option described in Section 2(c) and the Representative's Warrants described in Section 2(h) has been duly authorized and reserved for issuance and sale pursuant to this Agreement and, in the case of Common Stock issuable on exercise of the Representative's Warrants, the terms thereof and, when so issued and delivered by the Company, will be validly issued, fully paid and nonassessable. (ii) The Warrants included in the Units to be purchased by the Underwriters from the Company have been duly and validly authorized by all required corporate actions and will, when issued and delivered by the Company pursuant to this Agreement, be validly executed and delivered by, and will be valid and binding agreements of, the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (iii) The Representative's Warrants have been duly and validly authorized by all required corporate actions and will, when issued and delivered by the Company pursuant to this Agreement, be validly executed and delivered by, and will be valid and binding agreements of, the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (iv) The Common Stock issuable on exercise of the Warrants has been duly authorized and reserved for issuance and sale pursuant to their terms and, when issued and delivered by the Company pursuant to such warrants, will be validly issued, fully paid and nonassessable. (v) The Warrant Agreement has been duly and validly authorized by all required corporate actions of the Company and will, when executed and delivered (and assuming 4 due and valid execution by the Warrant Agent) constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (vi) Each of the Warrants and the Representative's Warrants will, when issued, possess rights, privileges, and characteristics as represented in the most recent form of Warrant Agreement or Representative's Warrants, as the case may be, filed as an exhibit to the Registration Statement. (j) No Applicable Registration or Other Similar Rights. Except as fairly and accurately described in the Registration Statement, there are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as have been duly waived. (k) No Material Adverse Change. Except as otherwise disclosed in the Disclosure Package, subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company (any such change is called a "Material Adverse Change"); (ii) the Company has not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company in respect of its capital stock. (l) Independent Accountants. Carlin, Charron & Rosen, LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Exchange Act. (m) Preparation of the Financial Statements. Each of the historical [and pro-forma] financial statements filed with the Commission as a part of or incorporated by reference in the Registration Statement, and included or incorporated by reference in the Disclosure Package and the Prospectus, presents fairly the information provided as of and at the dates and for the periods indicated. Such financial statements comply as to form with the applicable accounting requirements of the Securities Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement. Each item of historical or pro-form financial data relating to the operations, assets or liabilities of the Company and its predecessor set forth in summary form in each of the preliminary prospectus and the Prospectus fairly presents such information on a basis consistent with that of 5 the complete financial statements contained in the Registration Statement. The other financial and statistical information and data included in the Registration Statement, or included or incorporated by reference into the Disclosure Package or the Prospectus, are accurately presented and, in the case of financial information and data, prepared on a basis consistent with such financial statements and/or the books and records of the Company and its subsidiaries. (n) Incorporation and Good Standing; Subsidiaries. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in New Jersey and in each other jurisdiction in which such qualification is required except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. The Company does not own or control, directly or indirectly, any corporation, association or other entity, other than Converted Organics of Woodbridge, LLC. (o) Capitalization and Other Capital Stock Matters. The authorized, issued and outstanding capital stock of the Company is as set forth in the each of the Disclosure Package and the Prospectus under the caption "Capitalization" (other than for subsequent issuances, if any, pursuant to employee benefit plans described in each of the Disclosure Package and the Prospectus or upon exercise of outstanding options or warrants described in the Disclosure Package and Prospectus, as the case may be). The Common Stock conforms, and, when issued and delivered as provided in this Agreement, the Class A Warrants, the Class B Warrants and the Representative's Warrants will comply in all material respects to the description thereof contained in the each of the Disclosure Package and Prospectus. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company other than those accurately described in the Disclosure Package and the Prospectus. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth or incorporated by reference in each of the Disclosure Package and the Prospectus accurately and fairly presents the information required to be disclosed with respect to such plans, arrangements, options and rights. All of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens or encumbrances on such capital stock to secure indebtedness of the Company's subsidiaries as described in the Disclosure Package or the Prospectus. 6 (p) Quotation. The Units, the Common Stock, the Class A Warrants and the Class B Warrants have been approved for quotation on the Nasdaq Capital Market under the symbols "COINU," "COIN," "COINW" and "COINZ," respectively and on the Boston Stock Exchange under the symbols "____." (q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which it is a party or by which it or it may be bound (including, without limitation, such agreements and contracts filed as exhibits to the Registration Statement or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an "Existing Instrument")), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company's execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and the Prospectus (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by-laws of the Company, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and the Prospectus, except the registration or qualification of the Units under the Securities Act and applicable state securities or blue sky laws and from the National Association of Securities Dealers, Inc. (the "NASD"). (r) No Material Actions or Proceedings. Except as otherwise disclosed in the Disclosure Package and the Prospectus, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's knowledge, threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which have as the subject thereof any officer or director (in such capacities) of, or property owned or leased by, the Company or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. No material labor dispute with the employees of the Company or any of its subsidiaries exists or, to the best of the Company's knowledge, is threatened or imminent except for such disputes as would not, individually or in the aggregate, result in a Material Adverse Change. (s) Intellectual Property Rights. The Company owns or possesses adequate rights or licenses to use all patents, patent applications, trademarks, trade names, copyrights, domain names, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct its businesses as proposed to be conducted as 7 set forth in the Disclosure Package and the Prospectus; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. The Company has not received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Disclosure Package and the Prospectus and are not described in all material respects. None of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company's knowledge, any of its officers, directors or employees or otherwise in violation of the rights of any persons. (t) All Necessary Permits, etc. Except as otherwise disclosed in the Disclosure Package and the Prospectus or except as would not result in a Material Adverse Change, the Company and its subsidiaries possess such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct its businesses, and the Company has not received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. (u) Title to Properties. The Company and its subsidiaries have good and marketable title to all the properties and assets reflected as owned in the financial statements referred to in Section 1(m) above (or elsewhere in the Disclosure Package and the Prospectus), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company and its subsidiaries. The real property, buildings, improvements, equipment and personal property held under lease by the Company and its subsidiaries are held under valid, subsisting and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company and its subsidiaries. (v) Tax Law Compliance. The Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid all taxes required to be paid by it and, if due and payable, any related or similar assessment, fine or penalty levied against it. The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(m) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company has not been finally determined. (w) Company Not an "Investment Company." The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and after receipt of payment for the Units and the application of the proceeds thereof as contemplated under the caption "Use of Proceeds" in each of the preliminary prospectus and the Prospectus will not be, an "investment company" 8 within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. (x) Insurance. The Company and its subsidiaries are insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as the Company reasonably believes are adequate and customary for its business including, but not limited to, policies covering real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and earthquakes. The Company reasonably believes that it will be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. The Company has not been denied any insurance coverage which it has sought or for which it has applied. (y) No Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Units or the underlying securities. The Company acknowledges that the Underwriters may engage in passive market making transactions in the Units on the Nasdaq Capital Market in accordance with Regulation M under the Exchange Act. (z) Related Party Transactions. There are no business relationships or related-party transactions involving the Company or any other person required to be described in the preliminary prospectus or the Prospectus that have not been described as required. (aa) Disclosure Controls and Procedures. The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, (ii) will be evaluated for effectiveness as of the end of each fiscal quarter and fiscal year of the Company and (iii) are effective in all material respects to perform the functions for which they were established. The Company is not aware of (a) any significant deficiency in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or any material weaknesses in internal controls or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls. (bb) Company's Accounting System. The Company maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 9 (cc) No Unlawful Contributions or Other Payments. Neither the Company nor, to the best of the Company's knowledge, any employee or agent of the Company or any of its subsidiaries has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of the character required to be disclosed in the Disclosure Package and the Prospectus. (dd) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) the Company and its subsidiaries are not in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or any of its subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or its subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any of its subsidiaries has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's knowledge, threatened against the Company or any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law; and (iii) to the best of the Company's knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or against any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law. (ee) ERISA Compliance. The Company and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "ERISA Affiliate" means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company is a member. No "reportable event" (as defined under ERISA) 10 has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company or any of its ERISA Affiliates. No "employee benefit plan" established or maintained by the Company or any of its ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (ff) Compliance with Sarbanes-Oxley Act of 2002. The Company and, to the best of its knowledge, its officers and directors are in compliance with applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the "Sarbanes-Oxley Act") that are effective and are actively taking steps to ensure that they will be in compliance with other applicable provisions of the Sarbanes-Oxley Act upon the effectiveness of such provisions, including Section 402 related to loans and Sections 302 and 906 related to certifications. (gg) Material Understandings, Generally. Except as fairly described in the Prospectus and the Disclosure Package, the Company has not made a determination to take any action and is not a party to any understanding, whether or not legally binding, with any other person with respect to the taking of any action that, if known to prospective purchasers of the Units, would be likely to affect their assessment of the value or prospects of the Company or their decision to invest in the Units. Any certificate signed by an officer of the Company and delivered to the Representative or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters set forth therein. The Company acknowledges that the Underwriters and, for purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel to the Company and counsel to the Underwriters, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance. SECTION 2. Purchase, Sale and Delivery of the Units. (a) The Firm Units. Upon the terms herein set forth, the Company agrees to issue and sell the Firm Units to the several Underwriters. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase the Firm Units from the Company. The purchase price per Firm Unit to be paid by the several Underwriters to the Company shall be $____ per Unit. (b) The First Closing Date. Delivery of the Firm Units to be purchased by the Underwriters and payment therefor shall be made at 9:00 a.m. New York time on 11 ____________, 2007, or such other time and date as the Representative shall designate by notice to the Company (the time and date of such closing are called the "First Closing Date"). The Company hereby acknowledges that circumstances under which the Representative may provide notice to postpone the First Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Representative to recirculate to the public copies of an amended or supplemented Prospectus or Disclosure Package or a delay as contemplated by the provisions of Section 10. (c) The Optional Units; Each Subsequent Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the Underwriters to purchase up to an aggregate of _____________ Optional Units from the Company at the purchase price per share to be paid by the Underwriters for the Firm Units. The option granted hereunder may be exercised at any time and from time to time upon notice by the Representative to the Company, which notice may be given at any time within 45 days from the date of this Agreement. Such notice shall set forth (i) the aggregate number of Optional Units as to which the Underwriters are exercising the option, (ii) the names and denominations in which the Optional Units are to be registered and (iii) the time, date and place at which such Optional Units will be delivered (which time and date may be simultaneous with, but not earlier than, the First Closing Date; and in such case the term "First Closing Date" shall refer to the time and date of delivery of the Firm Units and the Optional Units). Each time and date of delivery, if subsequent to the First Closing Date, is called the "Subsequent Closing Date" and shall be determined by the Representative and shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. (d) Public Offering of the Units. The Representative hereby advises the Company that the Underwriters intend to offer for sale to the public, as described in the Prospectus, their respective portions of the Units as soon after this Agreement has been executed and the Registration Statement has been declared effective as the Representative, in its sole judgment, has determined is advisable and practicable. (e) Payment for the Units. Payment for the Units to be sold by the Company shall be made at the First Closing Date (and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately available funds to the order of the Company. It is understood that the Representative has been authorized, for its own account and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Units and any Optional Units the Underwriters have agreed to purchase. The Representative, individually and not as the Representative of the Underwriters, may (but shall not be obligated to) make payment for any Units to be purchased by any Underwriter whose funds shall not have been received by the Representative by the First Closing Date or any Subsequent Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement. (f) Delivery of the Units. Delivery of the Firm Units and the Optional Units shall be made through the facilities of The Depository Trust Company unless the Representative shall 12 otherwise instruct. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. (g) Delivery of Prospectus to the Underwriters. Not later than 10:00 p.m. New York time on the second business day following the date the Units are first released by the Underwriters for sale to the public, the Company shall deliver or cause to be delivered, copies of the Prospectus in such quantities and at such places as the Representative shall request. (h) Representative's Warrants. In addition to the sums payable to the Representative as provided elsewhere herein, the Representative shall be entitled to receive at the closing occurring on the First Closing Date, for itself alone and not as Representative of the Underwriters, as additional compensation for its services, Representative's Warrants for the purchase of up to ________ Units at a price of $____ per Unit, upon the terms and subject to adjustment and conversion as described in the form of Representative's Warrants filed as an exhibit to the Registration Statement. SECTION 3. Covenants of the Company. The Company covenants and agrees with each Underwriter as follows: (a) Representative' Review of Proposed Amendments and Supplements. During the period beginning at the Initial Sale Time and ending on the later of the First Closing Date or such date as, in the opinion of counsel for the Underwriters, the Prospectus is no longer required by law to be delivered in connection with sales by an Underwriter or dealer, including under circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act (the "Prospectus Delivery Period"), prior to amending or supplementing the Registration Statement or the Prospectus, including any amendment or supplement through incorporation by reference of any report filed under the Exchange Act, the Company shall furnish to the Representative for review a copy of each such proposed amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Representative shall reasonably object. (b) Securities Act Compliance. After the date of this Agreement, the Company shall promptly advise the Representative in writing (i) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (ii) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (iii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any preliminary prospectus or the Prospectus, (iv) of the time and date that any post-effective amendment to the Registration Statement becomes effective and (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order or notice preventing or suspending the use of the Registration Statement, any preliminary prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Common Stock from any securities exchange upon which it is listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. The Company shall use its best efforts to prevent the issuance of any such stop order or prevention or suspension of such use. If the Commission shall enter any such stop order or 13 order or notice of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment, or will file a new registration statement and use its best efforts to have such new registration statement declared effective as soon as practicable. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b) and 430A, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder, and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) were received in a timely manner by the Commission. (c) Exchange Act Compliance. During the Prospectus Delivery Period, the Company will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within the time periods required by the Exchange Act. (d) Amendments and Supplements to the Registration Statement, Prospectus and Other Securities Act Matters. If, during the Prospectus Delivery Period, any event or development shall occur or condition exist as a result of which the Disclosure Package or the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, as the case may be, not misleading, or if it shall be necessary to amend or supplement the Disclosure Package or the Prospectus, or to file under the Exchange Act any document incorporated by reference in the Disclosure Package or the Prospectus, in order to make the statements therein, in the light of the circumstances under which they were made, as the case may be, not misleading, or if in the opinion of the Representative it is otherwise necessary to amend or supplement the Registration Statement, the Disclosure Package or the Prospectus, or to file under the Exchange Act any document incorporated by reference in the Disclosure Package or the Prospectus, or to file a new registration statement containing the Prospectus, in order to comply with law, including in connection with the delivery of the Prospectus, the Company agrees to (i) notify the Representative of any such event or condition (unless such event or condition was previously brought to the Company's attention by the Representative during the Prospectus Delivery Period) and (ii) promptly prepare (subject to Section 3(a) and 3(e) hereof), file with the Commission (and use its best efforts to have any amendment to the Registration Statement or any new registration statement be declared effective) and furnish at its own expense to the Underwriters and to dealers, amendments or supplements to the Registration Statement, the Disclosure Package or the Prospectus, or any new registration statement, necessary in order to make the statements in the Disclosure Package or the Prospectus as so amended or supplemented, in the light of the circumstances under which they were made, as the case may be, not misleading or so that the Registration Statement, the Disclosure Package or the Prospectus, as amended or supplemented, will comply with law. (e) Permitted Free Writing Prospectuses. The Company represents that it has not made, and agrees that, unless it obtains the prior written consent of the Representative, it will not make, any offer relating to the Units that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a "free writing prospectus" (as defined in Rule 405 of the Securities Act) required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act; provided that the prior written consent of the Representative hereto shall be deemed to have been given in respect of the Free Writing 14 Prospectuses included in Schedule B hereto. Any such free writing prospectus consented to by the Representative is hereinafter referred to as a "Permitted Free Writing Prospectus." The Company agrees that (i) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and (ii) has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 of the Securities Act applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping. (f) Copies of any Amendments and Supplements to the Prospectus. The Company agrees to furnish the Representative, without charge, during the Prospectus Delivery Period, as many copies of each of the preliminary prospectus, the Prospectus and the Disclosure Package and any amendments and supplements thereto (including any documents incorporated or deemed incorporated by reference therein) as the Representative may reasonably request. (g) Blue Sky Compliance. The Company shall cooperate with the Representative and counsel for the Underwriters to qualify or register the Units for sale under (or obtain exemptions from the application of) the state securities or blue sky laws of those jurisdictions designated by the Representative, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Units. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Representative promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Units for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment. (h) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Units sold by it in the manner described under the caption "Use of Proceeds" in the Disclosure Package and the Prospectus. (i) Transfer Agent. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock. (j) Earnings Statement. As soon as practicable, the Company will make generally available to its security holders and to the Representative an earnings statement (which need not be audited) covering the twelve-month period ending _________, 2007 that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act. (k) Periodic Reporting Obligations. During the Prospectus Delivery Period, the Company shall file, on a timely basis, with the Commission, the Nasdaq Capital Market and the Boston Stock Exchange all reports and documents required to be filed under the Exchange Act. Additionally, the Company shall report the use of proceeds from the issuance of the Units as may be required under Rule 463 under the Securities Act. 15 (l) Company to Provide Interim Financial Statements. Prior to the First Closing Date and, if applicable, each Subsequent Closing Date, the Company will furnish the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement and the Prospectus. (m) Quotation. The Company will use its best efforts to include, subject to notice of issuance, the Units on the Nasdaq Capital Market and to list the Units on the Boston Stock Exchange. (n) Agreement Not to Offer or Sell Additional Securities. During the period commencing on the date hereof and ending on the 90th day following the date of the Prospectus, the Company will not, without the prior written consent of the Representative (which consent may be withheld at the Representative's sole discretion), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other than as contemplated by this Agreement with respect to the Units); provided, however, that the Company may issue shares of its Common Stock or options to purchase its Common Stock, or shares of Common Stock upon exercise of options, in each case, pursuant to any stock option, stock bonus or other stock plan, arrangement or contractual obligation described in the Prospectus, but only if the holders of such shares, options, or shares issued upon exercise of such options, agree in writing not to sell, offer, dispose of or otherwise transfer any such shares or options during such 365-day period without the prior written consent of the Representative (which consent may be withheld at the Representative's sole discretion). (o) Future Reports to the Representative. During the period of five years hereafter the Company will furnish, if not otherwise available on EDGAR, to the Representative at 811 SW Naito Parkway, Portland, Oregon 97204 Attention: Syndicate Department: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock. (p) Investment Limitation. The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Units in such a manner as would require the Company to register as an investment company under the Investment Company Act. 16 (q) No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. (r) Existing Lock-Up Agreements. Except as described in the Prospectus, and those entered into with the state of Washington, there are no existing agreements between the Company and its security holders that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company's securities. The Company will direct the transfer agent to place stop transfer restrictions upon the securities of the Company that are bound by such "lock-up" agreements for the duration of the periods contemplated therein. SECTION 4. Payment of Expenses. (a) The Representative shall be entitled to reimbursement from the Company, for itself alone and not as Representative of the Underwriters, to a non-accountable expense allowance equal to 3% of the aggregate initial public offering price of the Firm Units purchased by the Underwriters. The Representative shall be entitled to withhold this allowance on the Closing Date related to the purchase of the Firm Units or the Option Units, as the case may be. (b) In addition to the payment described in Paragraph (a) of this Section 4, the Company agrees to pay all costs, fees and expenses incurred in connection with the performance of their obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Units (including all printing and engraving costs, if any), (ii) all fees and expenses of the registrar and transfer agent of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Units to the Underwriters, (iv) all fees and expenses of the Company's counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each Issuer Free Writing Prospectus, each preliminary prospectus and the Prospectus, and all amendments and supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Units for offer and sale under the state securities or blue sky laws, and, if requested by the Representative, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Underwriters of such qualifications, registrations and exemptions, (vii) the filing fees incident to the NASD's review and approval of the Underwriters' participation in the offering and distribution of the Units, (viii) the fees and expenses associated with including the Units on the Nasdaq Capital Market and the Boston Stock Exchange and (ix) all other fees, costs and expenses referred to in Item 13 of Part II of the Registration Statement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel. SECTION 5. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Units as provided herein on the First 17 Closing Date and, with respect to the Optional Units, each Subsequent Closing Date, shall be subject to (1) the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the First Closing Date and each Subsequent Closing Date as though then made; (2) the timely performance by the Company of its covenants and other obligations hereunder; and (3) each of the following additional conditions: (a) Accountants' Comfort Letter. On the date hereof, the Representative shall have received from Carlin, Charron & Rosen, LLP, independent registered public accounting firm of the Company, a letter dated the date hereof addressed to the Underwriters, in form and substance satisfactory to the Representative, containing statements and information of the type ordinarily included in accountant's "comfort letters" to underwriters, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Prospectus (and the Representative shall have received an additional four conformed copies of such accountants' letter for the several Underwriters). (b) Effectiveness of Registration Statement; Compliance with Registration Requirements; No Stop Order. For the period from and after effectiveness of this Agreement and prior to the First Closing Date and, with respect to the Optional Units, any Subsequent Closing Date: (i) the Company shall have filed the Prospectus with the Commission (including the information required by Rule 430A under the Securities Act) in the manner and within the time period required by Rule 424(b) under the Securities Act; or the Company shall have filed a post-effective amendment to the Registration Statement containing the information required by such Rule 430A, and such post-effective amendment shall have become effective; and (ii) no stop order suspending the effectiveness of the Registration Statement, or any post-effective amendment to the Registration Statement, shall be in effect and no proceedings for such purpose shall have been instituted or threatened by the Commission. (c) No Material Adverse Change. For the period from and after the date of this Agreement and prior to the First Closing Date and, with respect to the Optional Units, each Subsequent Closing Date, in the judgment of the Representative there shall not have occurred any Material Adverse Change. (d) Opinion of Counsel for the Company. On each of the First Closing Date and each Subsequent Closing Date the Representative shall have received the opinion of Holland & Knight LLP, counsel for the Company, dated as of the First Closing Date or the Subsequent Closing Date, as applicable, substantially in the form attached as Exhibit A (and the Representative shall have received an additional four conformed copies of such counsel's legal opinion for the several Underwriters). 18 (e) Opinion of Counsel for the Underwriters. On each of the First Closing Date and each Subsequent Closing Date the Representative shall have received the opinion of Tonkon Torp LLP, counsel for the Underwriters, dated as of the First Closing Date or the Subsequent Closing Date, as applicable, in a form satisfactory to the Representative (and the Representative shall have received an additional four conformed copies of such counsel's legal opinion for the several Underwriters). (f) Officers' Certificate. On each of the First Closing Date and each Subsequent Closing Date the Representative shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such Closing Date, to the effect that the signers of such certificate have reviewed the Registration Statement, the Prospectus and any amendment or supplement thereto, any Issuer Free Writing Prospectus and any amendment or supplement thereto and this Agreement, to the effect set forth in subsection (b)(ii) of this Section 5, and further to the effect that: (i) for the period from and after the date of this Agreement and prior to such Closing Date, there has not occurred any Material Adverse Change; (ii) the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of such Closing Date; and (iii) the Company has complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date. (g) Bring-down Comfort Letter. On each of the First Closing Date and each Subsequent Closing Date, the Representative shall have received from Carlin, Charron & Rosen, LLP, independent public or certified public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Representative, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the First Closing Date or Subsequent Closing Date, as the case may be (and the Representative shall have received an additional four conformed copies of such accountants' letter the several Underwriters). (h) Lock-Up Agreement from Certain Securityholders of the Company. On or prior to the date hereof, the Company shall have furnished to the Representative an agreement in the form of Exhibit B hereto from each stockholder of the Company, and such agreement shall be in full force and effect on each of the First Closing Date and each Subsequent Closing Date. (i) Concurrent Bond Offering. On or before the First Closing Date, the Representative shall have received confirmation satisfactory to it of the receipt of proceeds by the Company from the sale of 20-year tax-exempt New Jersey Economic Development Authority bonds in the principal amount of not less than $17.5 million and bearing interest at a rate not greater than [8.2]%. 19 (j) Additional Documents. On or before each of the First Closing Date and each Subsequent Closing Date, the Representative and counsel for the Underwriters shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Units as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representative by notice to the Company at any time on or prior to the First Closing Date and, with respect to the Optional Units, at any time prior to each Subsequent Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 6. Reimbursement of Underwriters' Expenses. If this Agreement is terminated by the Representative pursuant to Section 5 or Section 11, or by the Company pursuant to Section 7, or if the sale to the Underwriters of the Units on the First Closing Date or Subsequent Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representative and the other Underwriters (or such Underwriters as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representative and the Underwriters in connection with the proposed purchase and the offering and sale of the Units, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. SECTION 7. Effectiveness of this Agreement. This Agreement shall become effective upon the execution of this Agreement by the parties hereto. 20 SECTION 8. Indemnification. (a) Indemnification of the Underwriters. (1) The Company agrees to indemnify and hold harmless each Underwriter, its officers and employees, and each person, if any, who controls any Underwriter within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, including any information deemed to be a part thereof pursuant to Rule 430A, Rule 430B and Rule 430C under the Securities Act, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) upon any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iv) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; or (v) upon any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Common Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) or (ii) above, provided that the Company shall not be liable under this clause (v) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its bad faith or willful misconduct; and to reimburse each Underwriter and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Representative) as such expenses are reasonably incurred by such Underwriter or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Representative expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The indemnity agreement set forth in this Section 8(a)(1) shall be in addition to any liabilities that the Company may otherwise have. (b) Indemnification of the Company, its Directors and Officers. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who 21 controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or arises out of or is 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 each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Representative expressly for use therein; and to reimburse the Company, or any such director, officer, or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer, or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that the only information that the Underwriters have furnished to the Company expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) are the statements set forth in the table in the first paragraph, in the ____ paragraph and ___--____paragraphs (relating to stabilization activities) and in the ______ paragraph (relating to market making) under the caption "Underwriting" in the preliminary prospectus and the Prospectus; and the Underwriters confirm that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Underwriter may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, 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 a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the 22 indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (the Representative in the case of Section 8(b) and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying parties on the one hand, and the indemnified parties, on the other hand, from the offering of the Units pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying parties, on the one hand, and the indemnified parties, on the other hand, in connection with the 23 statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the indemnifying parties, on the one hand, and the indemnified parties, on the other hand, in connection with the offering of the Units pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Units pursuant to this Agreement (before deducting expenses) received by the indemnifying parties, and the total underwriting discount received by the indemnified parties, in each case as set forth on the front cover page of the Prospectus bear to the aggregate initial public offering price of the Units as set forth on such cover. The relative fault of the indemnifying parties, on the one hand, and the indemnified parties, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by indemnifying parties, on the one hand, or the indemnified parties, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Units underwritten by it and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective underwriting commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each officer and employee of an Underwriter and each person, if any, who controls an Underwriter within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Underwriter; and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company. SECTION 10. Default of One or More of the Several Underwriters. If, on the First Closing Date or each Subsequent Closing Date, as the case may be, any one or more of the 24 several Underwriters shall fail or refuse to purchase Units that it or they have agreed to purchase hereunder on such date, and the aggregate number of Units which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Units to be purchased on such date, the other Underwriters shall be obligated, severally, in the proportions that the number of Firm Units set forth opposite their respective names on Schedule A bears to the aggregate number of Firm Units set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as may be specified by the Representative with the consent of the non-defaulting Underwriters, to purchase the Units which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date. If, on the First Closing Date or each Subsequent Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Units and the aggregate number of Units with respect to which such default occurs exceeds 10% of the aggregate number of Units to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Units are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Representative or the Company shall have the right to postpone the First Closing Date or each Subsequent Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected. As used in this Agreement, the term "Underwriter" shall be deemed to include any person substituted for a defaulting Underwriter under this Section 10. Any action taken under this Section 10 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. SECTION 11. Termination of this Agreement. Prior to the First Closing Date and, with respect to Optional Units, each Subsequent Closing Date, whether before or after notification by the Commission to the Company of the effectiveness of the Registration Statement under the Securities Act, this Agreement may be terminated by the Representative by notice given to the Company if at any time (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the Nasdaq Capital Market or by the Boston Stock Exchange, or trading in securities generally on either the Nasdaq Stock Market, the Boston Stock Exchange or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal, New York or Delaware authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions that, in the judgment of the Representative is material and adverse and makes it impracticable to market the Units in the manner and on the terms described in the Prospectus or to enforce contracts for the sale of securities; or (iv) in the judgment of the Representative there shall have occurred any Material Adverse Change (regardless of whether any loss associated with such Material Adverse Change shall have been insured). Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company to any Underwriter, except that the Company shall be obligated to reimburse the 25 expenses of the Representative and the Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the Company, or (c) of any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 12. No Advisory or Fiduciary Responsibility. The Company acknowledges and agrees that: (i) the purchase and sale of the Units pursuant to this Agreement, including the determination of the public offering price of the Units and any related discounts and commissions, is an arm's-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Underwriter is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company or its affiliates, stockholders, creditors or employees or any other party; (iii) no Underwriter has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Company with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement; (iv) the several Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and that the several Underwriters have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the several Underwriters with respect to any breach or alleged breach of agency or fiduciary duty. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the several Underwriters, or any of them, with respect to the subject matter hereof. SECTION 13. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers, and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Units sold hereunder and any termination of this Agreement. SECTION 14. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: 26 If to the Representative: Paulson Investment Company, Inc. 811 SW Naito Parkway Portland, Oregon 97204 Facsimile: (503) 243-6000 Attention: Syndicate Department with a copy to: Tonkon Torp LLP 888 SW Fifth Avenue, Suite 1600 Portland, Oregon 97204 Facsimile: (503) 972-3718 Attention: Thomas P. Palmer If to the Company: Converted Organics Inc. 7A Commercial Wharf West Boston, Massachusetts 02110 Facsimile: (617) 624-0333 Attention: Edward J. Gildea with a copy to: Holland & Knight LLP 2300 US Bancorp Tower 111 SW 5th Avenue Portland, Oregon 97204 Facsimile: (503) 241-8014 Attention: Mark A. von Bergen Any party hereto may change the address for receipt of communications by giving written notice to the others. SECTION 15. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 10 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and personal representatives, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Units as such from any of the Underwriters merely by reason of such purchase. SECTION 16. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. 27 SECTION 17. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. SECTION 18. Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in Portland, Oregon or the courts of the State of Oregon in each case located in Portland, Oregon (collectively, the "Specified Courts"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. SECTION 19. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any preliminary prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company and the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the officers or employees of any Underwriter, any person controlling any Underwriter, the Company, the officers or employees of the Company, or any person controlling the Company, 28 (ii) acceptance of the Units and payment for them hereunder and (iii) termination of this Agreement. Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Underwriters, the Underwriters' officers and employees, any controlling persons referred to herein, the Company's directors and the Company's officers who sign the Registration Statement and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Units from any of the several Underwriters merely because of such purchase. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, CONVERTED ORGANICS INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representative as of the date first above written. PAULSON INVESTMENT COMPANY, INC. Acting as Representative of the several Underwriters named in the attached Schedule A. By: --------------------------------- [TITLE] 29 SCHEDULE A

NUMBER OF FIRM UNITS TO BE UNDERWRITERS PURCHASED - ------------ ---------- Paulson Investment Company, Inc. .................................. Investors Capital Corporation...................................... EKN Financial Services, Inc. ...................................... TOTAL...........................................................

SCH. A-1 SCHEDULE B ISSUER FREE WRITING PROSPECTUSES SCH. B-1 SCHEDULE C PRICING TERMS Price per Unit to public: $_________ Underwriting discounts and commissions per share: $_________ Offering proceeds to the Company, before expenses: $_________ Closing Date: ____________, 2007 SCH. E-1 EXHIBIT A Opinion of counsel for the Company to be delivered pursuant to Section 5(d) of the Underwriting Agreement. References to the Prospectus in this Exhibit A include any supplements thereto at the First Closing Date and, if applicable, each Subsequent Closing Date. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Underwriting Agreement. (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Disclosure Package and the Prospectus and to enter into and perform its obligations under the Underwriting Agreement. (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in New Jersey and in each other jurisdiction in which such qualification is required, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (iv) To the best of such counsel's knowledge, the Company does not own an equity interest in any other entity, other than Converted Organics of Woodbridge, LLC. (v) The authorized, issued and outstanding capital stock of the Company (including the Common Stock) conforms to the descriptions thereof set forth in the Disclosure Package and the Prospectus. All of the outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and, to the best of such counsel's knowledge, have been issued in compliance with the registration and qualification requirements of federal and state securities laws. The form of certificate used to evidence the Common Stock complies with all applicable requirements of the charter and by-laws of the Company and the General Corporation Law of the State of Delaware. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted and exercised thereunder, set forth in the Disclosure Package and the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. (vi) No stockholder of the Company or any other person has any preemptive right, right of first refusal or other similar right to subscribe for or purchase securities of the Company arising (i) by operation of the charter or by-laws of the Company or the General Corporation Law of the State of Delaware or (ii) to the best knowledge of such counsel, otherwise. (vii) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. (viii) The Units and the Common Stock included in the Units to be purchased by the Underwriters from the Company (including units purchasable on exercise of the Representative's overallotment option and the Representative's Warrants) have been duly authorized and reserved EX.A-1 for issuance and sale pursuant to the Underwriting Agreement and, in the case of Common Stock issuable on exercise of the Representative's Warrants, the terms thereof and, when so issued and delivered by the Company, will be validly issued, fully paid and nonassessable. The Class A Warrants and Class B Warrants included in the Units to be purchased by the Underwriters from the Company have been duly and validly authorized by all required corporate actions and will, when issued and delivered by the Company pursuant to the Underwriting Agreement, be validly executed and delivered by, and will be valid and binding agreements of, the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. The Representative's Warrants have been duly and validly authorized by all required corporate actions and will, when issued and delivered by the Company pursuant to the Underwriting Agreement, be validly executed and delivered by, and will be valid and binding agreements of, the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. The Common Stock issuable on exercise of Class A Warrants and Class B Warrants has been duly authorized and reserved for issuance and sale pursuant to the terms of such warrants and, when issued and delivered by the Company pursuant to such warrants, will be validly issued, fully paid and nonassessable. (ix) The Warrant Agreement has been duly authorized by the Company. When duly executed, authenticated, issued and delivered as contemplated in the Registration Statement and the Warrant Agreement, the Warrant Agreement will constitute the legally binding agreement of the Company, enforceable against it in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (x) The Registration Statement and the Rule 462(b) Registration Statement, if any, has been declared effective by the Commission under the Securities Act. To the best knowledge of such counsel, no stop order suspending the effectiveness of either of the Registration Statement or the Rule 462(b) Registration Statement, if any, has been issued under the Securities Act and no proceedings for such purpose have been instituted or are pending or are contemplated or threatened by the Commission. Any required filing of the Disclosure Package and the Prospectus and any supplement thereto pursuant to Rule 424(b) under the Securities Act has been made in the manner and within the time period required by such Rule 424(b). (xi) The Registration Statement, including any Rule 462(b) Registration Statement, the Prospectus, and each amendment or supplement to the Registration Statement and the Prospectus, and each document deemed to be part of the Disclosure Package, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or in exhibits to or excluded from the Registration Statement, as to which no opinion need be rendered) comply as to form in all material respects with the applicable requirements of the Securities Act. EX.A-2 (xii) The Units, the Common Stock and the Warrants have been approved for listing on the Nasdaq Capital Market under the symbol "____" and on the Boston Stock Exchange under the symbols "COINU," "COIN," "COINW" and "COINZ," respectively. (xiii) The statements (i) in each of the Disclosure Package and the Prospectus under the captions "Related Party Transactions," "Description of Securities" and "Shares Eligible for Future Sale," (ii) under the caption "Indemnification of Officers and Directors" in Item 24 of the Registration Statement, and (iii) under the caption "Recent Sales of Unregistered Securities in Item 26 of the Registration Statement, insofar as such statements constitute matters of law, legal conclusions or summaries of legal matters or documents or the Company's charter or by-law provisions, have been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. (xiv) To the best knowledge of such counsel, there are no legal or governmental actions, suits or proceedings pending or threatened which are required to be disclosed in the Registration Statement or the Disclosure Package, other than those disclosed therein. (xv) To the best knowledge of such counsel, there are no Existing Instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed as exhibits thereto; and the descriptions thereof and references thereto are correct in all material respects. (xvi) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority or agency, is required for the Company's execution, delivery and performance of the Underwriting Agreement and consummation of the transactions contemplated thereby and by the Prospectus, except as required under the Securities Act, the applicable laws of any foreign jurisdiction, applicable state securities or blue sky laws and from the NASD. (xvii) The execution and delivery of the Underwriting Agreement by the Company and the performance by the Company of its obligations thereunder (other than performance by the Company of its obligations under the indemnification section of the Underwriting Agreement, as to which no opinion need be rendered) (i) have been duly authorized by all necessary corporate action on the part of the Company; (ii) will not result in any violation of the provisions of the charter or by-laws of the Company; (iii) will not (A) constitute a breach of, or Default under any Existing Instrument, or (B) result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, in the case of each of clauses (A) and (B), any Existing Instrument filed as an exhibit to the Registration Statement or, to the best knowledge of such counsel, any other material Existing Instrument; or (iv) to the best knowledge of such counsel, will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company. (xviii) The Company is not, and after receipt of payment for the Units and the application of the proceeds thereof as contemplated under the caption "Use of Proceeds" in the Prospectus and in the Disclosure Package will not be, an "investment company" within the meaning of Investment Company Act. EX.A-3 (xix) To the best knowledge of such counsel, there are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by the Underwriting Agreement, except for such rights as have been duly waived. (xx) To the best knowledge of such counsel, the Company is not in violation of its charter or by-laws or any law, administrative regulation or administrative or court decree applicable to the Company or is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any material Existing Instrument, except in each such case for such violations or Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, representatives of the independent public or certified registered public accountants for the Company and with representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus, and any supplements or amendments thereto, and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, including the documents incorporated by reference therein (other than as specified above), and any supplements or amendments thereto, on the basis of the foregoing, nothing has come to their attention which has caused them to believe that (i) either the Registration Statement or any amendments thereto, at the time the Registration Statement or such amendments became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) the Prospectus, as of its date or at the First Closing Date or each Subsequent Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) the items specified in Schedule I, consisting of those included in the Disclosure Package, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or schedules or other financial data derived therefrom, included or incorporated by reference in the Registration Statement or the Prospectus or any amendments or supplements thereto). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the General Corporation Law of the State of Delaware, or the federal law of the United States, to the extent they deem proper and specified in such opinion, upon the opinion (which shall be dated the First Closing Date or each Subsequent Closing Date, as the case may be, shall be satisfactory in form and substance to the Underwriters, shall expressly state that the Underwriters may rely on such opinion as if it were addressed to them and shall be furnished to the Representative) of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters; provided, however, that such counsel shall further state that they believe that they and the Underwriters are justified in relying upon such opinion of other counsel, and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. EX.A-4 EXHIBIT B FORM OF LOCK-UP AGREEMENT EX.B-1 EX-4.1 3 b61186a5exv4w1.htm EX-4.1 FORM OF COMMON STOCK CERTIFICATE

Exhibit 4.1

CUSIP 21254s 10 7 CERTIFICATE NUMBER ZQ 000000

. CONVERTED ORGANICS INC. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM — as tenants in common UNIF GIFT MIN ACT- . . . . . . .         . . .Custodian . . . . . . . . . . . . . . . (Cust) (Minor) TEN ENT — as tenants by the entireties under Uniform Gifts to Minors Act . . . . . . . . . . . . . (State) JT TEN — as joint tenants with right of survivorship            UNIF TRF MIN ACT . . . . . . . . . . . . . .         .Custodian (until age. . . ). . . . . . . . . . . and not as tenants in common (Cust) (Minor) under Uniform Transfers to Minors Act. . . . . . . . . . (State) Additional abbreviations may also be used though not in the above list. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE            For value received, hereby sell, assign and transfer unto (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated: 20Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 . Signature: Signature: Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever.

EX-1.1

                                                                     EXHIBIT 1.1

                                     Form of

                             Converted Organics Inc.

                             UNDERWRITING AGREEMENT

                            dated ____________, 2007

                        PAULSON INVESTMENT COMPANY, INC.



                             UNDERWRITING AGREEMENT

[______________], 2007

Paulson Investment Company, Inc.
811 SW Naito Parkway
Portland, Oregon 97204

Ladies and Gentlemen:

     Introductory. Converted Organics Inc., a Delaware corporation (the
"Company") proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] Units, each Unit
consisting of (i) one share of the Company's common stock ("Common Stock"), (ii)
one Class A warrant to purchase one share of Common Stock (each a "Class A
Warrant" and, collectively, the "Class A Warrants"), and (iii) one Class B
warrant, to purchase one share of Common Stock (each a "Class B Warrant" and,
collectively, the "Class B Warrants" and, together with the Class A Warrants,
the "Warrants"). The Warrants are to be issued under the terms of a Warrant
Agreement (the "Warrant Agreement") by and between the Company and Computershare
Investor Services, as warrant agent (the "Warrant Agent"), substantially in the
form most recently filed as an exhibit to the Registration Statement
(hereinafter defined). The [___] Units to be sold by the Company are
collectively called the "Firm Units." In addition, the Company has granted to
the Underwriters an option to purchase up to an additional [___] Units (the
"Optional Units"), as provided in Section 2. The Firm Units and, if and to the
extent such option is exercised, the Optional Units, are collectively called the
"Units." Paulson Investment Company, Inc. has agreed to act as representative of
the several Underwriters (in such capacity, the "Representative") in connection
with the offering and sale of the Units.

     The Company confirms its agreement with the Underwriters as follows:

     SECTION 1. Representations and Warranties of the Company.

     The Company represents, warrants and covenants to each Underwriter as
follows:

     (a) Filing of the Registration Statement. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form SB-2 (File No. 333-135174), which contains a form
of prospectus to be used in connection with the public offering and sale of the
Units. Such registration statement, as amended, including the financial
statements, exhibits and schedules thereto, and the documents incorporated by
reference in the prospectus contained in the registration statement at the time
such registration statement became effective, in the form in which it was
declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), and including any required



information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A, Rule 430B or Rule 430C under the Securities Act, or pursuant to the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (collectively, the "Exchange Act"), is called the "Registration
Statement." Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement," and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such prospectus, in the form first filed pursuant
to Rule 424(b) under the Securities Act after the date and time that this
Agreement is executed and delivered by the parties hereto (the "Execution
Time"), or, if no filing pursuant to Rule 424(b) under the Securities Act is
required, the form of final prospectus relating to the Units included in the
Registration Statement at the effective date of the Registration Statement, is
called the "Prospectus." All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, the Company's preliminary
prospectus included in the Registration Statement (each a "preliminary
prospectus"), the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). Any
reference herein to any preliminary prospectus or the Prospectus or any
supplement or amendment to either thereof shall be deemed to refer to and
include any documents incorporated by reference therein as of the date of such
reference.

     (b) Compliance with Registration Requirements. The Registration Statement
has been declared effective by the Commission under the Securities Act. The
Company has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order preventing
or suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose have
been instituted or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.

     Each preliminary prospectus and the Prospectus when filed complied or will
comply in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical in content to the copy
thereof delivered to the Underwriters for use in connection with the offer and
sale of the Units other than with respect to any artwork and graphics that were
not filed. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times until the expiration of the prospectus
delivery period required under Section 4(3) of the Securities Act, complied and
will comply in all material respects with the Securities Act and did not and
will 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. The Prospectus (including any Prospectus wrapper), as
amended or supplemented, as of its date and at all subsequent times until the
Underwriters have completed their distribution of the offering of the Units, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in


                                       2



reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by the Representative expressly for use
therein, it being understood and agreed that the only such information furnished
by the Representative consists of the information described as such in Section 8
hereof. There are no contracts or other documents required to be described in
the Prospectus or to be filed as exhibits to the Registration Statement that
have not been described or filed as required.

     (c) Disclosure Package. The term "Disclosure Package" shall mean (i) the
preliminary prospectus, as amended or supplemented, (ii) the issuer free writing
prospectuses as defined in Rule 433 of the Securities Act (each, an "Issuer Free
Writing Prospectus"), if any, identified in Schedule B hereto, (iii) the pricing
terms set forth in Schedule C to this Agreement, and (iv) any other free writing
prospectus that the parties hereto shall hereafter expressly agree in writing to
treat as part of the Disclosure Package. As of ____ _.m. (Eastern time) on the
date of this Agreement (the "Initial Sale Time"), the Disclosure Package did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the information described as such in Section 8
hereof.

     (d) Company Not Ineligible Issuer. (i) At the time of filing the
Registration Statement and (ii) as of the date of the execution and delivery of
this Agreement (with such date being used as the determination date for purposes
of this clause (ii)), the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 of the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 of the Securities Act that
it is not necessary that the Company be considered an Ineligible Issuer.

     (e) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus
includes any information that conflicts with the information contained in the
Registration Statement, including any document incorporated by reference therein
that has not been superseded or modified. The foregoing sentence does not apply
to statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in Section 8 hereof.

     (f) Offering Materials Furnished to Underwriters. The Company has delivered
to the Representative five complete manually signed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representative have reasonably
requested for each of the Underwriters.

     (g) Distribution of Offering Material by the Company. The Company has not
distributed and will not distribute, prior to the later of each Subsequent
Closing Date (as defined


                                       3



below) and the completion of the Underwriters' distribution of the Units, any
offering material in connection with the offering and sale of the Units other
than a preliminary prospectus, the Prospectus, any Issuer Free Writing
Prospectus reviewed and consented to by the Representative, and the Registration
Statement.

     (h) The Underwriting Agreement. This Agreement has been duly authorized (to
the extent applicable), executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, except as
rights to indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.

     (i) Authorization of the Common Stock; Validity of Warrants and Warrant
Agreement.

     (i) The Common Stock included in the Units to be purchased by the
     Underwriters from the Company (including units purchasable on exercise of
     the Underwriters' overallotment option described in Section 2(c) and the
     Representative's Warrants described in Section 2(h) has been duly
     authorized and reserved for issuance and sale pursuant to this Agreement
     and, in the case of Common Stock issuable on exercise of the
     Representative's Warrants, the terms thereof and, when so issued and
     delivered by the Company, will be validly issued, fully paid and
     nonassessable.

     (ii) The Warrants included in the Units to be purchased by the Underwriters
     from the Company have been duly and validly authorized by all required
     corporate actions and will, when issued and delivered by the Company
     pursuant to this Agreement, be validly executed and delivered by, and will
     be valid and binding agreements of, the Company, enforceable in accordance
     with their terms, except as the enforcement thereof may be limited by
     bankruptcy, insolvency, reorganization, moratorium or other similar laws
     relating to or affecting the rights and remedies of creditors or by general
     equitable principles.

     (iii) The Representative's Warrants have been duly and validly authorized
     by all required corporate actions and will, when issued and delivered by
     the Company pursuant to this Agreement, be validly executed and delivered
     by, and will be valid and binding agreements of, the Company, enforceable
     in accordance with their terms, except as the enforcement thereof may be
     limited by bankruptcy, insolvency, reorganization, moratorium or other
     similar laws relating to or affecting the rights and remedies of creditors
     or by general equitable principles.

     (iv) The Common Stock issuable on exercise of the Warrants has been duly
     authorized and reserved for issuance and sale pursuant to their terms and,
     when issued and delivered by the Company pursuant to such warrants, will be
     validly issued, fully paid and nonassessable.

     (v) The Warrant Agreement has been duly and validly authorized by all
     required corporate actions of the Company and will, when executed and
     delivered (and assuming


                                       4



     due and valid execution by the Warrant Agent) constitute a valid and
     binding agreement of the Company, enforceable against the Company in
     accordance with its terms, except as the enforcement thereof may be limited
     by bankruptcy, insolvency, reorganization, moratorium or other similar laws
     relating to or affecting the rights and remedies of creditors or by general
     equitable principles.

     (vi) Each of the Warrants and the Representative's Warrants will, when
     issued, possess rights, privileges, and characteristics as represented in
     the most recent form of Warrant Agreement or Representative's Warrants, as
     the case may be, filed as an exhibit to the Registration Statement.

     (j) No Applicable Registration or Other Similar Rights. Except as fairly
and accurately described in the Registration Statement, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly waived.

     (k) No Material Adverse Change. Except as otherwise disclosed in the
Disclosure Package, subsequent to the respective dates as of which information
is given in the Disclosure Package: (i) there has been no material adverse
change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
is called a "Material Adverse Change"); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company in
respect of its capital stock.

     (l) Independent Accountants. Carlin, Charron & Rosen, LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and included in the
Disclosure Package and the Prospectus, is an independent registered public
accounting firm as required by the Securities Act and the Exchange Act.

     (m) Preparation of the Financial Statements. Each of the historical [and
pro-forma] financial statements filed with the Commission as a part of or
incorporated by reference in the Registration Statement, and included or
incorporated by reference in the Disclosure Package and the Prospectus, presents
fairly the information provided as of and at the dates and for the periods
indicated. Such financial statements comply as to form with the applicable
accounting requirements of the Securities Act and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included or incorporated by reference in the Registration
Statement. Each item of historical or pro-form financial data relating to the
operations, assets or liabilities of the Company and its predecessor set forth
in summary form in each of the preliminary prospectus and the Prospectus fairly
presents such information on a basis consistent with that of


                                       5



the complete financial statements contained in the Registration Statement. The
other financial and statistical information and data included in the
Registration Statement, or included or incorporated by reference into the
Disclosure Package or the Prospectus, are accurately presented and, in the case
of financial information and data, prepared on a basis consistent with such
financial statements and/or the books and records of the Company and its
subsidiaries.

     (n) Incorporation and Good Standing; Subsidiaries. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Disclosure Package and the Prospectus and to enter
into and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good standing
in New Jersey and in each other jurisdiction in which such qualification is
required except for such jurisdictions where the failure to so qualify or to be
in good standing would not, individually or in the aggregate, result in a
Material Adverse Change. The Company does not own or control, directly or
indirectly, any corporation, association or other entity, other than
Converted Organics of Woodbridge, LLC.

     (o) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the each of the
Disclosure Package and the Prospectus under the caption "Capitalization" (other
than for subsequent issuances, if any, pursuant to employee benefit plans
described in each of the Disclosure Package and the Prospectus or upon exercise
of outstanding options or warrants described in the Disclosure Package and
Prospectus, as the case may be). The Common Stock conforms, and, when issued and
delivered as provided in this Agreement, the Class A Warrants, the Class B
Warrants and the Representative's Warrants will comply in all material respects
to the description thereof contained in the each of the Disclosure Package and
Prospectus. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company other than those accurately
described in the Disclosure Package and the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth or incorporated by
reference in each of the Disclosure Package and the Prospectus accurately and
fairly presents the information required to be disclosed with respect to such
plans, arrangements, options and rights. All of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly by the
Company, free and clear of all liens, encumbrances, equities or claims, except
for such liens or encumbrances on such capital stock to secure indebtedness of
the Company's subsidiaries as described in the Disclosure Package or the
Prospectus.


                                       6



     (p) Quotation. The Units, the Common Stock, the Class A Warrants and the
Class B Warrants have been approved for quotation on the Nasdaq Capital Market
under the symbols "COINU," "COIN," "COINW" and "COINZ," respectively and on the
Boston Stock Exchange under the symbols "____."

     (q) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws or in default (or, with the giving of notice
or lapse of time, would be in default) ("Default") under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or other
instrument to which it is a party or by which it or it may be bound (including,
without limitation, such agreements and contracts filed as exhibits to the
Registration Statement or to which any of the property or assets of the Company
or any of its subsidiaries is subject (each, an "Existing Instrument")), except
for such Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change. The Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
the Disclosure Package and the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company, (ii) will not conflict with
or constitute a breach of, or Default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company. No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental or regulatory authority or
agency, is required for the Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
the Disclosure Package and the Prospectus, except the registration or
qualification of the Units under the Securities Act and applicable state
securities or blue sky laws and from the National Association of Securities
Dealers, Inc. (the "NASD").

     (r) No Material Actions or Proceedings. Except as otherwise disclosed in
the Disclosure Package and the Prospectus, there are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or any of its
subsidiaries, (ii) which have as the subject thereof any officer or director (in
such capacities) of, or property owned or leased by, the Company or (iii)
relating to environmental or discrimination matters, where in any such case (A)
there is a reasonable possibility that such action, suit or proceeding might be
determined adversely to the Company and (B) any such action, suit or proceeding,
if so determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement. No material labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the best of the Company's
knowledge, is threatened or imminent except for such disputes as would not,
individually or in the aggregate, result in a Material Adverse Change.

     (s) Intellectual Property Rights. The Company owns or possesses adequate
rights or licenses to use all patents, patent applications, trademarks, trade
names, copyrights, domain names, licenses, approvals, trade secrets and other
similar rights (collectively, "Intellectual Property Rights") reasonably
necessary to conduct its businesses as proposed to be conducted as


                                       7



set forth in the Disclosure Package and the Prospectus; and the expected
expiration of any of such Intellectual Property Rights would not result in a
Material Adverse Change. The Company has not received any notice of infringement
or conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change. The Company is not a party to or bound by
any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the
Disclosure Package and the Prospectus and are not described in all material
respects. None of the technology employed by the Company has been obtained or is
being used by the Company in violation of any contractual obligation binding on
the Company or, to the Company's knowledge, any of its officers, directors or
employees or otherwise in violation of the rights of any persons.

     (t) All Necessary Permits, etc. Except as otherwise disclosed in the
Disclosure Package and the Prospectus or except as would not result in a
Material Adverse Change, the Company and its subsidiaries possess such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct its
businesses, and the Company has not received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could result in a
Material Adverse Change.

     (u) Title to Properties. The Company and its subsidiaries have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(m) above (or elsewhere in the
Disclosure Package and the Prospectus), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company and its subsidiaries. The real property,
buildings, improvements, equipment and personal property held under lease by the
Company and its subsidiaries are held under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not materially interfere
with the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company and its subsidiaries.

     (v) Tax Law Compliance. The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid all taxes required to
be paid by it and, if due and payable, any related or similar assessment, fine
or penalty levied against it. The Company has made adequate charges, accruals
and reserves in the applicable financial statements referred to in Section 1(m)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined.

     (w) Company Not an "Investment Company." The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Units and the application of the proceeds thereof as contemplated under
the caption "Use of Proceeds" in each of the preliminary prospectus and the
Prospectus will not be, an "investment company"


                                       8



within the meaning of the Investment Company Act and will conduct its business
in a manner so that it will not become subject to the Investment Company Act.

     (x) Insurance. The Company and its subsidiaries are insured by recognized,
financially sound and reputable institutions with policies in such amounts and
with such deductibles and covering such risks as the Company reasonably believes
are adequate and customary for its business including, but not limited to,
policies covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company reasonably believes that it will be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change. The Company has not been denied any insurance coverage which it
has sought or for which it has applied.

     (y) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of any securities of the Company to facilitate the sale or resale of the
Units or the underlying securities. The Company acknowledges that the
Underwriters may engage in passive market making transactions in the Units on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange
Act.

     (z) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the preliminary prospectus or the Prospectus that have not been
described as required.

     (aa) Disclosure Controls and Procedures. The Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act), which (i) are designed to ensure that
material information relating to the Company and its subsidiaries is made known
to the Company's principal executive officer and its principal financial officer
by others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) will
be evaluated for effectiveness as of the end of each fiscal quarter and fiscal
year of the Company and (iii) are effective in all material respects to perform
the functions for which they were established. The Company is not aware of (a)
any significant deficiency in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls or (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal controls.

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


                                       9



     (cc) No Unlawful Contributions or Other Payments. Neither the Company nor,
to the best of the Company's knowledge, any employee or agent of the Company or
any of its subsidiaries has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in violation
of any law or of the character required to be disclosed in the Disclosure
Package and the Prospectus.

     (dd) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change (i) the Company and its
subsidiaries are not in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or any of its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation with
respect to which the Company or any of its subsidiaries has received written
notice, and no written notice by any person or entity alleging potential
liability for investigatory costs, cleanup costs, governmental responses costs,
natural resources damages, property damages, personal injuries, attorneys' fees
or penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or in
the past (collectively, "Environmental Claims"), pending or, to the best of the
Company's knowledge, threatened against the Company or any person or entity
whose liability for any Environmental Claim the Company has retained or assumed
either contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company or against any person or entity whose liability for any
Environmental Claim the Company has retained or assumed either contractually or
by operation of law.

     (ee) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA)


                                       10



has occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company or any of its ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company
or any of its ERISA Affiliates, if such "employee benefit plan" were terminated,
would have any "amount of unfunded benefit liabilities" (as defined under
ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, or any of its ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or failure to act, which would cause the
loss of such qualification.

     (ff) Compliance with Sarbanes-Oxley Act of 2002. The Company and, to the
best of its knowledge, its officers and directors are in compliance with
applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith (the "Sarbanes-Oxley Act") that
are effective and are actively taking steps to ensure that they will be in
compliance with other applicable provisions of the Sarbanes-Oxley Act upon the
effectiveness of such provisions, including Section 402 related to loans and
Sections 302 and 906 related to certifications.

     (gg) Material Understandings, Generally. Except as fairly described in the
Prospectus and the Disclosure Package, the Company has not made a determination
to take any action and is not a party to any understanding, whether or not
legally binding, with any other person with respect to the taking of any action
that, if known to prospective purchasers of the Units, would be likely to affect
their assessment of the value or prospects of the Company or their decision to
invest in the Units.

     Any certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.

      The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered pursuant to Section 5 hereof, counsel to the Company
and counsel to the Underwriters, will rely upon the accuracy and truthfulness
of the foregoing representations and hereby consents to such reliance.

     SECTION 2. Purchase, Sale and Delivery of the Units.

     (a) The Firm Units. Upon the terms herein set forth, the Company agrees to
issue and sell the Firm Units to the several Underwriters. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase the Firm Units from the Company. The
purchase price per Firm Unit to be paid by the several Underwriters to the
Company shall be $____ per Unit.

     (b) The First Closing Date. Delivery of the Firm Units to be purchased by
the Underwriters and payment therefor shall be made at 9:00 a.m. New York time
on


                                       11



____________, 2007, or such other time and date as the Representative shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company hereby acknowledges that circumstances
under which the Representative may provide notice to postpone the First Closing
Date as originally scheduled include, but are in no way limited to, any
determination by the Company or the Representative to recirculate to the public
copies of an amended or supplemented Prospectus or Disclosure Package or a delay
as contemplated by the provisions of Section 10.

     (c) The Optional Units; Each Subsequent Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Underwriters to purchase up to an aggregate of
_____________ Optional Units from the Company at the purchase price per share to
be paid by the Underwriters for the Firm Units. The option granted hereunder may
be exercised at any time and from time to time upon notice by the Representative
to the Company, which notice may be given at any time within 45 days from the
date of this Agreement. Such notice shall set forth (i) the aggregate number of
Optional Units as to which the Underwriters are exercising the option, (ii) the
names and denominations in which the Optional Units are to be registered and
(iii) the time, date and place at which such Optional Units will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of the Firm Units and the Optional Units). Each time
and date of delivery, if subsequent to the First Closing Date, is called the
"Subsequent Closing Date" and shall be determined by the Representative and
shall not be earlier than three nor later than five full business days after
delivery of such notice of exercise.

     (d) Public Offering of the Units. The Representative hereby advises the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Units as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representative, in its sole judgment, has determined
is advisable and practicable.

     (e) Payment for the Units. Payment for the Units to be sold by the Company
shall be made at the First Closing Date (and, if applicable, at any Subsequent
Closing Date) by wire transfer of immediately available funds to the order of
the Company.

     It is understood that the Representative has been authorized, for its own
account and the accounts of the several Underwriters, to accept delivery of and
receipt for, and make payment of the purchase price for, the Firm Units and any
Optional Units the Underwriters have agreed to purchase. The Representative,
individually and not as the Representative of the Underwriters, may (but shall
not be obligated to) make payment for any Units to be purchased by any
Underwriter whose funds shall not have been received by the Representative by
the First Closing Date or any Subsequent Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.

     (f) Delivery of the Units. Delivery of the Firm Units and the Optional
Units shall be made through the facilities of The Depository Trust Company
unless the Representative shall


                                       12



otherwise instruct. Time shall be of the essence, and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Underwriters.

     (g) Delivery of Prospectus to the Underwriters. Not later than 10:00 p.m.
New York time on the second business day following the date the Units are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Representative shall request.

     (h) Representative's Warrants. In addition to the sums payable to the
Representative as provided elsewhere herein, the Representative shall be
entitled to receive at the closing occurring on the First Closing Date, for
itself alone and not as Representative of the Underwriters, as additional
compensation for its services, Representative's Warrants for the purchase of up
to ________ Units at a price of $____ per Unit, upon the terms and subject to
adjustment and conversion as described in the form of Representative's Warrants
filed as an exhibit to the Registration Statement.

     SECTION 3. Covenants of the Company.

     The Company covenants and agrees with each Underwriter as follows:

     (a) Representative' Review of Proposed Amendments and Supplements. During
the period beginning at the Initial Sale Time and ending on the later of the
First Closing Date or such date as, in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer, including under circumstances
where such requirement may be satisfied pursuant to Rule 172 under the
Securities Act (the "Prospectus Delivery Period"), prior to amending or
supplementing the Registration Statement or the Prospectus, including any
amendment or supplement through incorporation by reference of any report filed
under the Exchange Act, the Company shall furnish to the Representative for
review a copy of each such proposed amendment or supplement, and the Company
shall not file any such proposed amendment or supplement to which the
Representative shall reasonably object.

     (b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representative in writing (i) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (ii) of the receipt of any comments of, or requests for
additional or supplemental information from, the Commission, (iii) of the time
and date of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus or the
Prospectus, (iv) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order or notice
preventing or suspending the use of the Registration Statement, any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. The Company shall use its best efforts to prevent the issuance of
any such stop order or prevention or suspension of such use. If the Commission
shall enter any such stop order or


                                       13



order or notice of prevention or suspension at any time, the Company will use
its best efforts to obtain the lifting of such order at the earliest possible
moment, or will file a new registration statement and use its best efforts to
have such new registration statement declared effective as soon as practicable.
Additionally, the Company agrees that it shall comply with the provisions of
Rules 424(b) and 430A, as applicable, under the Securities Act, including with
respect to the timely filing of documents thereunder, and will use its
reasonable efforts to confirm that any filings made by the Company under such
Rule 424(b) were received in a timely manner by the Commission.

     (c) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.

     (d) Amendments and Supplements to the Registration Statement, Prospectus
and Other Securities Act Matters. If, during the Prospectus Delivery Period, any
event or development shall occur or condition exist as a result of which the
Disclosure Package or the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein in the light of the
circumstances under which they were made, as the case may be, not misleading, or
if it shall be necessary to amend or supplement the Disclosure Package or the
Prospectus, or to file under the Exchange Act any document incorporated by
reference in the Disclosure Package or the Prospectus, in order to make the
statements therein, in the light of the circumstances under which they were
made, as the case may be, not misleading, or if in the opinion of the
Representative it is otherwise necessary to amend or supplement the Registration
Statement, the Disclosure Package or the Prospectus, or to file under the
Exchange Act any document incorporated by reference in the Disclosure Package or
the Prospectus, or to file a new registration statement containing the
Prospectus, in order to comply with law, including in connection with the
delivery of the Prospectus, the Company agrees to (i) notify the Representative
of any such event or condition (unless such event or condition was previously
brought to the Company's attention by the Representative during the Prospectus
Delivery Period) and (ii) promptly prepare (subject to Section 3(a) and 3(e)
hereof), file with the Commission (and use its best efforts to have any
amendment to the Registration Statement or any new registration statement be
declared effective) and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Registration Statement, the Disclosure
Package or the Prospectus, or any new registration statement, necessary in order
to make the statements in the Disclosure Package or the Prospectus as so amended
or supplemented, in the light of the circumstances under which they were made,
as the case may be, not misleading or so that the Registration Statement, the
Disclosure Package or the Prospectus, as amended or supplemented, will comply
with law.

     (e) Permitted Free Writing Prospectuses. The Company represents that it has
not made, and agrees that, unless it obtains the prior written consent of the
Representative, it will not make, any offer relating to the Units that would
constitute an Issuer Free Writing Prospectus or that would otherwise constitute
a "free writing prospectus" (as defined in Rule 405 of the Securities Act)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act; provided that the prior written
consent of the Representative hereto shall be deemed to have been given in
respect of the Free Writing


                                       14



Prospectuses included in Schedule B hereto. Any such free writing prospectus
consented to by the Representative is hereinafter referred to as a "Permitted
Free Writing Prospectus." The Company agrees that (i) it has treated and will
treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus, and (ii) has complied and will comply, as the case may
be, with the requirements of Rules 164 and 433 of the Securities Act applicable
to any Permitted Free Writing Prospectus, including in respect of timely filing
with the Commission, legending and record keeping.

     (f) Copies of any Amendments and Supplements to the Prospectus. The Company
agrees to furnish the Representative, without charge, during the Prospectus
Delivery Period, as many copies of each of the preliminary prospectus, the
Prospectus and the Disclosure Package and any amendments and supplements thereto
(including any documents incorporated or deemed incorporated by reference
therein) as the Representative may reasonably request.

     (g) Blue Sky Compliance. The Company shall cooperate with the
Representative and counsel for the Underwriters to qualify or register the Units
for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws of those jurisdictions designated by the
Representative, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Units. The Company shall not be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Units for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company shall use
its best efforts to obtain the withdrawal thereof at the earliest possible
moment.

     (h) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Units sold by it in the manner described under the caption "Use of
Proceeds" in the Disclosure Package and the Prospectus.

     (i) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.

     (j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representative an
earnings statement (which need not be audited) covering the twelve-month period
ending _________, 2007 that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act.

     (k) Periodic Reporting Obligations. During the Prospectus Delivery Period,
the Company shall file, on a timely basis, with the Commission, the Nasdaq
Capital Market and the Boston Stock Exchange all reports and documents required
to be filed under the Exchange Act. Additionally, the Company shall report the
use of proceeds from the issuance of the Units as may be required under Rule 463
under the Securities Act.


                                       15



     (l) Company to Provide Interim Financial Statements. Prior to the First
Closing Date and, if applicable, each Subsequent Closing Date, the Company will
furnish the Underwriters, as soon as they have been prepared by or are available
to the Company, a copy of any unaudited interim financial statements of the
Company for any period subsequent to the period covered by the most recent
financial statements appearing in the Registration Statement and the Prospectus.

     (m) Quotation. The Company will use its best efforts to include, subject to
notice of issuance, the Units on the Nasdaq Capital Market and to list the Units
on the Boston Stock Exchange.

     (n) Agreement Not to Offer or Sell Additional Securities. During the period
commencing on the date hereof and ending on the 90th day following the date of
the Prospectus, the Company will not, without the prior written consent of the
Representative (which consent may be withheld at the Representative's sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell, pledge, transfer or establish an open "put equivalent position" within
the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Units); provided, however,
that the Company may issue shares of its Common Stock or options to purchase its
Common Stock, or shares of Common Stock upon exercise of options, in each case,
pursuant to any stock option, stock bonus or other stock plan, arrangement or
contractual obligation described in the Prospectus, but only if the holders of
such shares, options, or shares issued upon exercise of such options, agree in
writing not to sell, offer, dispose of or otherwise transfer any such shares or
options during such 365-day period without the prior written consent of the
Representative (which consent may be withheld at the Representative's sole
discretion).

     (o) Future Reports to the Representative. During the period of five years
hereafter the Company will furnish, if not otherwise available on EDGAR, to the
Representative at 811 SW Naito Parkway, Portland, Oregon 97204 Attention:
Syndicate Department: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
capital stock.

      (p)   Investment Limitation.  The Company shall not invest, or
otherwise use the proceeds received by the Company from its sale of the Units
in such a manner as would require the Company to register as an investment
company under the Investment Company Act.


                                       16



     (q) No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.

     (r) Existing Lock-Up Agreements. Except as described in the Prospectus, and
those entered into with the state of Washington, there are no existing
agreements between the Company and its security holders that prohibit the sale,
transfer, assignment, pledge or hypothecation of any of the Company's
securities. The Company will direct the transfer agent to place stop transfer
restrictions upon the securities of the Company that are bound by such "lock-up"
agreements for the duration of the periods contemplated therein.

     SECTION 4. Payment of Expenses.

     (a) The Representative shall be entitled to reimbursement from the Company,
for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance equal to 3% of the aggregate initial public
offering price of the Firm Units purchased by the Underwriters. The
Representative shall be entitled to withhold this allowance on the Closing Date
related to the purchase of the Firm Units or the Option Units, as the case may
be.

     (b) In addition to the payment described in Paragraph (a) of this Section
4, the Company agrees to pay all costs, fees and expenses incurred in connection
with the performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all expenses
incident to the issuance and delivery of the Units (including all printing and
engraving costs, if any), (ii) all fees and expenses of the registrar and
transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Units to the
Underwriters, (iv) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each Issuer Free
Writing Prospectus, each preliminary prospectus and the Prospectus, and all
amendments and supplements thereto, and this Agreement, (vi) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Units for offer and
sale under the state securities or blue sky laws, and, if requested by the
Representative, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to the NASD's
review and approval of the Underwriters' participation in the offering and
distribution of the Units, (viii) the fees and expenses associated with
including the Units on the Nasdaq Capital Market and the Boston Stock Exchange
and (ix) all other fees, costs and expenses referred to in Item 13 of Part II of
the Registration Statement. Except as provided in this Section 4, Section 6,
Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses,
including the fees and disbursements of their counsel.

     SECTION 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Units
as provided herein on the First


                                       17



Closing Date and, with respect to the Optional Units, each Subsequent Closing
Date, shall be subject to (1) the accuracy of the representations and warranties
on the part of the Company set forth in Section 1 hereof as of the date hereof
and as of the First Closing Date and each Subsequent Closing Date as though then
made; (2) the timely performance by the Company of its covenants and other
obligations hereunder; and (3) each of the following additional conditions:

     (a) Accountants' Comfort Letter. On the date hereof, the Representative
shall have received from Carlin, Charron & Rosen, LLP, independent registered
public accounting firm of the Company, a letter dated the date hereof addressed
to the Underwriters, in form and substance satisfactory to the Representative,
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to underwriters, delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representative shall have received an additional four conformed copies of such
accountants' letter for the several Underwriters).

     (b) Effectiveness of Registration Statement; Compliance with Registration
Requirements; No Stop Order. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the Optional
Units, any Subsequent Closing Date:

          (i) the Company shall have filed the Prospectus with the Commission
          (including the information required by Rule 430A under the Securities
          Act) in the manner and within the time period required by Rule 424(b)
          under the Securities Act; or the Company shall have filed a
          post-effective amendment to the Registration Statement containing the
          information required by such Rule 430A, and such post-effective
          amendment shall have become effective; and

          (ii) no stop order suspending the effectiveness of the Registration
          Statement, or any post-effective amendment to the Registration
          Statement, shall be in effect and no proceedings for such purpose
          shall have been instituted or threatened by the Commission.

     (c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
Optional Units, each Subsequent Closing Date, in the judgment of the
Representative there shall not have occurred any Material Adverse Change.

     (d) Opinion of Counsel for the Company. On each of the First Closing Date
and each Subsequent Closing Date the Representative shall have received the
opinion of Holland & Knight LLP, counsel for the Company, dated as of the First
Closing Date or the Subsequent Closing Date, as applicable, substantially in the
form attached as Exhibit A (and the Representative shall have received an
additional four conformed copies of such counsel's legal opinion for the several
Underwriters).


                                       18



     (e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and each Subsequent Closing Date the Representative shall have received the
opinion of Tonkon Torp LLP, counsel for the Underwriters, dated as of the First
Closing Date or the Subsequent Closing Date, as applicable, in a form
satisfactory to the Representative (and the Representative shall have received
an additional four conformed copies of such counsel's legal opinion for the
several Underwriters).

     (f) Officers' Certificate. On each of the First Closing Date and each
Subsequent Closing Date the Representative shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect that the
signers of such certificate have reviewed the Registration Statement, the
Prospectus and any amendment or supplement thereto, any Issuer Free Writing
Prospectus and any amendment or supplement thereto and this Agreement, to the
effect set forth in subsection (b)(ii) of this Section 5, and further to the
effect that:

          (i) for the period from and after the date of this Agreement and prior
          to such Closing Date, there has not occurred any Material Adverse
          Change;

          (ii) the representations, warranties and covenants of the Company set
          forth in Section 1 of this Agreement are true and correct with the
          same force and effect as though expressly made on and as of such
          Closing Date; and

          (iii) the Company has complied with all the agreements hereunder and
          satisfied all the conditions on its part to be performed or satisfied
          hereunder at or prior to such Closing Date.

     (g) Bring-down Comfort Letter. On each of the First Closing Date and each
Subsequent Closing Date, the Representative shall have received from Carlin,
Charron & Rosen, LLP, independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to the
Representative, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Subsequent Closing Date, as the case may be (and the Representative shall have
received an additional four conformed copies of such accountants' letter the
several Underwriters).

     (h) Lock-Up Agreement from Certain Securityholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the Representative
an agreement in the form of Exhibit B hereto from each stockholder of the
Company, and such agreement shall be in full force and effect on each of the
First Closing Date and each Subsequent Closing Date.

     (i) Concurrent Bond Offering. On or before the First Closing Date, the
Representative shall have received confirmation satisfactory to it of the
receipt of proceeds by the Company from the sale of 20-year tax-exempt New
Jersey Economic Development Authority bonds in the principal amount of not less
than $17.5 million and bearing interest at a rate not greater than [8.2]%.


                                       19



     (j) Additional Documents. On or before each of the First Closing Date and
each Subsequent Closing Date, the Representative and counsel for the
Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Units as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.

     If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Representative
by notice to the Company at any time on or prior to the First Closing Date and,
with respect to the Optional Units, at any time prior to each Subsequent Closing
Date, which termination shall be without liability on the part of any party to
any other party, except that Section 4, Section 6, Section 8 and Section 9 shall
at all times be effective and shall survive such termination.

     SECTION 6. Reimbursement of Underwriters' Expenses. If this Agreement is
terminated by the Representative pursuant to Section 5 or Section 11, or by the
Company pursuant to Section 7, or if the sale to the Underwriters of the Units
on the First Closing Date or Subsequent Closing Date is not consummated because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Representative and the other Underwriters (or such Underwriters as
have terminated this Agreement with respect to themselves), severally, upon
demand for all out-of-pocket expenses that shall have been reasonably incurred
by the Representative and the Underwriters in connection with the proposed
purchase and the offering and sale of the Units, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.

     SECTION 7. Effectiveness of this Agreement. This Agreement shall become
effective upon the execution of this Agreement by the parties hereto.


                                       20



     SECTION 8. Indemnification.

     (a) Indemnification of the Underwriters.

     (1) The Company agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Company), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A, Rule 430B and Rule 430C under the Securities
Act, or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not misleading;
or (ii) upon any untrue statement or alleged untrue statement of a material fact
contained in any Issuer Free Writing Prospectus, any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in whole
or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (v) upon any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Common Stock or the offering contemplated hereby, and which is included
as part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon any matter covered by clause (i) or (ii) above,
provided that the Company shall not be liable under this clause (v) to the
extent that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its bad faith or willful misconduct; and to reimburse each
Underwriter and each such controlling person for any and all expenses (including
the fees and disbursements of counsel chosen by the Representative) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use in
the Registration Statement, any Issuer Free Writing Prospectus, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto). The
indemnity agreement set forth in this Section 8(a)(1) shall be in addition to
any liabilities that the Company may otherwise have.

     (b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who


                                       21



controls the Company within the meaning of the Securities Act or the Exchange
Act, against any loss, claim, damage, liability or expense, as incurred, to
which the Company, or any such director, officer, or controlling person may
become subject, under the Securities Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is 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 each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any Issuer Free
Writing Prospectus, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Representative expressly for
use therein; and to reimburse the Company, or any such director, officer, or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company hereby acknowledges that the
only information that the Underwriters have furnished to the Company expressly
for use in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth in the table in the first paragraph, in
the ____ paragraph and ___--____paragraphs (relating to stabilization
activities) and in the ______ paragraph (relating to market making) under the
caption "Underwriting" in the preliminary prospectus and the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.

     (c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, 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 a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the


                                       22



indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (the Representative in the case of
Section 8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.

     (d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.

     SECTION 9. Contribution. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying parties on the one hand, and the
indemnified parties, on the other hand, from the offering of the Units pursuant
to this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying parties, on the one hand, and the indemnified parties,
on the other hand, in connection with the


                                       23



statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the indemnifying parties, on the one hand, and the indemnified
parties, on the other hand, in connection with the offering of the Units
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Units pursuant to
this Agreement (before deducting expenses) received by the indemnifying parties,
and the total underwriting discount received by the indemnified parties, in each
case as set forth on the front cover page of the Prospectus bear to the
aggregate initial public offering price of the Units as set forth on such cover.
The relative fault of the indemnifying parties, on the one hand, and the
indemnified parties, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by indemnifying parties, on the one hand, or the
indemnified parties, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

     The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.

     The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.

     Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Units underwritten by it and
distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule A. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.

     SECTION 10. Default of One or More of the Several Underwriters. If, on the
First Closing Date or each Subsequent Closing Date, as the case may be, any one
or more of the


                                       24



several Underwriters shall fail or refuse to purchase Units that it or they have
agreed to purchase hereunder on such date, and the aggregate number of Units
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase does not exceed 10% of the aggregate number of the Units to be
purchased on such date, the other Underwriters shall be obligated, severally, in
the proportions that the number of Firm Units set forth opposite their
respective names on Schedule A bears to the aggregate number of Firm Units set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representative with the consent of
the non-defaulting Underwriters, to purchase the Units which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or each Subsequent Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
Units and the aggregate number of Units with respect to which such default
occurs exceeds 10% of the aggregate number of Units to be purchased on such
date, and arrangements satisfactory to the Representative and the Company for
the purchase of such Units are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, Section 6, Section 8 and Section 9
shall at all times be effective and shall survive such termination. In any such
case either the Representative or the Company shall have the right to postpone
the First Closing Date or each Subsequent Closing Date, as the case may be, but
in no event for longer than seven days in order that the required changes, if
any, to the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.

     As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

     SECTION 11. Termination of this Agreement. Prior to the First Closing Date
and, with respect to Optional Units, each Subsequent Closing Date, whether
before or after notification by the Commission to the Company of the
effectiveness of the Registration Statement under the Securities Act, this
Agreement may be terminated by the Representative by notice given to the Company
if at any time (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Capital Market
or by the Boston Stock Exchange, or trading in securities generally on either
the Nasdaq Stock Market, the Boston Stock Exchange or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, New York or Delaware authorities; (iii) there shall
have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective substantial change in United States' or international
political, financial or economic conditions that, in the judgment of the
Representative is material and adverse and makes it impracticable to market the
Units in the manner and on the terms described in the Prospectus or to enforce
contracts for the sale of securities; or (iv) in the judgment of the
Representative there shall have occurred any Material Adverse Change (regardless
of whether any loss associated with such Material Adverse Change shall have been
insured). Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the


                                       25



expenses of the Representative and the Underwriters pursuant to Sections 4 and 6
hereof, (b) any Underwriter to the Company, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.

     SECTION 12. No Advisory or Fiduciary Responsibility. The Company
acknowledges and agrees that: (i) the purchase and sale of the Units pursuant to
this Agreement, including the determination of the public offering price of the
Units and any related discounts and commissions, is an arm's-length commercial
transaction between the Company, on the one hand, and the several Underwriters,
on the other hand, and the Company is capable of evaluating and understanding
and understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement; (ii) in connection with each transaction
contemplated hereby and the process leading to such transaction each Underwriter
is and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary of the Company or its affiliates, stockholders, creditors or
employees or any other party; (iii) no Underwriter has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Company with
respect to any of the transactions contemplated hereby or the process leading
thereto (irrespective of whether such Underwriter has advised or is currently
advising the Company on other matters) and no Underwriter has any obligation to
the Company with respect to the offering contemplated hereby except the
obligations expressly set forth in this Agreement; (iv) the several Underwriters
and their respective affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of the Company and that the
several Underwriters have no obligation to disclose any of such interests by
virtue of any advisory, agency or fiduciary relationship; and (v) the
Underwriters have not provided any legal, accounting, regulatory or tax advice
with respect to the offering contemplated hereby and the Company has consulted
its own legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the several
Underwriters with respect to any breach or alleged breach of agency or fiduciary
duty.

     This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the several Underwriters, or any of
them, with respect to the subject matter hereof.

     SECTION 13. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Units sold hereunder and any termination of this Agreement.

     SECTION 14. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:


                                       26



     If to the Representative:

          Paulson Investment Company, Inc.
          811 SW Naito Parkway
          Portland, Oregon 97204
          Facsimile: (503) 243-6000
          Attention: Syndicate Department

     with a copy to:

          Tonkon Torp LLP
          888 SW Fifth Avenue, Suite 1600
          Portland, Oregon 97204
          Facsimile: (503) 972-3718
          Attention: Thomas P. Palmer

     If to the Company:

          Converted Organics Inc.
          7A Commercial Wharf West
          Boston, Massachusetts 02110
          Facsimile: (617) 624-0333
          Attention: Edward J. Gildea

     with a copy to:

          Holland & Knight LLP
          2300 US Bancorp Tower
          111 SW 5th Avenue
          Portland, Oregon 97204
          Facsimile: (503) 241-8014
          Attention: Mark A. von Bergen

     Any party hereto may change the address for receipt of communications by
giving written notice to the others.

     SECTION 15. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and personal representatives, and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Units as such from any of the
Underwriters merely by reason of such purchase.

     SECTION 16. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.


                                       27



     SECTION 17. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

     SECTION 18. Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in Portland, Oregon or the courts of the State
of Oregon in each case located in Portland, Oregon (collectively, the "Specified
Courts"), and each party irrevocably submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of a judgment of
any such court (a "Related Judgment"), as to which such jurisdiction is
non-exclusive) of such courts in any such suit, action or proceeding. Service of
any process, summons, notice or document by mail to such party's address set
forth above shall be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum.

     SECTION 19. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.

     Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.

     The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the officers or
employees of any Underwriter, any person controlling any Underwriter, the
Company, the officers or employees of the Company, or any person controlling the
Company,


                                       28



(ii) acceptance of the Units and payment for them hereunder and (iii)
termination of this Agreement.

     Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' officers and employees, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Units from any of the
several Underwriters merely because of such purchase.

     If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.

                                        Very truly yours,

                                        CONVERTED ORGANICS INC.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

     The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representative as of the date first above written.

PAULSON INVESTMENT COMPANY, INC.
Acting as Representative of the
several Underwriters named in the
attached Schedule A.


By:
    ---------------------------------
    [TITLE]


                                       29



                                   SCHEDULE A



                                                                       NUMBER OF
                                                                      FIRM UNITS
                                                                         TO BE
UNDERWRITERS                                                           PURCHASED
- ------------                                                          ----------
                                                                   
Paulson Investment Company, Inc. ..................................
Investors Capital Corporation......................................
EKN Financial Services, Inc. ......................................

   TOTAL...........................................................



                                    SCH. A-1



                                   SCHEDULE B

                        ISSUER FREE WRITING PROSPECTUSES


                                    SCH. B-1



                                   SCHEDULE C

                                  PRICING TERMS

Price per Unit to public: $_________

Underwriting discounts and commissions per share: $_________

Offering proceeds to the Company, before expenses: $_________

Closing Date: ____________, 2007


                                    SCH. E-1




                                                                       EXHIBIT A

                       Opinion of counsel for the Company
     to be delivered pursuant to Section 5(d) of the Underwriting Agreement.

     References to the Prospectus in this Exhibit A include any supplements
thereto at the First Closing Date and, if applicable, each Subsequent Closing
Date. Capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Underwriting Agreement.

     (i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.

     (ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Disclosure Package and the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement.

     (iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in New Jersey and in each other jurisdiction in
which such qualification is required, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.

     (iv) To the best of such counsel's knowledge, the Company does not own an
equity interest in any other entity, other than Converted Organics of
Woodbridge, LLC.

     (v) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conforms to the descriptions thereof set forth in
the Disclosure Package and the Prospectus. All of the outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable and, to the best of such counsel's knowledge, have been issued in
compliance with the registration and qualification requirements of federal and
state securities laws. The form of certificate used to evidence the Common Stock
complies with all applicable requirements of the charter and by-laws of the
Company and the General Corporation Law of the State of Delaware. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Disclosure Package and the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.

     (vi) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Law of the State of Delaware
or (ii) to the best knowledge of such counsel, otherwise.

     (vii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.

     (viii) The Units and the Common Stock included in the Units to be purchased
by the Underwriters from the Company (including units purchasable on exercise of
the Representative's overallotment option and the Representative's Warrants)
have been duly authorized and reserved


                                     EX.A-1



for issuance and sale pursuant to the Underwriting Agreement and, in the case of
Common Stock issuable on exercise of the Representative's Warrants, the terms
thereof and, when so issued and delivered by the Company, will be validly
issued, fully paid and nonassessable. The Class A Warrants and Class B Warrants
included in the Units to be purchased by the Underwriters from the Company have
been duly and validly authorized by all required corporate actions and will,
when issued and delivered by the Company pursuant to the Underwriting Agreement,
be validly executed and delivered by, and will be valid and binding agreements
of, the Company, enforceable in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles. The Representative's
Warrants have been duly and validly authorized by all required corporate actions
and will, when issued and delivered by the Company pursuant to the Underwriting
Agreement, be validly executed and delivered by, and will be valid and binding
agreements of, the Company, enforceable in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles. The Common
Stock issuable on exercise of Class A Warrants and Class B Warrants has been
duly authorized and reserved for issuance and sale pursuant to the terms of such
warrants and, when issued and delivered by the Company pursuant to such
warrants, will be validly issued, fully paid and nonassessable.

     (ix) The Warrant Agreement has been duly authorized by the Company. When
duly executed, authenticated, issued and delivered as contemplated in the
Registration Statement and the Warrant Agreement, the Warrant Agreement will
constitute the legally binding agreement of the Company, enforceable against it
in accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

     (x) The Registration Statement and the Rule 462(b) Registration Statement,
if any, has been declared effective by the Commission under the Securities Act.
To the best knowledge of such counsel, no stop order suspending the
effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Disclosure Package and the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been made in the manner and within the
time period required by such Rule 424(b).

     (xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, and each document deemed to be part of the
Disclosure Package, as of their respective effective or issue dates (other than
the financial statements and supporting schedules included therein or in
exhibits to or excluded from the Registration Statement, as to which no opinion
need be rendered) comply as to form in all material respects with the applicable
requirements of the Securities Act.


                                     EX.A-2



     (xii) The Units, the Common Stock and the Warrants have been approved for
listing on the Nasdaq Capital Market under the symbol "____" and on the Boston
Stock Exchange under the symbols "COINU," "COIN," "COINW" and "COINZ,"
respectively.

     (xiii) The statements (i) in each of the Disclosure Package and the
Prospectus under the captions "Related Party Transactions," "Description of
Securities" and "Shares Eligible for Future Sale," (ii) under the caption
"Indemnification of Officers and Directors" in Item 24 of the Registration
Statement, and (iii) under the caption "Recent Sales of Unregistered Securities
in Item 26 of the Registration Statement, insofar as such statements constitute
matters of law, legal conclusions or summaries of legal matters or documents or
the Company's charter or by-law provisions, have been reviewed by such counsel
and fairly present and summarize, in all material respects, the matters referred
to therein.

     (xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement or the Disclosure
Package, other than those disclosed therein.

     (xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; and the descriptions thereof
and references thereto are correct in all material respects.

     (xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Underwriting Agreement and consummation of the transactions contemplated thereby
and by the Prospectus, except as required under the Securities Act, the
applicable laws of any foreign jurisdiction, applicable state securities or blue
sky laws and from the NASD.

     (xvii) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder (other
than performance by the Company of its obligations under the indemnification
section of the Underwriting Agreement, as to which no opinion need be rendered)
(i) have been duly authorized by all necessary corporate action on the part of
the Company; (ii) will not result in any violation of the provisions of the
charter or by-laws of the Company; (iii) will not (A) constitute a breach of, or
Default under any Existing Instrument, or (B) result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, in the case of each of clauses (A) and (B), any Existing
Instrument filed as an exhibit to the Registration Statement or, to the best
knowledge of such counsel, any other material Existing Instrument; or (iv) to
the best knowledge of such counsel, will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company.

     (xviii) The Company is not, and after receipt of payment for the Units and
the application of the proceeds thereof as contemplated under the caption "Use
of Proceeds" in the Prospectus and in the Disclosure Package will not be, an
"investment company" within the meaning of Investment Company Act.


                                     EX.A-3



     (xix) To the best knowledge of such counsel, there are no persons with
registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by the Underwriting Agreement, except for such rights as have been
duly waived.

     (xx) To the best knowledge of such counsel, the Company is not in violation
of its charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or is in Default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate, result in
a Material Adverse Change.

     In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified registered public
accountants for the Company and with representatives of the Underwriters at
which the contents of the Registration Statement and the Prospectus, and any
supplements or amendments thereto, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, including the documents incorporated
by reference therein (other than as specified above), and any supplements or
amendments thereto, on the basis of the foregoing, nothing has come to their
attention which has caused them to believe that (i) either the Registration
Statement or any amendments thereto, at the time the Registration Statement or
such amendments became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) the Prospectus, as
of its date or at the First Closing Date or each Subsequent Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
the items specified in Schedule I, consisting of those included in the
Disclosure Package, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein, in
the light of circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial data derived therefrom, included or
incorporated by reference in the Registration Statement or the Prospectus or any
amendments or supplements thereto).

     In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or each Subsequent Closing
Date, as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Representative) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they and
the Underwriters are justified in relying upon such opinion of other counsel,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.


                                     EX.A-4



                                                                       EXHIBIT B

                            FORM OF LOCK-UP AGREEMENT


                                     EX.B-1

EX-4.1

exv4w1

EX-4.4

Exhibit 4.4

Stock Certificate 21254S 20 6

CONVERTED ORGANICS INC.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	-	as tenants in common	UNIF GIFT MIN ACT-		Custodian
				(Cust)		(Minor)
TEN ENT	-	as tenants by the entireties		under Uniform Gifts to Minors Act
						(State)
JT TEN	-	as joint tenants with right of survivorship	UNIF TRF MIN ACT		Custodian (until age)
		and not as tenants in common		(Cust)		(Minor)
				under Uniform Transfers to Minors Act
						(State)
		Additional abbreviations may also be used though not in the above list.

The Registered Holder hereby is entitled, at any time after the Separation Time (as defined on the face hereof) to exchange the Units represented by this Unit Certificate for Common Stock Certificate(s) representing one share of Common Stock for each Unit represented by this Unit Certificate, a Class A Warrant Certificate(s) representing one redeemable Class A Warrant for each Unit represented by this Unit Certificate and a Class B Warrant Certificate(s) representing one non-redeemable Class B Warrant for each Unit represented by this Unit Certificate upon surrender of this Unit Certificate to the Warrant Agent and Registrar together with any documentation required by such agent.

REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE FACE HEREOF, AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE OF THIS CERTIFICATE. COPIES OF THE WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE WARRANT AGENT AND REGISTRAR, COMPUTERSHARE TRUST COMPANY, INC.

For value received,                         hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)

Shares

of the units represented by the within Certificate, and do(es) hereby irrevocably constitute and appoint

Attorney

to transfer the said units on the books of the within-named Corporation with full power of substitution in the premises.

Dated:			20
Signature:
Signature:
	Notice:	Signature must conform in all respects to the name of Registered Holder as specified on the face of this Warrant Certificate in every particular, without alteration or any change whatsoever, and the signature must be guaranteed in the usual manner.

Signature(s) Guaranteed: Medallion Guarantee Stamp

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.

EX-10.1C

                                                                   Exhibit 10.1C

Mr. Edward J. Gildea, President
Converted Organics, Inc.
7A Commercial Wharf West
Boston, MA 02210

January 12, 2007

Re: April 11, 2006 FINANCING TERMS AGREEMENT

Dear Mr. Gildea:

      This letter confirms that the COMPANY and the undersigned PURCHASER of
UNITS pursuant to the above-referenced FINANCING TERMS AGREEMENT AND PURSUANT TO
THE EXTENSION LETTER DATED OCTOBER 16, 2006 (attached hereto as Exhibit A) agree
as follows (CAPITALIZED/ITALIC terms shall have the same meaning ascribed to
them in the FINANCING TERMS AGREEMENT):

      1. The MATURITY DATE is hereby extended to the earlier of February 19,
2007 or the closing of a PUBLIC OFFERING.

      2. The COMPANY'S obligation to deliver ALTERNATE BRIDGE EQUITY UNITS in
the absence of a PUBLIC OFFERING is postponed to February 19, 2007.

      3. Up through February 19, 2007 the COMPANY at its option shall have the
right, but not the obligation, to pay the Bridge NOTES interest in PRIMARY
BRIDGE EQUITY UNITS (or ALTERNATE BRIDGE EQUITY UNITS, as the case may be). Any
PRIMARY BRIDGE EQUITY UNITS so issued shall be entitled to the same registration
rights set forth in the FINANCING TERMS AGREEMENT for all other PRIMARY BRIDGE
EQUITY UNITS.

      4. The undersigned hereby appoints David A. Rapaport, Esq. (Executive Vice
President and General Counsel of High Capital Finding, LLC) as his/her/its Agent
to permit up to two (2) 30-day Maturity Date extensions.

      Notwithstanding the MATURITY DATE extension, and the FINANCING TERMS
AGREEMENT AND THE EXTENSION LETTER DATED OCTOBER 16, 2006, the COMPANY agrees
that the interest rate on the BRIDGE NOTES shall be computed at the rate of 18%
per annum from October 16, 2006 to the date of payment in full of all interest
and principal on the BRIDGE NOTES.

Very truly yours,


- ----------------------------------

Accepted and agreed:

Converted Organics, Inc.

By:                                           Date:
    -----------------------------------            -----------------------------
    Edward J. Gildea, President

EX-10.4A

                                                                   Exhibit 10.4A

                     FIRST AMENDMENT TO AGREEMENT OF LEASE

                  THIS FIRST AMENDMENT TO AGREEMENT OF LEASE (the "AMENDMENT")
is made and entered into this 18th day of January, 2007, ("the "AMENDMENT DATE")
by and between RECYCLING TECHNOLOGY DEVELOPMENT, LLC, having an address of 75
Crows Mill Road, Keasbey, New Jersey 08832 ("LANDLORD") and CONVERTED ORGANICS,
INC., a Delaware corporation, with offices located at 7A Commercial Wharf West,
Boston, MA 02110 ("TENANT").

                                   W I T N E S S E T H:

                  WHEREAS, Landlord and Tenant entered into that certain
Agreement of Lease dated June 2, 2006 (hereinafter called the "LEASE"), demising
certain premises more particularly described in the Lease (the "LEASED
PREMISES"); and

                  WHEREAS, Landlord and Tenant desire to amend the Lease to
increase the rent payable thereunder and to provide that Landlord is to make
certain improvements to the Leased Premises, and make certain other
modifications to the Lease, all as set forth below.

                  NOW THEREFORE, in consideration of the Leased Premises and the
sum of Ten Dollars ($10.00) in hand paid by Tenant to Landlord, the receipt
whereof is hereby acknowledged, Landlord and Tenant do hereby mutually covenant
and agree as follows:

          1.       Section 4.1 is deleted in its entirety and replaced with the
following:

                  "LANDLORD'S WORK: Anything contained in this Lease to the
 contrary notwithstanding, it is expressly understood and agreed that as of the
 Amendment Date, Tenant has not yet taken possession of the Leased Premises and
 Tenant shall not be permitted to take possession of the Leased Premises prior
 to the Work Completion Date (as hereinafter defined); provided, however, Tenant
 shall be permitted use of the Staging Area (as hereinafter defined), and
 subject to the terms of Section 4.6C hereof, Tenant shall be permitted to
 commence Tenant's Work prior to the Work Completion Date. Following the date
 hereof and in accordance with the terms hereof, Landlord shall improve the
 Leased Premises, at its sole cost and expense, in accordance with the terms of
 Exhibit C attached hereto ("LANDLORD'S WORK").

          2.      Section 4.5 is deleted in its entirety and replaced with the
following:

                  "CONSTRUCTION PERIOD: Subject to Landlord's approval of
Tenant's Construction Plans and the obtaining of Landlord's Permits (the later
to occur of (i) Tenant's Construction Plans being complete and approved by
Landlord, and (ii) the date Landlord is in receipt of Landlord's Permits being
the "CONSTRUCTION START DATE"), Landlord shall have a period of up to fifteen
(15) calendar months following the Construction Start Date to commence and
complete Landlord's Work (as hereinafter defined (such period being sometimes
herein referred to as the "CONSTRUCTION PERIOD"))." The date upon which Landlord
completes Landlord's Work shall be THE "WORK COMPLETION DATE."

         3.       Section 4.6A of the Lease is deleted in its entirety and
replaced with the following:

                  "TENANT'S CONSTRUCTION PLANS: Within thirty (30) days of the
date hereof, Tenant shall submit to Landlord for its review and approval, a
complete set of architectural plans, sealed by a licensed architect, for
Landlord's Work. Such plans and specifications shall be prepared and provided at
Tenant's sole cost and expense, shall be consistent with Landlord's Work, and in
compliance with all laws, ordinances, codes, permits, rules, regulations and
requirements of all duly constituted governmental authorities having
jurisdiction and applicable insurance companies (collectively, "LAWS") and shall
include, as applicable, complete and detailed plans and specifications,
including, but not limited to elevations, mechanical, electrical, plumbing and
signage plans (collectively, "TENANT'S CONSTRUCTION PLANS") such that same may
be submitted by Landlord to obtain Landlord's Permits. Tenant hereby agrees that
Tenant's Construction Plans shall not require the construction of any structure
beyond the "footprint" of the structure currently situate on that portion of the
Property on which the Leased Premises are to be rebuilt. Landlord shall give its
approval or disapproval (giving specific reasons in case of disapproval) of
Tenant's Construction Plans within ten (10) business days after their delivery
to Landlord for an initial review, and within five (5) business days after their
delivery to Landlord for resubmission. In the event that Landlord shall advise
Tenant of any objections to Tenant's Construction Plans, and Landlord and Tenant
cannot reasonably resolve said objections to their mutual satisfaction within
thirty (30) days following Tenant's receipt of Landlord's objections, then
either party may submit such dispute to arbitration in accordance with Section
54. Notwithstanding anything herein contained to the contrary, the commencement
or pending decision of any arbitration proceeding in conjunction with this Lease
shall not delay or excuse any payment of Base Rent, additional rent or other
charge which is otherwise due and payable under this Lease. In the event that
Tenant fails to timely submit Tenant's Construction Plans as contemplated
herein, Landlord may, at its option, take either of the following actions: (i)
extend the time for Tenant to submit Tenant's Construction Plans, in which case
the Construction Period shall be extended one day for each day Tenant is late in
submitting Tenant's Construction Plans, or (ii) by written notice to Tenant,
terminate this Lease (subject to the provisions of Section 44). Tenant
acknowledges that Landlord's approval of Tenant's Construction Plans shall not
be deemed a warranty or representation that Tenant's Construction Plans comply
with applicable Laws, or other legal requirements or are sufficient for Tenant's
needs or purposes. Notwithstanding anything herein contained to the contrary, in
no event may Tenant seek, submit, or request any changes, modifications or other
alterations of the Leased Premises, which entail or require either partial or
full site plan review and approval, without Landlord's prior written consent,
which consent may be withheld by Landlord in its sole and un-reviewable
discretion."

         4.       Section 4.6B of the Lease is deleted in its entirety and
replaced with the following:

          "LANDLORD'S PERMITS: Following Landlord's approval of Tenant's
Construction Plans, Landlord shall apply, at its sole cost and expense, for all
permits and approvals necessary to perform Landlord's Work ("LANDLORD'S
PERMITS") and shall diligently proceed in good faith to obtain Landlord's
Permits in order that Landlord may, subject to the provisions hereof, perform
Landlord's Work to completion. Upon receipt of Landlord's Permits, Landlord
shall promptly


                                       2


commence Landlord's Work, in accordance with Tenant's Construction Plans, as
approved by Landlord."

         5.       Section 4.6C of the Lease is deleted in its entirety and
replaced with the following:

         "TENANT'S WORK: Subject to Tenant obtaining all necessary governmental
 permits and approvals, Tenant shall have the right to install certain equipment
 and ancillary infrastructure improvements, pursuant to plans and specifications
 which shall have been prepared by Tenant at its sole cost and expense and
 submitted to Landlord for its prior written approval, in its sole and absolute
 discretion (such plans being hereinafter referred to as "TENANT'S EQUIPMENT
 PLANS" and such work hereinafter being referred to as "TENANT'S WORK").
 Tenant's Equipment Plans shall be in compliance with all Laws and applicable
 insurance companies and shall include, as applicable, complete and detailed
 plans and specifications, including, but not limited to, elevations,
 mechanical, electrical, plumbing and signage plans. Tenant hereby agrees that
 Tenant's Equipment Plans shall not require the construction of any structure
 beyond the footprint of the Leased Premises. Landlord shall give its approval
 or disapproval (giving specific reasons for disapproval) of Tenant's Equipment
 Plans within ten (10) business days after their delivery to Landlord for
 initial review, and within five (5) business days after their delivery to
 Landlord for resubmission. Tenant acknowledges that Landlord's approval of
 Tenant's Equipment Plans shall not be deemed a warranty or representation that
 Tenant's Equipment Plans comply with applicable Laws, or other legal
 requirements or are sufficient for Tenant's needs or purposes. All equipment
 and ancillary improvements made, performed or installed by Tenant, inclusive of
 Tenant's Work, shall be provided at Tenant's sole cost and expense and shall be
 performed in compliance with all of the terms and conditions of this Lease
 (including, but not limited to Section 21) and all applicable Laws. Tenant's
 Work shall be performed by reputable and licensed contractors reasonably
 approved by Landlord which shall work in a harmonious manner in accordance with
 good construction industry practice(s). Tenant may commence Tenant's Work prior
 to the Work Completion Date, provided Tenant and Tenant's agents and
 contractors do not interfere with any work being performed by or on behalf of
 Landlord in the Leased Premises. Tenant shall not cause any conflict or work
 stoppage as a result of the performance of Tenant's Work in the Leased
 Premises. Tenant agrees to instruct its contractors and others performing
 construction work on its behalf, to cooperate with Landlord and its contractors
 and subcontractors, or those contractors or subcontractors of any affiliates of
 Landlord who are performing work in the Leased Premises or on the Property, in
 order to minimize interference therewith. In the event that Landlord's agents,
 contractors or employees, or Tenant's work, or Tenant's agents, contractors or
 employees, are respectively impeding, interfering, or otherwise delaying the
 completion of work being performed by either Landlord or its affiliates, or
 Tenant, as the case may be, the aggrieved party shall provide the other with
 written notice (a "NOTICE OF DELAY"), which shall reasonably detail the
 circumstances of such delay and propose a "good faith solution", (as defined
 below), to resolve same. A "good faith solution" shall be defined as a solution
 which minimizes the costs and adverse effects on both parties. Within two (2)
 business days following receipt of a Notice of Delay, Landlord and Tenant will
 arrange for a conference call and/or meeting with each other's representatives,
 which representatives shall have decision making authority (the "RESOLUTION
 MEETING"). During the Resolution Meeting, all parties shall discuss the Notice
 of Delay and proposed good faith solution with the intent and purpose of


                                       3


 resolving the matter in good faith as set forth above. Accurate minutes of the
 Resolution Meeting shall be kept and approved by both parties. In the event
 that a mutually satisfactory resolution is not reached following the Resolution
 Meeting, either Landlord or Tenant may submit the dispute to an Arbitration in
 accordance with the provisions of Article 54; provided, however, that given any
 timing constraints, such Arbitration shall be handled on an expedited basis.
 Notwithstanding anything herein to the contrary, in no event may Tenant seek,
 submit, or request in any application made to any municipal or other governing
 body having jurisdiction, any changes, modifications or other alterations of
 the Leased Premises, which entail or require either partial or full site plan
 review and approval, without Landlord's prior written consent, which consent
 may be withheld by Landlord in its sole and absolute discretion. In the event
 Landlord is delayed in performing Landlord's Work as a result of Tenant's Work
 being performed by Tenant or Tenant's contractors prior to the Work Completion
 Date, the Construction Period shall be extended one day for each day Landlord
 is so delayed."


         6.       The following is added as section 4,7:

         "STAGING AREA: Provided that Tenant shall not be in default of this
 Lease beyond any applicable notice and cure period hereunder, during the
 Construction Period only, Landlord agrees to designate, from time to time, upon
 request of Tenant, a temporary staging area (the "STAGING AREA"), in and around
 the Property, for use by Tenant and Tenant's Contractors for the assemblage of
 equipment and infrastructure to be installed in the Leased Premises following
 the Work Completion Date. The use of the Staging Area shall be subject to all
 of the terms and conditions of this Lease, except that Tenant shall not be
 required to pay any fee for the use of the initial Staging Area. The tentative
 initial Staging Area is shown on Exhibit A attached hereto. Notwithstanding the
 foregoing, Tenant shall accept the Staging Area so designated by Landlord in
 its "as-is where-is condition", with all faults, it being agreed that Landlord
 shall not be required to perform any work or expend any sums to ready the
 Staging Area for Tenant's use. Tenant's use of the Staging Area shall be at
 Tenant's sole risk. The use of the Staging Area shall not interfere with the
 use and enjoyment of the Property or the Building by Landlord, or any tenants,
 occupants, guests or invitees thereof, nor interfere with any work being
 performed by or on behalf of Landlord in and around the Property or the
 Building, including, but not limited to, Landlord's Work. Landlord reserves the
 right to change the location of any previously designated Staging Area to a new
 location within reasonable proximity to the Leased Premises, upon five (5) days
 notice to Tenant, and all costs and expenses of moving and relocating shall be
 borne by Tenant. At the end of the Construction Period (or any earlier
 cessation of the use of the Staging Area by Tenant, Tenant shall promptly
 remove (and/or cause its Contractors to promptly remove), all vehicles,
 equipment, machinery, materials, debris and all other personal property on or
 prior to said date, so that the Staging Area is left in the same condition as
 existed as of the date upon which Tenant's use thereof commenced. In the event
 Tenant does not vacate the Staging Area as required by the terms hereof,
 Landlord shall have the right, but not the obligation, to remove all debris and
 personal property from the Staging Area, disposing of same as it sees fit, and
 Tenant shall be responsible for the costs incurred by Landlord in removing and
 disposing of all debris and personal property from the Staging Area as
 additional rent.


                                       4


         7. Schedule B of the Lease is deleted in its entirety and replaced with
Exhibit B attached hereto.

         8. Section 44.1 is modified by increasing the Security Deposit from
Sixty Five Thousand ($65,000) Dollars to Four Hundred Fifteen Thousand
($415,000) Dollars. Tenant shall pay the additional Three Hundred Fifty Thousand
($350,000) Dollars on or before the earlier to occur of (i) the date of the
closing of Tenant's financing through the New Jersey Economic Development
Authority (the "CLOSING DATE"), or (ii) March 1, 2007.

         9. Except as supplemented and amended by this Amendment, the Lease is
unmodified and continues in full force and effect, and Landlord and Tenant
hereby ratify and confirm the Lease as so amended and supplemented. Any terms
that are not defined in this Amendment shall have the meanings ascribed in the
Lease. The Lease as supplemented and amended hereby shall inure to the benefit
of and be binding upon Landlord, Tenant and their successors, assigns, heirs and
legal representatives. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one instrument.

IN WITNESS WHEREOF, the parties have executed and sealed this Amendment as of
the day and year first above set forth.



ATTEST (WITNESS)                       TENANT:

                                       CONVERTED ORGANICS, INC,
/s/ Illegible
- ------------------------------
                                       BY: /s/ Edward J. Gildea
                                          --------------------------------------

                                       Name: Edward J. Gildea
                                            ------------------------------------

                                       Its:  President
                                            ------------------------------------



                                       LANDLORD:

                                       RECYCLING TECHNOLOGY
                                       DEVELOPMENT, LLC

/s/ Illegible                          BY: /s/ Illegible
- ------------------------------            --------------------------------------

                                       Name: Illegible
                                            ------------------------------------

                                       Its: Member
                                            ------------------------------------


                                       5

                                   EXHIBIT "A"

                              Initial Staging Area




                             (STAGING AREA GRAPHIC)



                                  EXHIBIT "B"


                               BASE RENT SCHEDULE

The lease term is for ten (10) years with an option to renew for an additional
ten (10) years. Base Rent shall be as follows:




Period             Previous Rent  Increase           Monthly Rent  Total Rent
- ------             -------------  --------           ------------  ----------
                                                       
 6/2/06 - 2/28/07  N/A            N/A                $32,500       $292,500
 3/1/07 - 5/31/07  $32,500        $45,401.65         $77,901.65    $233,704.95
 6/1/07 - 5/31/08  $77,901.65     N/A                $77,901.65    $934,819.80
 6/1/08 - 5/31/09  $77,901.65     N/A                $77,901.65    $934,819.80
 6/1/09 - 5/31/10  $77,901.65     N/A                $77,901.65    $934,819.80
 6/1/10 - 5/31/11  $77,901.65     N/A                $77,901.65    $934,819.80
 6/1/11 - 5/31/12  $77,901.65     $1,625             $79,526.65    $954,319.80
 6/1/12 - 5/31/13  $79,526.65     $682.50            $80,209.15    $962,509.80
 6/1/13 - 5/31/14  $80,209.15     $696.15            $80,905.30    $970,863.60
 6/1/14 - 5/31/15  $80,905.30     $710.07            $81,615.37    $979,384.44
 6/1/15 - 5/31/16  $81,615.37     N/A                $70,989.24    $851,870.88
 6/1/16 - 5/31/17  $70,989.24     N/A                $38,784.90    $465,418.77
 6/1/17 - 5/31/18  $38,784.90     plus 2% $775.70    $39,560.60    $474,727.14
 6/1/18 - 5/31/19  $39,560.60     plus 2% $791.21    $40,351.81    $484,221.69
 6/1/19 - 5/31/20  $40,351.81     plus 2% $807.04    $41,158.84    $493,906.12
 6/1/20 - 5/31/21  $41,158.84     plus 2% $823.18    $41,982.02    $503,784.24
 6/1/21 - 5/31/22  $41,982,02     plus 5% $2,099.10  $44,081.12    $528,973.45
 6/1/22 - 5/31/23  $44,081,12     plus 2% $881.62    $44,962.74    $539,552.92
 6/1/23 - 5/31/24  $44,962.74     plus 2% $899.25    $45,862.00    $550,343.98
 6/1/24 - 5/31/25  $45,862        plus 2% $917.24    $46,779.24    $561,350.86
 6/1/25 - 5/31/26  $46,779.24     plus 2% $935.58    $47,714.82    $572,577.88





                                    EXHIBIT C

                                LANDLORD'S WORK

                                       2



                               Converted Organics
                                    Exhibit C



Renovation of the shell of the building, related to the Leased Premises, (60,000
Sq. Ft.).


Approval of Engineering, Design and Drawings
Purchase of Steel Trusses and Steel Bar Joist and Structural Steel
Mobilization
Erection of proposed columns and foundation
Erection of Structural Steel
Erection of Trusses & Bar Joists
Installation of 26 gauge "R" Panel Roof System
Installation of 26 gauge "R" panel-6ft. translucent panels-east wall
Installation of 26 gauge "R" panel-6ft translucent panels-west wall
Installation of 26 gauge "R" panel-6ft translucent panels-south wall


                                       1

EX-10.13

                                                                   Exhibit 10.13

                                                                  Project L06276
                                                                  Contract 5E

                              AIA Document B141/CMa

             STANDARD FORM OF AGREEMENT BETWEEN OWNER AND ARCHITECT

               Where the Construction Manager is NOT a Constructor

                    1992 CONSTRUCTION MANAGER-ADVISER EDITION

      THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
     ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.

 This document is intended to be used in conjunction with the 1992 editions of
                 AIA Documents B801/CMa, AlOl/CMa and A201/CMa.

AGREEMENT made as of the NINETEENTH day of DECEMBER in the year of Two Thousand
and Six

(In words indicate day, month and year)

BETWEEN the Owner:              Converted Organics of Woodbridge, LLC.
(Name and address)              99 Madison Avenue
                                Fanwood, NJ 07023

and the Architect:              For the purposes of this Agreement, all
(Name and address)              references to "Architect" shall be intended to
                                mean "Facility Engineer". Facility Engineer is:

                                The Construction Partnership, Inc.
                                436 Creamery Way, Suite 100
                                Exton, PA 19341

for the following Project:      Converted Organics of Woodbridge, LLC
(include detailed               75 Crows Mill Road
descriptions of Project         Keasbey, NJ
location address and scope)

The Construction Manager is:    The Construction Partnership, Inc.
(Name and Address)              436 Creamery Way, Suite 100
                                Exton, PA 19341

The Owner and Architect agree as set forth below.

Copyright 1975, 1980, (c) 1992 by The American Institute of Architects, 1735
New York Avenue N.W., Washington, D.C. 20006-5292 Reproduction of the material
herein for substantial quotation of its provisions without the written
permission of the AIA violates the copyright laws of the United States and will
subject the violator to legal prosecution.

(LOGO)   AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION
         MANAGER-ADVISER EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE
         AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N W,
         WASHINGTON. DC 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
         U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               Bl41/CMa-1992   1



          TERMS AND CONDITIONS OF AGREEMENT BETWEEN OWNER AND ARCHITECT

                                    ARTICLE 1
                          ARCHITECT'S RESPONSIBILITIES

1.1 ARCHITECT'S SERVICES

1.1.1 The Architect's services consist of those services performed by the
Architect. Architect's employees and Architect's consultants as enumerated in
Articles 2 and 3 of this Agreement and any other services included in Article
12.

1.1.2 The Architect's services shall be provided in conjunction with the
services of a Construction Manager as described in the edition of AIA Document
B80l/CMa, Standard Form of Agreement Between Owner and Construction Manager,
current as of the date of this Agreement.

1.1.3 The Architect's services shall be performed as expeditiously as is
consistent with professional skill and care and the orderly progress of the
work. The Architect shall submit for the Owner's approval and the Construction
Manager's information a schedule for the performance of the Architect's services
which may be adjusted as the Project proceeds, and shall include allowances for
periods of time required for the Owner's and Construction Manager's review and
for approval of submissions by authorities having jurisdiction over the Project.
Time limits established by this schedule approved by the Owner shall not, except
for reasonable cause, be exceeded by the Architect or Owner.

1.1.4 The services covered by this Agreement are subject to the time limitations
contained in Subparagraph 11.5.1.

                                    ARTICLE 2
                       SCOPE OF ARCHITECT'S BASIC SERVICES

2.1 DEFINITION

2.1.1 The Architect's Basic Services consist of those described in Paragraphs
2.2 through 2.6 and any other services identified In Article 12 as part of Basic
Services, and include normal structural, mechanical and electrical engineering
services.

2.2 SCHEMATIC DESIGN PHASE

2.2.1 The Architect shall review the program, schedule and construction budget
furnished by the Owner to ascertain the requirements of the Project and shall
arrive at a mutual understanding of such requirements with the Owner.

2.2.2 The Architect shall review with the Owner and Construction Manager
proposed site use and improvements; selection of materials, building systems and
equipment; and methods of Project delivery.

2.2.3 The Architect shall review with the Owner and Construction Manager
alternative approaches to design and construction of the Project.

2.2.4 Based on the mutually agreed-upon program, schedule and construction
budget requirements, the Architect shall prepare, for approval by the Owner,
Schematic Design Documents consisting of drawings and other documents
illustrating the scale and relationship of Project components.

2.2.5 At intervals appropriate to the progress of the Schematic Design Phase and
mutually agreeable to the Owner, Construction Manager and Architect, the
Architect shall provide schematic design studies for the Owner's review and the
Construction Manager's information.

2.2.6 In the further development of the drawings and specifications during this
and subsequent phases of design, the Architect shall be entitled to assume the
accuracy of the estimates of Construction Cost which are to be provided by the
Construction Manager under the Construction Manager's agreement with the Owner.

2.2.7 Upon completion of the Schematic Design Phase, the Architect shall provide
drawings, outline specifications and other documents for the Owner's approval
and the Construction Manager's information.

2.3 DESIGN DEVELOPMENT PHASE

2.3.1 Based on the approved Schematic Design Documents and any adjustments
authorized by the Owner in the program, schedule or construction budget, the
Architect shall prepare Design Development Documents for the Construction
Manager's review and the Owner's approval. The Design Development Documents
shall be based upon data and estimates prepared by the Construction Manager and
shall consist of drawings and other documents that establish and describe the
size and character of the Project as to architectural, structural, mechanical
and electrical systems, materials and such other elements as may be appropriate.

2.3.2 At intervals mutually agreeable to the Owner, Construction Manager and
Architect, the Architect shall provide drawings and other documents which depict
the current status of design development for the Owner's review and the
Construction Manager's information.

2.3.3 Upon completion of the Design Development Phase, the Architect shall
provide drawings, outline specifications and Other documents for the Owner's
approval and the Construction Manager's information.

2.4 CONSTRUCTION DOCUMENTS PHASE

2.4.1 Based on the approved Design Development Documents and any further
adjustments authorized by the Owner in the scope or quality of the Project or in
the construction budget, the Architect, utilizing data and estimates prepared by
the Construction Manager, shall prepare, for approval by the Owner, Construction
Documents consisting of Drawings and Specifications setting forth in detail the
requirements for the construction of the Project.

2.4.2 At intervals mutually agreeable to the Owner, Construction Manager and
Architect, the Architect shall provide Drawings and Specifications for the
Owner's and the Construction Manager's review.

2.4.3 Upon completion of the Construction Documents Phase, the Architect shall
provide Construction Documents for the Owner's approval and the Construction
Manager's information.

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N W, WASHINGTON. DC 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


                                                               Bl41/CMa-1992   2



2.4.4 The Architect shall assist the Owner and Construction Manager in the
preparation of the necessary bidding, information bidding forms, the Conditions
of the Contracts, and the forms of Agreement between the Owner and the
Contractors. The Architect shall assist the Construction Manager in issuing
bidding documents to bidders and conducting prebid conferences with prospective
bidders. The Architect, with the assistance of the Construction Manager, shall
respond to questions from bidders, and shall issue addenda

2.4.5 The Architect shall assist the Owner and Construction Manager in
connection with the Owner's responsibility for filing documents required for the
approval of governmental authorities having jurisdiction over the Project.

2.5 BIDDING OR NEGOTIATION PHASE

2.5.1 The Architect, following the Owner's approval of the Construction
Documents and of the Construction Manager's latest estimate of Construction
Cost, shall assist the Construction Manager in obtaining bids or negotiated
proposals and assist in preparing contracts for construction.

2.6 CONSTRUCTION PHASE-ADMINISTRATION OF THE CONSTRUCTION CONTRACT

2.6.1 The Architect's responsibility to provide Basic Services for the
Construction Phase under this Agreement commences with the award of the Contract
for construction and terminates at the earlier of the issuance to the Owner of
the final Project Certificate for Payment or 60 days after the date of
Substantial Completion of the work.

2.6.2 The Architect shall provide administration of the Contract for
construction in cooperation with the Construction Manager as set forth below and
in the edition of AIA Document A201/CMa, General Conditions of the Contract for
Construction. Construction Manager-Adviser Edition, current as of the date of
this Agreement.

2.6.3 Duties, responsibilities and limitations of authority of the Architect
shall not be restricted, modified or extended without written agreement of the
Owner and Architect with consent of the Contractors and the Construction
Manager which consent shall not be unreasonably withheld.

2.6.4 The Architect shall be a representative of and shall advise and consult
with the Owner (1) during construction until final payment to the Contractors is
due, and (2) as an Additional Service at the Owner's direction from rime to time
during the correction period described in the Contracts for Construction. The
Architect shall have authority to act on behalf of the Owner only to the extent
provided in this Agreement unless otherwise modified by written instrument.

2.6.5 The Architect shall visit the site at intervals appropriate to the stage
of construction or as otherwise agreed by the Owner and Architect in writing to
become generally familiar with the progress and quality of the Work completed
and to determine in general if the work is being performed in a manner
indicating that the Work when completed will be in accordance with the Contract
Documents. However, the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity of the Work. On
the basis of on-site observations as an architect, the Architect shall keep the
Owner informed of the progress and quality of the Work, and shall endeavor to
guard the Owner against defects and deficiencies in the Work (More extensive
site representation may be agreed to as an Additional Service, as described in
Paragraph 3.2.)

2.6.6 The Architect shall not have control over or charge of and shall not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are the Contractors' responsibility under the Contracts for
Construction. The Architect shall not be responsible for the Contractors'
schedules or failure to carry out the Work in accordance with the Contract
Documents. The Architect shall not be responsible for the performance by the
Construction Manager of the services required by the Construction Manager's
agreement with the Owner. The Architect shall not have control over or charge of
acts or omissions of the Contractors, Subcontractors, or their agents or
employees, or of any other persons performing services or portions of the Work.

2.6.7 The Architect shall at all times have access to the Work wherever it is in
preparation or progress.

2.6.8 Communications by and with the Architect's consultants shall be through
the Architect.

2.6.9 Based on the Architect's observations and evaluations of each Contractor's
Application for Payment, the Architect shall review and certify the amounts due
the respective Contractors.

2.6.9.1 The Architect's certification for payment shall constitute a
representation to the Owner, based on the Architect's observations at the site
as provided in Subparagraph 2.6.5, on the recommendations of the Construction
Manager and on the data comprising the Contractors' Applications for Payment,
that, to the best of the Architect's knowledge, information and belief, the Work
has progressed to the point indicated and the quality of the Work is in
accordance with the Contract Documents. The foregoing representations are
subject to an evaluation of the Work for conformance with the Contract Documents
upon Substantial Completion, to results of subsequent tests and inspections, to
minor deviations from the Contract Documents correctable prior to completion and
to specific qualifications expressed by the Architect. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified.

2.6.9.2 The issuance of a Certificate for Payment shall not be a representation
that the Architect has (1) made exhaustive or continuous on-site inspections to
check the quality or quantity of the Work, (2) reviewed construction means,
methods, techniques, sequences or procedures, (3) reviewed copies of
requisitions received from Subcontractors and material suppliers and other data
requested by the Owner to substantiate the Contractor's right to payment or (4)
ascertained how or for what purpose the Contractor has used money previously
paid on account of the Contract Sum.

2.6.10 The Architect shall have authority, after notification to the
Construction Manager, to reject Work which does not conform to the Contract
Documents. Whenever the Architect considers it necessary or advisable for
implementation of the intent of the Contract Documents, the Architect will have
authority, upon written authorization from the Owner, to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such work is fabricated, installed or
completed. However, neither this authority of the Architect nor a decision made
in good faith either to exercise or not to exercise such authority shall give
rise to a duty or responsibility

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


3   B141/CMA-1992



of the Architect to the Construction Manager, Contractors, Subcontractors,
material and equipment suppliers, their agents or employees or other persons
performing portions of the Work.

2.6.11 The Architect shall review and approve or take other appropriate action
upon Contractors submittals such as Shop Drawings, Product Data and Samples, but
only for the limited purpose of Checking for conformance with Information given
and the design concept expressed in the Contract Documents. The Architect's
action shall be taken with such reasonable promptness as to cause no delay in
the Contractors' Work or in construction by the Owner's own forces, while
allowing sufficient time in the Architect's professional judgment to permit
adequate review Review of such submittals is not conducted for the purpose of
determining the accuracy and completeness of other details such as dimensions
and quantities or for substantiating instructions for installation or
performance of equipment or systems designed by the Contractors, all of which
remain the responsibility of the Contractors to the extent required by the
Contract Documents. The Architect's review shall not constitute approval of
safety precautions or, unless otherwise specifically stated by the Architect, of
construction means, methods, techniques, sequences or procedures. The
Architect's approval of a specific item shall not indicate approval of an
assembly of which the item is a component. When professional certification of
performance characteristics of materials, systems or equipment is required by
the Contract Documents, the Architect shall be entitled to rely upon such
certification to establish that the materials, systems or equipment will meet
the performance criteria required by the Contract Documents

2.6.12 The Architect shall review and sign or take other appropriate action on
Change Orders and Construction Change Directives prepared by the Construction
Manager for the Owner's approval and execution in accordance with the Contract
Documents.

2.6.13 The Architect may authorize minor changes in Work not involving an
adjustment in a Contract Sum or an extension of a Contract Time which are not
inconsistent with the intent of the Contract Documents. Such changes shall be
effected by written order issued through the Construction Manager.

2.6.14 The Architect, assisted by the Construction Manager, shall conduct
Inspections to determine the date or dates of Substantial Completion and the
date of final completion. The Architect shall forward to the Owner warranties
and similar submittals required by the Contract Documents which have been
received from the Construction Manager. The Architect shall issue a final
Project Certificate for Payment upon compliance with the requirements of the
Contract Documents.

2.6.15 The Architect shall interpret and decide matters concerning performance
of the Owner and Contractor under the requirements of the Contract Documents on
written request of either the Owner or Contractor, The Architect's response to
such requests shall be made with reasonable promptness and within any time
limits agreed upon

2.6.16 Interpretations and decisions of the Architect shall be consistent with
the intent of and reasonably inferable from the Contract Documents and shall be
in writing or in the form of drawings. When making such interpretations and
initial decisions, the Architect shall endeavor to secure faithful performance
by both Owner and Contractors, shall not show partiality to either, and shall
not be liable for results of interpretations or decisions so rendered in good
faith.

2.6.17 The Architect's decisions on matters relating to aesthetic effect shall
be final if consistent with the intent expressed in the Contract Documents.

2.6.18 The Architect shall render written decisions within a reasonable time on
all claims, disputes or other matters in question between the Owner and
Contractors relating to the execution or progress of the Work as provided in the
Contract Documents.

2.6.19 The Architect's decisions on claims, disputes or other matters, including
those in question between the Owner and Contractors, except for those relating
to aesthetic effect as provided in Subparagraph 2.6.17, shall be subject to
arbitration as provided in this Agreement and in the Contract Documents.

                                    ARTICLE 3
                               ADDITIONAL SERVICES

3.1 GENERAL

3.1.1 The services described in this Article 3 are not included in Basic
Services unless so identified in Article 12, and they shall be paid for by the
Owner as provided in this Agreement. In addition to the compensation for Basic
Services. The services described under Paragraphs 3.2 and 3.4 shall only be
provided if authorized or confirmed in writing by the Owner. If services
described under Contingent Additional Services in Paragraph 3.3 are required due
to circumstances beyond the Architect's control, the Architect shall notify the
Owner prior to commencing such services. If the Owner deems that such services
described under Paragraph 3.3 are not required, the Owner shall give prompt
written notice to the Architect. If the Owner indicates in writing that all or
part of such Contingent Additional Services are not required, the Architect
shall have no obligation to provide those services.

3.2 PROJECT REPRESENTATION BEYOND BASIC SERVICES

3.2.1 If more extensive representation at the site than is described in
Subparagraph 2.6.5 is required, the Architect shall provide one or more Project
Representatives to assist in carrying out such additional on-site
responsibilities

3.2.2 Project Representatives shall be selected, employed and directed by the
Architect, and the Architect shall be compensated therefor as agreed by the
Owner and Architect. The duties, responsibilities and limitations of authority
of Project Representatives shall be as described in the edition of AIA Document
B352 current as of the date of this Agreement, unless otherwise agreed.

3.2.3 Through the observations by such Project Representatives, the Architect
shall endeavor to provide further protection for the Owner against defects and
deficiencies in the Work, but the furnishing of such project representation
shall not modify the rights, responsibilities or obligations of the Architect as
described elsewhere in this Agreement.

3.3 CONTINGENT ADDITIONAL SERVICES

3.3.1 Making revisions in Drawings, Specifications or other documents when such
revisions are:

     .1   inconsistent with approvals or instructions previously given by the
          Owner, including revisions made necessary by adjustments in the
          Owner's program or Project budget;

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


                                                               B141/CMA-1992   4



     .2   requested by the Owner because the Construction Manager's estimate of
          Construction Cost exceeds the Owner's budget, except where such excess
          is due to changes initiated by the Architect in scope, capacities of
          basic systems, or the kinds and quality of materials, finishes or
          equipment;

     .3   required by the enactment or revision of codes, laws or regulations
          subsequent to the preparation of such documents; or

     .4   due to changes required as a result of the Owner's failure to render
          decisions in a timely manner.

3.3.2 Providing services required because of significant changes in the Project
including, but not limited to changes in size, quality, complexity, the Owner's
or Construction Manager's schedule, or the method of bidding or negotiating and
contracting for construction, except for services required under Subparagraph 5.
2.3.

3.3.3 Preparing Drawings, Specifications and other documentation and supporting
data, evaluating Contractor's proposals, and providing other services in
connection with Change Orders and Construction Change Directives.

3.3.4 Providing services in connection with evaluating substitutions proposed by
Contractors and making subsequent revisions to Drawings. Specifications and
other documentation resulting therefrom.

3.3.5 Providing consultation concerning replacement of Work damaged by fire or
other cause during construction, and furnishing services required in connection
with the replacement of such Work.

3.3.6 Providing services made necessary by the termination or default of the
Construction Manager or a Contractor, by major defects or deficiencies in the
Work of a Contractor, or by failure of performance of either the Owner or a
Contractor under a Contract for Construction.

3.3.7 Providing services in evaluating an extensive number of claims submitted
by a Contractor or others in connection with the Work.

3.3.8 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Architect is party thereto.

3.3.9 Preparing documents for alternate, separate or sequential bids or
providing services in connection with bidding, negotiation or construction prior
to the completion of the Construction Documents Phase.

3.4 OPTIONAL ADDITIONAL SERVICES

3.4.1 Providing analyses of the Owner's needs and programming the requirements
of the Project.

3.4.2 Providing financial feasibility or other special studies.

3.4.3 Providing planning surveys, site evaluations or comparative studies of
prospective sites.

3.4.4 Providing special surveys, environmental studies and submissions required
for approvals of governmental authorities or others having jurisdiction over the
Project.

3.4.5 Providing services relative to future facilities, systems and equipment.

3.4.6 Providing services to investigate existing conditions or facilities or to
make measured drawings thereof.

3.4.7 Providing services to verify the accuracy of drawings or other information
furnished by the Owner.

3.4.8 Providing coordination of construction performed by the Owner's own forces
and coordination of services required in connection with construction performed
and equipment supplied by the Owner.

3.4.9 Providing services in connection with the work of separate consultants
retained by the Owner.

3.4.10 Providing estimates of Construction Cost.

3.4.11 Providing detailed quantity surveys or inventories of material and
equipment.

3.4.12 Providing analyses of owning and operating costs.

3.4.13 Providing interior design and other similar services required for or in
connection with the selection, procurement or installation of furniture,
furnishings and related equipment.

3.4.14 Providing services for planning tenant or rental spaces.

3.4.15 Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.

3.4.16 Preparing a set of reproducible record drawings showing significant
changes in the Work made during construction based on marked-up prints, drawings
and other data furnished by Contractors.

3.4.17 Providing assistance in the utilization of equipment or systems such as
testing, adjusting and balancing, preparation of operation and maintenance
manuals, training personnel for operation and maintenance, and consultation
during operation.

3.4.18 Providing services after issuance to the Owner of the final Project
Certificate for Payment, or in the absence of a final Project Certificate for
Payment, more than 60 days after the date of Substantial Completion of the Work.

3.4.19 Providing services of consultants for other than architectural,
structural, mechanical and electrical engineering portions of the Project
provided as a part of Basic Services.

3.4.20 Providing any other services not otherwise included in this Agreement or
not customarily furnished in accordance with generally accepted architectural
practice.

                                    ARTICLE 4
                            OWNER'S RESPONSIBILITIES

4.1 The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems, and site
requirements.

4.2 The Owner shall establish and update an overall budget for the Project based
on consultation with the Construction Manager and the Architect, which shall
include the Construction Cost, the Owner's other costs and reasonable
contingencies related to all of these costs

4.3 If requested by the Architect, the Owner shall furnish evidence that
financial arrangements have been made to fulfill the Owner's obligations under
this Agreement.

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


5   B141/CMA-1992



4.4 The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner or such authorized representative
shall render decisions in a timely manner pertaining to documents submitted by
the Architect in order to avoid unreasonable delay in the orderly and sequential
progress of the Architect's services.

4.5 The Owner shall retain a construction manager to administer the Project. The
Construction Manager's services, duties and responsibilities will be as
described in the edition of AlA Document B801/CMa. Standard Form of Agreement
Between Owner and Construction Manager, current as of the date of this
Agreement. The Terms and Conditions of the Agreement between Owner and
Construction Manager shall be furnished to the Architect and shall not be
modified without written consent of the Architect, which consent shall not be
unreasonably withheld. The Architect shall not be responsible for actions taken
by the Construction Manager.

4.6 The Owner shall furnish surveys describing physical characteristics, legal
limitations and utility locations for the site of the Project, and a written
legal description of the site. The surveys and legal information shall include,
as applicable, grades and lines of streets, alleys, payments and adjoining
property and structures; adjacent drainage; rights-of-way, restrictions,
easements, encroachments, zoning, deed restrictions, boundaries and contours of
the site; locations, dimensions and necessary data pertaining to existing
buildings, other improvements and trees; and information concerning available
utility services and lines, both public and private, above and below grade,
including inverts and depths. All the information on the Survey shall be
referenced to a Project benchmark.

4.7 The Owner shall furnish the services of geotechnical engineers when such
services are requested by the Architect. Such services may include but are not
limited to test borings, test pits, determinations of soil bearing values,
percolation tests, evaluations of hazardous materials, and ground corrosion and
resistivity tests, including necessary operations for anticipating subsoil
conditions, with reports and appropriate professional recommendations.

4.7.1 The Owner shall furnish the services of other consultants when such
services are reasonably required by the scope of the Project and are requested
by the Architect.

4.8 The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.

4.9 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may require to verify the Contractor's Application for
Payment or to ascertain how or for what purposes the Contractor has used the
money paid by or on behalf of the Owner.

4.10 The services, information, surveys and reports required by Paragraphs 4.6
through 4.9 shall be furnished at the Owner's expense, and the Architect shall
be entitled to rely upon the accuracy and completeness thereof.

4.11 Prompt written notice shall be given by the Owner to the Architect and
Construction Manager if the Owner becomes aware of any fault or defect in the
Project or nonconformance with the Contract Documents.

4.12 The proposed language of certificates or certifications requested of the
Architect or Architect's consultants shall be submitted to the Architect for
review and approval at least 14 days prior to execution. The Owner shall not
request certifications that would require knowledge or services beyond the scope
of this Agreement.

4.13 The Owner shall furnish the required information and services and shall
render approvals and decisions as expeditiously as necessary for the orderly
progress of the Architect's services and Work of the Contractors.

4.14 The Owner shall furnish the Architect copies of written communications with
the Construction Manager and Contractors.

                                    ARTICLE 5
                                CONSTRUCTION COST

5.1 DEFINITION

5.1.1 The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.

5.1.2 The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable allowance
for the Contractors' overhead and profit. In addition, a reasonable allowance
for contingencies shall be included for market conditions at the time of bidding
and for changes in the Work during construction. Construction Cost shall also
include the compensation of the Construction Manager and Construction Manager's
consultants.

5.1.3 Construction Cost does not include the compensation of the Architect and
Architect's consultants, the costs of the land, rights-of-way, financing or
other costs which are the responsibility of the Owner as provided in Paragraphs
4.1 through 4.4 and 4.6 through 4.14.

5.2 RESPONSIBILITY FOR CONSTRUCTION COST

5.2.1 The Architect's review of the Owner's Project budget and of preliminary
estimates of Construction Cost or detailed estimates of Construction Cost
prepared by the Construction Manager is solely for the Architect's guidance in
the Architect's preparation of the Construction Documents. Accordingly, the
Architect cannot and does not warrant the accuracy of the estimates of the
Construction Manager, or warrant or represent that bids or negotiated prices
will not vary from the Owner's Project budget or from any estimate of
Construction Cost or evaluation reviewed by the Architect.

5.2.2 No fixed limit of Construction Cost shall be established as a condition of
this Agreement.

5.2.3 in the event that the Construction Manager's estimate or the lowest bona
fide bid or negotiated proposal received by the Owner exceeds the Owner's budget
for reasons other than those described in Paragraph 3.3, the modification of
Contract Documents shall be the limit of the Architect's responsibility. The
Architect shall be entitled to compensation in accordance with this Agreement
for all services performed whether or not the Construction Phase is commenced.

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


                                                               B141/CMA-1992   6



                                    ARTICLE 6
         USE OF ARCHITECTS DRAWINGS, SPECIFICATIONS AND OTHER DOCUMENTS

6.1 The Drawings, Specifications and other documents prepared by the Architect
for this Project are instruments of the Architect's service for use solely with
respect to this Project and unless otherwise provided, the Architect shall be
deemed the author of these documents and shall retain all common law, statutory
and other reserved rights, including the copyright. The Owner shall be permitted
to retain copies, including reproducible copies, of the Architect's Drawings,
Specifications and other documents for information and reference in connection
with the Owner's use and occupancy of the Project. The Architect's Drawings,
Specifications or other documents shall not be used by the Owner or others on
other projects, for additions to this Project or for completion of this Project
by others, unless the Architect is adjudged to be in default under this
Agreement, except by agreement in writing and with appropriate compensation to
the Architect.

6.2 Submission or distribution of documents to meet official regulatory
requirements or for similar purposes in connection with the Project is not to be
construed as publication in derogation of the Architect's reserved rights.

                                    ARTICLE 7
                                   ARBITRATION

7.1 Claims, disputes or other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or breach thereof shall
be subject to and decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect unless the parties mutually agree otherwise.

7.2 Demand for arbitration Shall be filed in writing with the other party to
this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.

7.3 No arbitration arising out of or relating to this Agreement shall include,
by consolidation, joinder or in any other manner, an additional person or
entity not a party to this Agreement, except by written consent containing a
specific reference to this Agreement signed by the Owner, Architect, and any
other person or entity sought to be joined. Consent to arbitration involving an
additional person or entity shall not constitute consent to arbitration of any
claim, dispute or other matter in question not described in the written consent
or with a person or entity not named or described therein. The foregoing
agreement to arbitrate and other agreements to arbitrate with an additional
person or entity duly consented to by the parties to this Agreement shall be
specifically enforce able in accordance with applicable law in any court having
jurisdiction thereof.

7.4 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.

                                    ARTICLE 8
                     TERMINATION, SUSPENSION OR ABANDONMENT

8.1 This Agreement may be terminated by either party upon not less than seven
days' written notice should the other party fail Substantially to perform in
accordance with the terms of this Agreement through no fault of the party
initiating the termination.

8.2 If the Project is suspended by the Owner for more than 30 consecutive days,
the Architect shall be compensated for services performed prior to notice of
such suspension. When the Project is resumed, the Architect's compensation shall
be equitably adjusted to provide for expenses incurred in the interruption and
resumption of the Architect's services.

8.3 This Agreement may be terminated by the Owner upon not less than seven days'
written notice to the Architect in the event that the Project is permanently
abandoned. If the Project is abandoned by the Owner for more than 90 consecutive
days, the Architect may terminate this Agreement by giving written notice.

8.4 Failure of the Owner to make payments to the Architect in accordance with
this Agreement shall be considered substantial nonperformance and cause for
termination.

8.5 If the Owner fails to make payment when due the Architect for services and
expenses, the Architect may, upon seven days' written notice to the Owner,
suspend performance of services under this Agreement. Unless payment in full is
received by the Architect within seven days of the date of the notice, the
suspension shall take effect without further notice. In the event of a
suspension of services, the Architect shall have no liability to the Owner for
delay or damage caused the Owner because of such suspension of services.

8.6 In the event of termination not the fault of the Architect, the Architect
shall be compensated for services performed prior to termination, together with
Reimbursable Expenses then due and all Termination Expenses as defined in
Paragraph 8.7.

8.7 Termination Expenses are in addition to compensation for Basic and
Additional Services, and include expenses which are directly attributable to
termination. Termination Expenses shall be computed as a percentage of the total
compensation for Basic Services and Additional Services earned to the time of
termination, as follows:

     .1   Twenty percent of the total compensation for Basic and Additional
          Services earned to date if termination occurs before or during the
          predesign, site analysis, or Schematic Design Phases; or

     .2   Ten percent of the total compensation for Basic and Additional
          Services earned to date if termination occurs during the Design
          Development Phase; or

     .3   Five percent of the total compensation for Basic and Additional
          Services earned to date if termination occurs during any subsequent
          phase;

                                    ARTICLE 9
                            MISCELLANEOUS PROVISIONS

9.1 Unless otherwise provided, this Agreement shall be governed by the law of
the place where the Project is located.

9.2 Terms in this Agreement shall have the same meaning as those in the edition
of AIA Document A201/CMa, Gen-

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, NW., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


7   B141/CMA-1992



Conditions of the Contract for Construction, Construction Manager-Adviser
Edition, current as of the date of this Agreement.

9.3 Causes of action between the parties to this Agreement pertaining to acts or
failure to act shall be deemed to have accrued and the applicable statutes of
limitations shall commence to run not later than either the date of Substantial
Completion for acts or failures to act occurring prior to Substantial
Completion, or the date of issuance of the final Project Certificate for Payment
for acts or failures to act occurring after Substantial Completion.

9.4 The Owner and Architect waive all rights against each other and against the
Construction Manager Contractors, and the consultants, agents and employees of
any of them for damages, but only to the extent covered by properly insurance
during construction, except such rights as they may have to the proceeds of such
insurance as set forth in the edition of AIA Document A20l/CMa. General
Conditions of the Contract for Construction. Construction Manager-Adviser
Edition, current as of the date of this Agreement. The Owner and Architect each
shall require similar waivers from their Construction Manager. Contractors,
consultants, agents, and persons or entities awarded separate contracts
administered under the Owner's own forces.

9.5 The Owner and Architect, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this
Agreement and to the partners, successors, assigns and legal representatives of
such other party with respect to all covenants of this Agreement. Neither Owner
nor Architect shall assign this Agreement without the written consent of the
other.

9.6 This Agreement represents the entire and integrated agreement between the
Owner and Architect and supersedes all prior negotiations, representations or
agreements, either written or oral. This Agreement may be amended only by
written instrument signed by both Owner and Architect.

9.7 Nothing contained in this Agreement shall create a contractual relationship
with or a cause of action in favor of a third party against either the Owner or
Architect.

9.8 Unless otherwise provided in this Agreement, the Architect and Architect's
consultants shall have no responsibility for the discovery, presence, handling,
removal or disposal of or exposure of persons to hazardous materials in any form
at the Project site, including but not limited to asbestos, asbestos products,
polychlorinated biphenyl (PCB) or other toxic substances.

9.9 The Architect shall have the right to include representations of the design
of the Project, including photographs of the exterior and interior, among the
Architect's promotional and professional materials. The Architect's materials
shall not include the Owner's confidential or proprietary information if the
Owner has previously advised the Architect in writing of the specific
information considered by the Owner to be confidential or proprietary. The Owner
shall provide professional credit for the Architect on the construction sign
and in the promotional materials for the Project.

                                   ARTICLE 10
                            PAYMENTS TO THE ARCHITECT

10.1 DIRECT PERSONNEL EXPENSE

10.1.1 Direct Personnel Expense is defined as the direct salaries of the
Architect's personnel engaged on the Project and the portion of the cost of
their mandatory and customary contributions and benefits related thereto, such
as employment taxes and other statutory employee benefits, insurance, sick
leave, holidays, vacations, pensions and similar contributions and benefits.

10.2 REIMBURSABLE EXPENSES

10.2.1 Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Architect and
Architect's employees and consultants in the interest of the Project, as
identified in the following Clauses.

10.2.1.1 Expense of transportation in connection with the Project; expenses in
connection with authorized out-of-town travel; long distance communications; and
fees paid for securing approval of authorities having jurisdiction over the
Project.

10.2.1.2 Expense of reproductions, postage, express deliveries, electronic
facsimile transmissions and handling of Drawings. Specifications and other
documents.

10.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.

10.2.1.4 Expense of renderings, models and mock-ups requested by the Owner.

10.2.1.5 Expense of additional insurance coverage or limits, including
professional liability insurance, requested by the Owner in excess of that
normally carried by the Architect and Architect's consultants.

10.2.1.6 Expense of computer-aided design and drafting equipment time when used
in connection with the Project.

10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES

10.3.1 An initial payment as set forth in Paragraph 11.1 is the minimum payment
under this Agreement.

10.3.2 Subsequent payments for Basic Services shall be made monthly and, where
applicable shall be in proportion to services performed within each phase of
service on the basis set forth in Subparagraph 11.2.2.

10.3.3 If and to the extent that the time initially established in Subparagraph
11.5.1 of this Agreement is exceeded or extended through no fault of the
Architect, compensation for any services rendered during the additional period
of time shall be computed in the manner set forth in Subparagraph 11.3.2.

10.3.4 When compensation is based on a percentage of Construction Cost and any
portions of the Project are deleted or otherwise not constructed, compensation
for those portions

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, NW., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


                                                               B141/CMA-1992   8



of the Project shall be payable to the extent services are performed on those
portions, in accordance with the schedule set forth in Subparagraph 11.2.2,
based on (1) the lowest bona fide bids or negotiated proposals, or (2) if no
such bids or proposals are received, the most recent estimate of Construction
Cost prepared by the Construction Manager for such portions of the Project.

10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES AND REIMBURSABLE EXPENSES

10.4.1 Payments on account of the Architect's Additional Services and for
Reimbursable Expenses shall be made monthly upon presentation of the Architect's
statement of services rendered or expenses incurred.

10.5 PAYMENTS WITHHELD

10.5.1 No deductions shall be made from the Architect's compensation on account
of penalty, liquidated damages or other sums withheld from payments to
Contractors, or on account of the cost of changes in the Work other than those
for which the Architect has been found to be liable.

10.6 ARCHITECT'S ACCOUNTING RECORDS

10.6.1 Records of Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized representative
at mutually convenient times.

                                   ARTICLE 11
                              BASIS OF COMPENSATION

The Owner shall compensate the Architect as follows:

11.1 AN INITIAL PAYMENT of TEN THOUSAND Dollars ($10,000) shall be made upon
execution of this Agreement and credited to the Owner's account at final
payment.

11.2 BASIC COMPENSATION

11.2.1 FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 12 as part of Basic Services, Basic Compensation shall be
computed as follows:

(Insert basis of compensation, including stipulated sum. multiples or
percentages and identify phases in which particular methods of compensation
apply, if necessary.)

                           STIPULATED SUM OF $250,000

11.2.2 Where compensation is based On a stipulated sum or percentage of
Construction Cost, progress payments for Basic Services in each phase shall
total the following percentages of the total Basic Compensation payable:

(Insert additional phases as appropriate.)

Schematic Design Phase:       percent (15%)
Design Development Phase:     percent (30%)
Construction Documents Phase: percent (35%)
Bidding or Negotiation Phase: percent (5%)
Construction Phase:           percent (15%)
Total Basic Compensation:     one hundred percent (100%)

11.3 COMPENSATION FOR ADDITIONAL SERVICES

11.3.1 FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as described in
Paragraph 3.2, compensation shall be computed as follows:

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992. THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE, N W WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED
PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL
PROSECUTION.


                                                               B141/CMA-1992   9



11.3.2 FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described in Articles 3 and
12, other than (1) Additional Project Representation, as described in Paragraph
3.2, and (2) services included in Article 12 as part of Basic Services, but
excluding services of consultants, compensation shall be computed as follows:

(Insert basis of compensation. Including rates and/or multiples of Direct
Personal Expenses for Principals and employees and identify Principals and
classify employees, if required identify specific services in which particular
methods of compensation apply, if necessary.)

11.3.3 FOR ADDITIONAL SERVICES OF CONSULTANTS. including additional structural,
mechanical and electrical engineering services and those provided under
Subparagraph 3.4.19 or identified in Article 12 as part of Additional Services,
a multiple of __________ (__________) times the amounts billed to the Architect
for such services.

(Identify specific types of consultants in Article 12, if required.)

11.4 REIMBURSABLE EXPENSES

11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 10.2, and any other
items included in Article 12 as Reimbursable Expenses, a multiple of __________
(_________) times the expenses incurred by the Architect, the Architect's
employees and consultants in the interest of the Project.

            REIMBURSABLE EXPENSES ARE INCLUDED IN THE STIPULATED SUM.

11.5 ADDITIONAL PROVISIONS

11.5.1 IF THE BASIC SERVICES covered by this Agreement have nut been completed
within __________ (__________) months of the date hereof, through no fault of
the Architect, extension of the Architect's services beyond that time shall be
compensated as provided in Subparagraphs 10.3.3 and 11.3.2 NOT APPLICABLE

11.5.2 Payments are due and payable THIRTY (30) days from the date of the
Architect's invoice. Amounts unpaid SIXTY (60) days after the invoice date
shall bear interest at the rate entered below, or in the absence thereof at the
legal rate prevailing from time to time at the principal place of business of
the Architect (Interest rate of interest agreed upon)

     1.5% PER MONTH

(User taxes and requirements under the Federal Truth in Lending Act. similar
state and local consumer credit laws and other regulations at the Owner's and
Architect's principal places of business the location of the Project and
elsewhere may affect the vailidity of this precision. Specific legal advice
should be obtained with respect to Illegible or modifications and also
regarding requirements such as written Illegible or waivers.)

11.5.3 The rates and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Architect.

     NOT APPLICABLE

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992. THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED
PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL
PROSECUTION.


                                                              B141/CMA-1992   10



                                   ARTICLE 12
                          OTHER CONDITIONS OR SERVICES

(Insert descriptions of other Services, identify Additional Services included
within Basic Compensation, and insert modifications to the payment and
compensetion terms included in the Agreement.)

The execution of this Agreement is contingent on the Owner securing a letter
from the Bank of New York confirming financing of this project in the amount of
a minimum of $17,500,000 including $700,000 in contingency funds.

Provide Facility Engineering work in accordance with Architect's Proposal dated
November 9, 2006. The Terms and Conditions of which shall take precedence over
any other contract document. In the event of a conflict between said proposal
and any other contract documents, the said proposal shall be controlling.

This Agreement entered into as of the day and year first written above.

OWNER                                   ARCHITECT


/s/ EDWARD GILDEA                       /s/ MICHAEL LEADER
- -------------------------------------   ----------------------------------------
(Signature)                             (Signature)

EDWARD GILDEA, PRESIDENT                MICHAEL LEADER, PRES.
(Printed name and title)                (Printed name and title)

(AIA LOGO)   CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS
             CAUTION PRINTED IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT
             BE OBSCURED AS MAY OCCUR WHEN DOCUMENTS ARE REPRODUCED. SEE
             INSTRUCTION SHEET FOR LIMITED LICENSE FOR REPRODUCTION OF THIS
             DOCUMENT.

AIA DOCUMENT B141/CMA - OWNER-ARCHITECT AGREEMENT - CONSTRUCTION MANAGER-ADVISER
EDITION - 1992 EDITION - AIA(R) - (C)1992. THE AMERICAN INSTITUTE OF ARCHITECTS,
1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED
PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL
PROSECUTION.


                                                              B141/CMA-1992   11

EX-10.14

                                                                   Exhibit 10.14

                                                                  Project L06276
                                                                  Contract 5C

                              AIA Document A101/CMa

                           STANDARD FORM OF AGREEMENT
                          BETWEEN OWNER AND CONTRACTOR

                 where the basis of payment is a STIPULATED SUM

                    1992 CONSTRUCTION MANAGER-ADVISER EDITION

      THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
     ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.

The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction, Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.

AGREEMENT made as of the Nineteenth day 0f December in the year of Two Thousand
Six
(In words, indicate day, month and year.)

BETWEEN the Owner:              Converted Organics of Woodbridge, LLC
(Name and address)              99 Madison Avenue
                                Fanwood, NJ 07023

and the Contractor:             The Construction Partnership, Inc.
(Name and address)              436 Creamery Way Suite 100
                                Exton, PA 19341

For the following Project:      Converted Organics of Woodbridge, LLC
(Include detailed description   75 Crows Mill Road
of Project, location, address   Keasbey, NJ
and scope)

The Construction Manager is:    The Construction Partnership, Inc.
(Name and address)              436 Creamery Way, Suite 100
                                Exton, PA 19341

The Architect is:               For the purposes of this Agreement all
(Name and address)              references to "Architect" shall be intended to
                                mean "Process Engineer". Process Engineer is:

                                     Weston Solutions, Inc.
                                     1 Wall Street
                                     Manchester, NH 03101

The Owner and Contractor agree as set forth below.

Copyright 1975, 1980, (C)1992 by The American Institute of Architects, 1735 New
York Avenue, N.W., Washington, D.C. 20006-5292. Reproduction of the material
herein or substantial quotation of its provisions without the written permission
of the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution.

(LOGO)   AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION
         MANAGER-ADVISER EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
         ARCHITECTS, 1735 NEW YORK AVENUE. N.W., WASHINGTON, D.C. 20006-5292 -
         WARNING: UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL
         SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   1



                                    ARTICLE 1
                             THE CONTRACT DOCUMENTS

The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.

                                    ARTICLE 2
                            THE WORK OF THIS CONTRACT

The Contractor shall execute the entire work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:

Provide General Construction work in accordance with the Contractor's Proposal
5C dated November 9, 2006, the Terms and Conditions of which shall take
precedence over any other contract document including, but not limited to, the
drawings listed in Attachment "A". In the event of a conflict between said
proposal and any other contract documents, the said proposal shall be
controlling.

                                    ARTICLE 3
                 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.

(Insert the date of commencement, if it differs from the date of this Agreement
or if applicable, state that the date will be fixed in a notice to proceed)

Date of Commencement shall be a fixed date within 45 days of the date of this
Agreement.

Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.

3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than

(Insert the calendar date or number of calendar days after the date of
commencement Also insert any requirements for earlier Substantial Completion of
certain portions of the Work if not stated elsewhere in the Contract Documents)

     425 days from the notice to proceed

, subject to adjustments of this Contract Time as provided in the Contract
Documents.

(Insert provisions, if any for liquidated damages relating to failure to
complete on time)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS. 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   2



                                    ARTICLE 4
                                  CONTRACT SUM

4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Nine Hundred Sixty Two Thousand
Eighty Nine Dollars ($962,089), subject to additions and deductions as
provided in the Contract Documents.

4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:

(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid)

4.3 Unit prices, if any, are as follows:

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   3



                                    ARTICLE 5
                                PROGRESS PAYMENTS

5.1 Based upon Applications for Payment submitted by the Contractor to the
Construction Manager, and upon Project Applications and Certificates for Payment
issued by the Construction Manager and Architect, the Owner shall make progress
payments on account of the Contract Sum to the Contractor as provided below and
elsewhere in the Contract Documents.

5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:

5.3 Provided an Application for Payment is submitted to the Construction Manager
not later than the 25th day of a month, the Owner shall make payment to the
Contractor not later than the 30th day of the following month. If an Application
for Payment is received by the Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than 30 days after the
Construction Manager receives the Application for Payment.

5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager or Architect may require.
This schedule, unless objected to by the Construction Manager or Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.

5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.

5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:

5.6.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the total Contract Sum allocated to that portion of the
Work in the Schedule of Values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions;

5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of ten
percent (10%);

5.6.3 Subtract the aggregate of previous payments made by the Owner; and

5.6.4 Subtract amounts, if any, for which the Construction Manager or Architect
has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5
of the General Conditions.

5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:

5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to increase
the total payments to one hundred percent (100%) of the Contract Sum, less such
amounts as the Construction Manager recommends and the Architect determines for
incomplete Work and unsettled claims; and

5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.

5.8 Reduction or limitation of retainage, if any, shall be as follows:

(If it is intended, prior to Substantial Completion of the entire work, to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5.6.1 and 5.6.2 above and this is not explained elsewhere in the
Contract Documents, insert here provisions for such reduction or limitation.)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT. CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   4



                                    ARTICLE 6
                                  FINAL PAYMENT

Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Project Certificate for Payment has been issued
by the Construction Manager and Architect; such final payment shall be made by
the Owner not more than 30 days after the issuance of the final Project
Certificate for Payment, or as follows:

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.

7.2 Payments due and unpaid under the Contract shall bear interest from the date
payment is due at the rate stated below, or in the absence thereof, at the legal
rate prevailing from time to time at the place where the Project is located.

(insert rate of interest agreed upon, if any)

(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)

7.3 Temporary facilities and services:

(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents)

7.4 Other Provisions:

(Here list any special provisions affecting the Contract)

Insurance requirements shall be as set forth in the attached
"Contractor's Statement of Insurance Conditions"

The execution of this Agreement is contingent on the Owner securing a letter
from the Bank of New York confirming financing of this project in the amount of
a minimum of $17,500,000 including $700,000 in contingency funds.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   5



                                    ARTICLE 8
                            TERMINATION OR SUSPENSION

8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.

8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.

                                    ARTICLE 9
                        ENUMERATION OF CONTRACT DOCUMENTS

9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:

9.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A1O1/CMa, 1992 Construction Manager-Adviser
Edition.

9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201/CMa, 1992 Construction Manager-Adviser Edition.

9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated _____________, and are as follows:



DOCUMENT   TITLE   PAGES
- --------   -----   -----
             



9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows: (Either list the Specifications here or
refer to an exhibit attached to this Agreement)



SECTION   TITLE   PAGES
- -------   -----   -----
            



AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   6



9.1.5 The Drawings are as follows, and are dated ________________ unless a
different date is shown below:

(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)



NUMBER   TITLE   DATE
- ------   -----   ----
           



                               See Attachment "A"

9.1.6 The Addenda, if any, are as follows:



NUMBER   DATE   PAGES
- ------   ----   -----
          



Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   7



9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:

(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)

This project is a New Jersey Development Agency project. Contractor is to meet
all requirements of the NJEDA as stated in meeting attended by Construction
Manager and Contractor on November 2, 2006. These items include but are not
limited to:

Prevailing wage requirements as documented in TCPI Meeting Minutes dated
November 2, 2006 and information package provided at meeting (attached).

Affirmative action requirements as documented in TCPI meeting minutes dated
November 2, 2006 and information package provided at meeting (attached).

NJEDA Exhibit "E" attached.

This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner

OWNER                                   CONTRACTOR


/s/ Edward Gildea                       /s/ Michael Leader
- -------------------------------------   ----------------------------------------
(Signature)                             (Signature)

EDWARD GILDEA, PRESIDENT                MICHAEL LEADER, PRES.
(Printed name and title)                (Printed name and title)

(LOGO AIA)  CAUTION: You should sign an original AIA document which has this
            caution printed in red. An original assures that changes will not be
            obscured as may occur when documents are reproduced. See Instruction
            Sheet for Limited License for Reproduction of this document.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   8



                                 ATTACHMENT "A"

DRAWING LIST

A-1 Floor Plan                                                           11/9/06

EX-10.15

                                                                   Exhibit 10.15

                                                                  PROJECT L06276
                                                                     CONTRACT 5B

                              AIA Document B801/CMa

                       STANDARD FORM OF AGREEMENT BETWEEN
                         OWNER AND CONSTRUCTION MANAGER

               where the Construction Manager is NOT a Constructor

                                  1992 EDITION

      THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
      ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION

            This document is intended to be used in conjunction with
       the 1992 editions of AIA Documents B141/CMa, A101/CMa and A201/CMa

AGREEMENT made as of the Nineteenth day of December in the year of Two Thousand
Six (In words, indicate day, month and year)

BETWEEN the Owner: _____________________________________________________________
(Name and address)

     Converted Organics of Woodbridge, LLC
     99 Madison Avenue
     Fanwood, NJ 07023

and the Construction Manager: __________________________________________________
(Name and address)

     The Construction Partnership, Inc.
     436 Creamery Way, Suite 100
     Exton, PA 19341

for the following Project: _____________________________________________________
(Include detailed description of Project, location, address and scope)

     Converted Organics of Woodbridge, LLC
     75 Crows Mill Road
     Keasbey, NJ

The Architect is:  For the purposes of this Agreement all references to
(Name and address) "Architect" shall be intended to mean "Process Engineer".
                   Process Engineer is:

     Weston Solutions, Inc.
     1 Wall Street
     Manchester, NH 03101

The Owner and Construction Manager agree as set forth below.

Copyright 1973-1980, (C)1992 by The American Institute of Architects, 1735 New
York Avenue N.W., Washington, D.C. 20006-5292 Reproduction of the material
herein or substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution

(LOGO)   AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992
         EDITION - AIA(R) (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735
         NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
         UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT
         THE VIOLATOR TO LEGAL PROSECUTION.


                                                               B801/CMA-1992   1



                    TERMS AND CONDITIONS OF AGREEMENT BETWEEN
                         OWNER AND CONSTRUCTION MANAGER

                                    ARTICLE 1
                     CONSTRUCTION MANAGER'S RESPONSIBILITIES

1.1 CONSTRUCTION MANAGER'S SERVICES

1.1.1 The Construction Manager's services consist of those services performed by
the Construction Manager, Construction Manager's employees and Construction
Manager's consultants as enumerated in Articles 2 and 3 of this Agreement and
any other services included in Article 14.

1.1.2 The Construction Manager's services shall be provided in conjunction with
the services of an Architect as described in the edition of AIA Document
B141/CMa, Standard Form of Agreement Between Owner and Architect, Construction
Manager-Adviser Edition, current as of the date of this Agreement.

1.1.3 The Construction Manager shall provide sufficient organization, personnel
and management to carry out the requirements of this Agreement in an expeditious
and economical manner consistent with the interests of the Owner.

1.1.4 The services covered by this Agreement are subject to the time limitations
contained in Subparagraph 13.5.1.

                                    ARTICLE 2
                 SCOPE OF CONSTRUCTION MANAGER'S BASIC SERVICES

2.1 DEFINITION

2.1.1 The Construction Manager's Basic Services consist of those described in
Paragraphs 2.2 and 2.3 and any other services identified in Article 14 as part
of Basic Services.

2.2 PRE-CONSTRUCTION PHASE [NOTE: PARAGRAPH 2.2 DELETED IN IT'S ENTIRETY]

2.2.1 The Construction Manager shall review the program furnished by the Owner
to ascertain the requirements of the Project and shall arrive at a mutual
understanding of such requirements with the Owner.

2.2.2 The Construction Manager shall provide a preliminary evaluation of the
Owner's program, schedule and construction budget requirements, each in terms of
the other.

2.2.3 Based on early schematic designs and other design criteria prepared by the
Architect, the Construction Manager shall prepare preliminary estimates of
Construction Cost for program requirements using area, volume or similar
conceptual estimating techniques. The Construction Manager shall provide cost
evaluations of alternative materials and systems.

2.2.4 The Construction Manager shall expeditiously review design documents
during their development and advise on proposed site use and improvements,
selection of materials, building systems and equipment, and methods of Project
delivery. The Construction Manager shall provide recommendations on relative
feasibility of construction methods, availability of materials and labor, time
requirements for procurement, installation and construction, and factors
related to construction cost including, but not limited to, costs of alternative
designs or materials, preliminary budgets, and possible economies.

2.2.5 The Construction Manager shall prepare and periodically update a Project
Schedule for the Architect's review and the Owner's acceptance. The Construction
Manager shall obtain the Architect's approval for the portion of the preliminary
project schedule relating to the performance of the Architect's services. In the
Project Schedule, the Construction Manager shall coordinate and integrate the
Construction Manager's services, the Architect's services and the Owner's
responsibilities with anticipated construction schedules, highlighting critical
and long-lead-time items.

2.2.6 As the Architect progresses with the preparation of the Schematic, Design
Development and Construction Documents, the Construction Manager shall prepare
and update, at appropriate intervals agreed to by the Owner, Construction
Manager and Architect, estimates of Construction Cost of increasing detail and
refinement. The estimated cost of each Contract shall be indicated with
supporting detail. Such estimates shall be provided for the Architect's review
and the Owner's approval. The Construction Manager shall advise the Owner and
Architect if it appears that the Construction Cost may exceed the latest
approved Project budget and make recommendations for corrective action.

2.2.7 The Construction Manager shall consult with the Owner and Architect
regarding the Construction Documents and make recommendations whenever design
details adversely affect constructibility, cost or schedules.

2.2.8 The Construction Manager shall provide recommendations and information to
the Owner and Architect regarding the assignment of responsibilities for
temporary Project facilities and equipment, materials and services for common
use of the Contractors. The Construction Manager shall verify that such
requirements and assignment of responsibilities are included in the proposed
Contract Documents.

2.2.9 The Construction Manager shall provide recommendations and information to
the Owner regarding the allocation of responsibilities for safety programs among
the Contractors.

2.2.10 The Construction Manager shall advise on the division of the Project into
individual Contracts for various categories of Work, including the method to be
used for selecting Contractors and awarding Contracts. If multiple Contracts are
to be awarded, the Construction Manager shall review the Construction Documents
and make recommendations as required to provide that (1) the Work of the
Contractors is coordinated, (2) all requirements for the Project have been
assigned to the appropriate Contract, (3) the likelihood of jurisdictional
disputes has been minimized, and (4) proper coordination has been provided for
phased construction.

2.2.11 The Construction Manager shall prepare a Project construction schedule
providing for the components of the Work, including phasing of construction,
times of commencement

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               B801/CMA-1992   2



[NOTE: PARAGRAPH 2.2 DELETED IN IT'S ENTIRETY]

and completion required of each Contractor, ordering and delivery of products
requiring long lead time, and the occupancy requirements of the Owner. The
Construction Manager shall provide the current Project construction schedule for
each set of bidding documents.

2.2.12 The Construction Manager shall expedite and coordinate the ordering and
delivery of materials requiring long lead time.

2.2.13 The Construction Manager shall assist the Owner in selecting, retaining
and coordinating the professional services of surveyors, special consultants and
testing laboratories required for the Project.

2.2.14 The Construction Manager shall provide an analysis of the types and
quantities of labor required for the Project and review the availability of
appropriate categories of labor required for critical phases The Construction
Manager shall make recommendations for actions designed to minimize adverse
effects of labor shortages.

2.2.15 The Construction Manager shall assist the Owner in obtaining information
regarding applicable requirements for equal employment opportunity programs for
inclusion in the Contract Documents.

2.2.16 Following the Owner's approval of the Construction Documents, the
Construction Manager shall update and submit the latest estimate of Construction
Cost and the Project construction schedule for the Architect's review and the
Owner's approval.

2.2.17 The Construction Manager shall submit the list of prospective bidders for
the Architect's review and the Owner's approval.

2.2.18 The Construction Manager shall develop bidders' interest in the Project
and establish bidding schedules. The Construction Manager, with the assistance
of the Architect, shall issue bidding documents to bidders and conduct prebid
conferences with prospective bidders. The Construction Manager shall assist the
Architect with regard to questions from bidders and with the issuance of
addenda.

2.2.19 The Construction Manager shall receive bids, prepare bid analyses and
make recommendations to the Owner for the Owner's award of Contracts or
rejection of bids.

2.2.20 The Construction Manager shall assist the Owner in preparing Construction
Contracts and advise the Owner on the acceptability of Subcontractors and
material suppliers proposed by Contractors.

2.2.21 The Construction Manager shall assist the Owner in obtaining building
permits and special permits for permanent improvements, except for permits
required to be obtained directly by the various Contractors. The Construction
Manager shall verify that the Owner has paid applicable fees and assessments.
The Construction Manager shall assist the Owner and Architect in connection with
the Owner's responsibility for filing documents required for the approvals of
governmental authorities having jurisdiction over the Project.

2.3 CONSTRUCTION PHASEADMINISTRATION OF THE CONSTRUCTION CONTRACT

2.3.1 The Construction Phase will commence with the award of the initial
Construction Contract or purchase order and, together with the Construction
Manager's obligation to provide Basic Services under this Agreement, will end 30
days after final payment to all Contractors is due.

2.3.2 The Construction Manager shall provide administration of the Contracts for
Construction in cooperation with the Architect as set forth below and in the
edition of AIA Document A201/CMa, General Conditions of the Contract for
Construction, Construction Manager-Adviser Edition, current as of the date of
this Agreement.

2.3.3 The Construction Manager shall provide administrative, management and
related services to coordinate scheduled activities and responsibilities of the
Contractors with each other and with those of the Construction Manager, the
Owner and the Architect to endeavor to manage the Project in accordance with the
latest approved estimate of Construction Cost, the Project Schedule and the
Contract Documents.

2.3.4 The Construction Manager shall schedule and conduct meetings to discuss
such matters as procedures, progress and scheduling. The Construction Manager
shall prepare and promptly distribute minutes to the Owner, Architect and
Contractors.

2.3.5 Utilizing the Construction Schedules provided by the Contractors, the
Construction Manager shall update the Project construction schedule
incorporating the activities of the Contractors on the Project, including
activity sequences and durations, allocation of labor and materials, processing
of Shop Drawings, Product Data and Samples, and delivery of products requiring
long lead time and procurement. The Project construction schedule shall include
the Owner's occupancy requirements showing portions of the Project having
occupancy priority. The Construction Manager shall update and reissue the
Project construction schedule as required to show current conditions. If an
update indicates that the previously approved Project construction schedule may
not be met, the Construction Manager shall recommend corrective action to the
Owner and Architect.

2.3.6 Consistent with the various bidding documents, and utilizing information
from the Contractors, the Construction Manager shall coordinate the sequence of
construction and assignment of space in areas where the Contractors are
performing Work.

2.3.7 The Construction Manager shall endeavor to obtain satisfactory performance
from each of the Contractors. The Construction Manager shall recommend courses
of action to the Owner when requirements of a Contract are not being fulfilled.

2.3.8 The Construction Manager shall monitor the approved estimate of
Construction Cost. The Construction Manager shall show actual costs for
activities in progress and estimates for uncompleted tasks by way of comparison
with such approved estimate.

2.3.9 The Construction Manager shall develop cash flow reports and forecasts for
the Project and advise the Owner and Architect as to variances between actual
and budgeted or estimated costs.

2.3.10 The Construction Manager shall maintain accounting records on authorized
Work performed under unit costs, additional Work performed on the basis of
actual costs of labor and materials, and other Work requiring accounting
records.

2.3.11 The Construction Manager shall develop and implement procedures for the
review and processing of applications by Contractors for progress and final
payments.

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


3   B801/CMA-1992



2.3.11.1 Based on the Construction Manager's observations and evaluations of
each Contractor's Application for Payment, the Construction Manager shall review
and certify the amounts due the respective Contractors.

2.3.11.2 The Construction Manager shall prepare a Project Application for
Payment based on the Contractors' Certificates for Payment.

2.3.11.3 The Construction Manager's certification for payment shall constitute a
representation to the Owner, based on the Construction Manager's determinations
at the site as provided in Subparagraph 2.3.13 and on the data comprising the
Contractors' Applications for Payment, that, to the best of the Construction
Manager's knowledge, information and belief, the Work has progressed to the
point indicated and the quality of the Work is in accordance with the Contract
Documents. The foregoing representations are subject to an evaluation of the
Work for conformance with the Contract Documents upon Substantial Completion, to
results of subsequent tests and inspections, to minor deviations from the
Contract Documents correctable prior to completion and to specific
qualifications expressed by the Construction Manager. The issuance of a
Certificate for Payment shall further constitute a representation that the
Contractor is entitled to payment in the amount certified.

2.3.11.4 The issuance of a Certificate for Payment shall not be a representation
that the Construction Manager has (1) made exhaustive or continuous on-site
inspections to check the quality or quantity of the Work, (2) reviewed
construction means, methods, techniques, sequences for the Contractor's own
Work, or procedures, (3) reviewed copies of requisitions received from
Subcontractors and material suppliers and other data requested by the Owner to
substantiate the Contractor's right to payment or (4) ascertained how or for
what purpose the Contractor has used money previously paid on account of the
Contract Sum.

2.3.12 The Construction Manager shall review the safety programs developed by
each of the Contractors for purposes of coordinating the safety programs with
those of the other Contractors. The Construction Manager's responsibilities for
coordination of safety programs shall not extend to direct control over or
charge of the acts or omissions of the Contractors, Subcontractors, agents or
employees of the Contractors or Subcontractors, or any other persons performing
portions of the Work and not directly employed by the Construction Manager.

2.3.13 The Construction Manager shall determine in general that the Work of each
Contractor is being performed in accordance with the requirements of the
Contract Documents, endeavoring to guard the Owner against defects and
deficiencies in the Work. As appropriate, the Construction Manager shall have
authority, upon written authorization from the Owner, to require additional
inspection or testing of the Work in accordance with the provisions of the
Contract Documents, whether or not such Work is fabricated, installed or
completed. The Construction Manager, in consultation with the Architect, may
reject Work which does not conform to the requirements of the Contract
Documents.

2.3.14 The Construction Manager shall schedule and coordinate the sequence of
construction in accordance with the Contract Documents and the latest approved
Project construction schedule.

2.3.15 With respect to each Contractor's own Work, the Construction Manager
shall not have control over or charge of and shall not be responsible for
construction means, methods, techniques, sequences or procedures, or for safety
precautions and programs in connection with the Work of each of the Contractors,
since these are solely the Contractor's responsibility under the Contract for
Construction. The Construction Manager shall not be responsible for a
Contractor's failure to carry out the Work in accordance with the respective
Contract Documents. The Construction Manager shall not have control over or
charge of acts or omissions of the Contractors, Subcontractors, or their agents
or employees, or any other persons performing portions of the Work not directly
employed by the Construction Manager.

2.3.16 The Construction Manager shall transmit to the Architect requests for
interpretations of the meaning and intent of the Drawings and Specifications,
and assist in the resolution of questions that may arise.

2.3.17 The Construction Manager shall review requests for changes, assist in
negotiating Contractors' proposals, submit recommendations to the Architect and
Owner, and, if they are accepted, prepare Change Orders and Construction Change
Directives which incorporate the Architect's modifications to the Documents.

2.3.18 The Construction Manager shall assist the Architect in the review,
evaluation and documentation of Claims.

2.3.19 The Construction Manager shall receive certificates of insurance from the
Contractors and forward them to the Owner with a copy to the Architect.

2.3.20 In collaboration with the Architect, the Construction Manager shall
establish and implement procedures for expediting the processing and approval of
Shop Drawings, Product Data, Samples and other submittals. The Construction
Manager shall review all Shop Drawings, Product Data, Samples and other
submittals from the Contractors. The Construction Manager shall coordinate
submittals with information contained in related documents and transmit to the
Architect those which have been approved by the Construction Manager. The
Construction Manager's actions shall be taken with such reasonable promptness as
to cause no delay in the Work or in the activities of the Owner or Contractors.

2.3.21 The Construction Manager shall record the progress of the Project. The
Construction Manager shall submit written progress reports to the Owner and
Architect including information on each Contractor and each Contractor's Work,
as well as the entire Project, showing percentages of completion. The
Construction Manager shall keep a daily log containing a record of weather, each
Contractor's Work on the site, number of workers, identification of equipment,
Work accomplished, problems encountered, and other similar relevant data as the
Owner may require.

2.3.22 The Construction Manager shall maintain at the Project site for the
Owner one record copy of all Contracts, Drawings, Specifications, addenda,
Change Orders and other Modifications, in good order and marked currently to
record changes and selections made during construction, and in addition,
approved Shop Drawings, Product Data, Samples and similar required submittals.
The Construction Manager shall maintain records, in duplicate, of principal
building layout lines, elevations of the bottom of footings, floor levels and
key site elevations certified by a qualified surveyor or professional engineer.
The Construction Manager shall make all such records available to the Architect
and upon completion of the Project shall deliver them to the Owner.

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               B801/CMA-1992   4



2.3.23 The Construction Manager shall arrange for the delivery, storage,
protection and security of Owner-purchased materials, systems and equipment that
are a part of the Project until such items are incorporated into the Project.

2.3.24 With the Architect and the Owner's maintenance personnel, the
Construction Manager shall observe the Contractors' final testing and start-up
of utilities, operational systems and equipment.

2.3.25 When the Construction Manager considers each Contractor's Work or a
designated portion thereof substantially complete, the Construction Manager
shall, jointly with the Contractor, prepare for the Architect a list of
incomplete or unsatisfactory items and a schedule for their completion. The
Construction Manager shall assist the Architect in conducting inspections to
determine whether the Work or designated portion thereof is substantially
complete.

2.3.26 The Construction Manager shall coordinate the correction and completion
of the Work. Following issuance of a Certificate of Substantial Completion of
the Work or a designated portion thereof, the Construction Manager shall
evaluate the completion of the Work of the Contractors and make recommendations
to the Architect when Work is ready for final inspection. The Construction
Manager shall assist the Architect in conducting final inspections.

2.3.27 The Construction Manager shall secure and transmit to the Architect
warranties and similar submittals required by the Contract Documents for
delivery to the Owner and deliver all keys, manuals, record drawings and
maintenance stocks to the Owner. The Construction Manager shall forward to the
Architect a final Project Application for Payment upon compliance with the
requirements of the Contract Documents.

2.3.28 Duties, responsibilities and limitations of authority of the Construction
Manager as set forth in the Contract Documents shall not be restricted, modified
or extended without written consent of the Owner, Construction Manager,
Architect and Contractors Consent shall not be unreasonably withheld.

                                    ARTICLE 3
                               ADDITIONAL SERVICES

3.1 GENERAL

3.1.1 The services described in this Article 3 are not included in Basic
Services unless so identified in Article 14, and they shall be paid for by the
Owner as provided in this Agreement, in addition to the compensation for Basic
Services. The Optional Additional Services described under Paragraph 3.3 shall
only be provided if authorized or confirmed in writing by the Owner. If services
described under Contingent Additional Services in Paragraph 3.2 are required due
to circumstances beyond the Construction Manager's control, the Construction
Manager shall notify the Owner prior to commencing such services. If the Owner
deems that such services described under Paragraph 3.2 are not required, the
Owner shall give prompt written notice to the Construction Manager. If the Owner
indicates in writing that all or part of such Contingent Additional Services are
not required, the Construction Manager shall have no obligation to provide those
services.

3.2 CONTINGENT ADDITIONAL SERVICES

3.2.1 Providing services required because of significant changes in the Project
including, but not limited to, changes in size, quality, complexity or the
Owner's schedule.

3.2.2 Providing consultation concerning replacement of Work damaged by fire or
other cause during construction, and furnishing services required in connection
with the replacement of such Work.

3.2.3 Providing services made necessary by the termination or default of the
Architect or a Contractor, by major defects or deficiencies in the Work of a
Contractor, or by failure of performance of either the Owner or Contractor under
a Contract for Construction.

3.2.4 Providing services in evaluating an extensive number of claims submitted
by a Contractor or others in connection with the Work.

3.2.5 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding except where the Construction Manager is party
thereto.

3.3 OPTIONAL ADDITIONAL SERVICES

3.3.1 Providing services relative to future facilities, systems and equipment.

3.3.2 Providing services to investigate existing conditions or facilities or to
provide measured drawings thereof.

3.3.3 Providing services to verify the accuracy of drawings or other information
furnished by the Owner.

3.3.4 Providing services required for or in connection with the Owner's
selection, procurement or installation of furniture, furnishings and related
equipment.

3.3.5 Providing services for tenant improvements.

3.3.6 Providing any other services not otherwise included in this Agreement.

                                    ARTICLE 4
                            OWNER'S RESPONSIBILITIES

4.1 The Owner shall provide full information regarding requirements for the
Project, including a program which shall set forth the Owner's objectives,
schedule, constraints and criteria, including space requirements and
relationships, flexibility, expandability, special equipment, systems, and site
requirements.

4.2 The Owner shall establish and update an overall budget for the Project based
on consultation with the Construction Manager and Architect, which shall include
the Construction Cost, the Owner's other costs and reasonable contingencies
related to all of these costs.

4.3 If requested by the Construction Manager, the Owner shall furnish evidence
that financial arrangements have been made to fulfill the Owner's obligations
under this Agreement.

4.4 The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner, or such authorized
representative, shall render decisions in a timely manner pertaining to
documents submitted by the Construction Manager in order to avoid unreasonable
delay in the orderly and sequential progress of the Construction Manager's
services.

4.5 The Owner shall retain an architect whose services, duties and
responsibilities are described in the edition of AIA.

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


5   B801/CMA-1992



Document B141/CMa, Standard Form of Agreement Between Owner and Architect,
Construction Manager-Adviser Edition, current as of the date of this Agreement.
The Terms and Conditions of the Agreement Between the Owner and Architect shall
be furnished to the Construction Manager and shall not be modified without
written consent of the Construction Manager, which consent shall not be
unreasonably withheld. The Construction Manager shall not be responsible for
actions taken by the Architect.

4.6 The Owner shall furnish structural, mechanical, chemical, air and water
pollution tests, tests for hazardous materials, and other laboratory and
environmental tests, inspections and reports required by law or the Contract
Documents.

4.7 The Owner shall furnish all legal, accounting and insurance counseling
services as may be necessary at any time for the Project, including auditing
services the Owner may re-uire to verify the Contractors' Applications for
Payment or to ascertain how or for what purposes the Contractors have used the
money paid by or on behalf of the Owner.

4.8 The Owner shall furnish the Construction Manager with a sufficient quantity
of Construction Documents.

4.9 The services, information and reports required by Paragraphs 4.5 through 4.8
shall be furnished at the Owner's expense, and the Construction Manager shall be
entitled to rely upon the accuracy and completeness thereof.

4.10 Prompt written notice shall be given by the Owner to the Construction
Manager and Architect if the Owner becomes aware of any fault or defect in the
Project or nonconformance with the Contract Documents.

4.11 The Owner reserves the right to perform construction and operations related
to the Project with the Owner's own forces, and to award contracts in connection
with the Project which are not part of the Construction Manager's
responsibilities under this Agreement. The Construction Manager shall notify the
Owner if any such independent action will interfere with the Construction
Manager's ability to perform the Construction Manager's responsibilities under
this Agreement. When performing construction or operations related to the
Project, the Owner agrees to be subject to the same obligations and to have the
same rights as the Contractors.

4.12 Information or services under the Owner's control shall be furnished by the
Owner with reasonable promptness to avoid delay in the orderly progress of the
Construction Manager's services and the progress of the Work.

                                    ARTICLE 5
                                CONSTRUCTION COST

5.1 DEFINITION

5.1.1 The Construction Cost shall be the total cost or estimated cost to the
Owner of all elements of the Project designed or specified by the Architect.

5.1.2 The Construction Cost shall include the cost at current market rates of
labor and materials furnished by the Owner and equipment designed, specified,
selected or specially provided for by the Architect, plus a reasonable allowance
for the Contractors' overhead and profit. In addition, a reasonable allowance
for contingencies shall be included for market conditions at the time of bidding
and for changes in the Work during construction. Except as provided in
Subparagraph 5.1.3, Construction Cost shall also include the compensation of the
Construction Manager and Construction Manager's consultants.

5.1.3 Construction Cost does not include the compensation of the Architect and
Architect's consultants, costs of the land, rights-of-way, financing or other
costs which are the responsibility of the Owner as provided in Article 4. If any
portion of the Construction Manager's compensation is based upon a percentage of
Construction Cost, then Construction Cost, for the purpose of determining such
portion, shall not include the compensation of the Construction Manager or
Construction Manager's consultants.

5.2  RESPONSIBILITY FOR CONSTRUCTION COST

5.2.1 Evaluations of the Owner's Project budget, preliminary estimates of
Construction Cost and detailed estimates of Construction Cost prepared by the
Construction Manager represent the Construction Manager's best judgment as a
person or entity familiar with the construction industry. It is recognized,
however, that neither the Construction Manager nor the Owner has control over
the cost of labor, materials or equipment, over Contractors' methods of
determining bid prices, or over competitive bidding, market or negotiating
conditions. Accordingly, the Construction Manager cannot and does not warrant or
represent that bids or negotiated prices will not vary from the Project budget
proposed, established or approved by the Owner, or from any cost estimate or
evaluation prepared by the Construction Manager.

5.2.2 No fixed limit of Construction Cost shall be established as a condition of
this Agreement by the furnishing, proposal or establishment of a Project budget
unless such fixed limit has been agreed upon in writing and signed by the
parties hereto. If such a fixed limit has been established, the Construction
Manager shall be permitted to include contingencies for design, bidding and
price escalation, and shall consult with the Architect to determine what
materials, equipment, component systems and types of construction are to be
included in the Contract Documents, to suggest reasonable adjustments in the
scope of the Project, and to suggest inclusion of alternate bids in the
Construction Documents to adjust the Construction Cost to the fixed limit Fixed
limits, if any, shall be increased in the amount of any increase in the Contract
Sums occurring after execution of the Contracts for Construction.

5.2.3 If the Bidding or Negotiation Phase has not commenced within 90 days after
submittal of the Construction Documents to the Owner, any Project budget or
fixed limit of Construction Cost shall be adjusted to reflect changes in the
general level of prices in the construction industry between the date of
submission of the Construction Documents to the Owner and the date on which
proposals are sought.

5.2.4 If a fixed limit of Construction Cost (adjusted as provided in
Subparagraph 5.2.3) is exceeded by the sum of the lowest bona fide bids or
negotiated proposals plus the Construction Manager's estimate of other elements
of Construction Cost for the Project, the Owner shall:

     .1   give written approval of an increase in such fixed limit;

     .2   authorize rebidding or renegotiating of the Project within a
          reasonable time;

     .3   if the Project is abandoned, terminate in accordance with Paragraph
          9.3; or

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               B801/CMA-1992   6



     .4   cooperate in revising the Project scope and quality as requited to
          reduce the Construction Cost.

5.2.5 If the Owner chooses to proceed under Clause 5.2.4.4, the Construction
Manager, without additional charge, shall cooperate with the Owner and Architect
as necessary to bring the Construction Cost within the fixed limit, if
established as a condition of this Agreement.

                                    ARTICLE 6
                         CONSTRUCTION SUPPORT ACTIVITIES

6.1 Construction support activities, if provided by the Construction Manager,
shall be governed by separate contractual agreements unless otherwise provided
in Article 14.

6.2 Reimbursable expenses listed in Article 14 for construction support
activities may be subject to trade discounts, rebates, refunds and amounts
received from sales of surplus materials and equipment which shall accrue to the
Owner, and the Construction Manager shall make provisions so that they can be
secured.

                                    ARTICLE 7
                              OWNERSHIP AND USE OF
                      ARCHITECT'S DRAWINGS, SPECIFICATIONS
                               AND OTHER DOCUMENTS

7.1 The Drawings, Specifications and other documents prepared by the Architect
are instruments of the Architect's service through which the Work to be executed
by the Contractors is described. The Construction Manager may retain one record
set. The Construction Manager shall not own or claim a copyright in the
Drawings, Specifications and other documents prepared by the Architect, and
unless otherwise indicated the Architect shall be deemed the author of them and
will retain all common law, statutory and other reserved rights, in addition to
the copyright. All copies of them, except the Construction Manager's record set,
shall be returned or suitably accounted for to the Architect, on request, upon
completion of the Project. The Drawings, Specifications and other documents
prepared by the Architect, and copies thereof furnished to the Construction
Manager, are for use solely with respect to this Project They are not to be used
by the Construction Manager on other projects or for additions to this Project
outside the scope of the Work without the specific written consent of the Owner
and Architect The Construction Manager is granted a limited license to use and
reproduce applicable portions of the Drawings, Specifications and other
documents prepared by the Architect appropriate to and for use in the
performance of the Construction Manager's services under this Agreement

All copies made under this license shall bear the statutory copyright notice, if
any, shown on the Drawings, Specifications and other documents prepared by the
Architect. Submittal or distribution to meet official regulatory requirements or
for other purposes in connection with this Project is not to be construed as
publication in derogation of the Architect's copyright or other reserved rights.

                                    ARTICLE 8
                                   ARBITRATION

8.1 Claims, disputes or other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or breach thereof shall
be subject to and decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect unless the parties mutually agree otherwise

8.2 Demand for arbitration shall be filed in writing with the other party to
this Agreement and with the American Arbitration Association. A demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.

8.3 No arbitration arising out of or relating to this Agreement shall include,
by consolidation, joinder or in any other manner, an additional person or entity
not a party to this Agreement, except by written consent containing a specific
reference to this Agreement signed by the Owner, Construction Manager, and any
other person or entity sought to be joined. Consent to arbitration involving an
additional person or entity shall not constitute consent to arbitration of any
claim, dispute or other matter in question not described in the written consent
or with a person or entity not named or described therein. The foregoing
agreement to arbitrate and other agreements to arbitrate with an additional
person or entity duly consented to by the parties to this Agreement shall be
specifically enforceable in accordance with applicable law in any court having
jurisdiction thereof.

8.4 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.

                                    ARTICLE 9
                             TERMINATION, SUSPENSION
                                 OR ABANDONMENT

9.1 This Agreement may be terminated by either party upon not less than seven
days' written notice should the other party fail substantially to perform in
accordance with the terms of this Agreement through no fault of the party
initiating the termination.

9.2 If the Project is suspended by the Owner for more than 30 consecutive days,
the Construction Manager shall be compensated for services performed prior to
notice of such suspension When the Project is resumed, the Construction
Manager's compensation shall be equitably adjusted to provide for expenses
incurred in the interruption and resumption of the Construction Manager's
services.

9.3 This Agreement may be terminated by the Owner upon not less than seven days'
written notice to the Construction Manager in the event that the Project is
permanently abandoned. If the Project is abandoned by the Owner for more than 90
consecutive days, the Construction Manager may terminate this Agreement by
giving written notice.

9.4 Failure of the Owner to make payments to the Construction Manager in
accordance with this Agreement shall be considered substantial nonperformance
and cause for termination.

9.5 If the Owner fails to make payment when due the Construction Manager for
services and expenses, the Construction Manager may, upon seven days' written
notice to the Owner, suspend performance of services under this Agreement.
Unless payment in full is received by the

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


7   B801/CMA-1992



Construction Manager within seven days of the date of the notice, the
suspension shall take effect without further notice In the event of a suspension
of services, the Construction Manager shall have no liability to the Owner for
delay or damage caused to the Owner because of such suspension of services.

9.6 In the event of termination not the fault of the Construction Manager, the
Construction Manager shall be compensated for services performed prior to
termination, together with Reimbursable Expenses then due and all Termination
Expenses as defined in Paragraph 9.7.

9.7 Termination Expenses are those costs directly attributable to termination
for which the Construction Manager is not otherwise compensated.

                                   ARTICLE 10
                            MISCELLANEOUS PROVISIONS

10.1 Unless otherwise provided, this Agreement shall be governed by the law of
the place where the Project is located.

10.2 Terms in this Agreement shall have the same meaning as those in the edition
of AIA Document A201/CMa, General Conditions of the Contract for Construction,
Construction Manager-Adviser Edition, current as of the date of this Agreement.

10.3 Causes of action between the parties to this Agreement pertaining to acts
or failures to act shall be deemed to have accrued and the applicable statutes
of limitations shall commence to run not later than either the date of
Substantial Completion for acts or failures to act occurring prior to
Substantial Completion, or the date of issuance of the final Project Certificate
for Payment for acts or failures to act occurring after Substantial Completion.

10.4 WAIVERS OF SUBROGATION. The Owner and Construction Manager waive all rights
against each other and against the Contractors, Architect, consultants, agents
and employees of any of them, for damages, but only to the extent covered by
property insurance during construction, except such rights as they may have to
the proceeds of such insurance as set forth in the edition of AIA Document
A201/CMa, General Conditions of the Contract for Construction, Construction
Manager-Adviser Edition, current as of the date of this Agreement. The Owner and
Construction Manager each shall require similar waivers from their Contractors,
Architect, consultants, agents, and persons or entities awarded separate
contracts administered under the Owner's own forces

10.5 The Owner and Construction Manager, respectively, bind themselves, their
partners, successors, assigns and legal representatives to the other party to
this Agreement and to the partners, successors, assigns and legal
representatives of such other party with respect to all covenants of this
Agreement Neither Owner nor Construction Manager shall assign this Agreement
without the written consent of the other

10.6 This Agreement represents the entire and integrated agreement between the
Owner and Construction Manager and supersedes all prior negotiations,
representations or agreements, either written or oral. This Agreement may be
amended only by written instrument signed by both Owner and Construction
Manager.

10.7 Nothing contained in this Agreement shall create a contractual
relationship with or a cause of action in favor of a third party against either
the Owner or Construction Manager

10.8 Unless otherwise provided in this Agreement, the Construction Manager and
the Construction Manager's consultants shall have no responsibility for the
discovery, presence, handling, removal or disposal of or exposure of persons to
hazardous materials in any form at the Project site, including but not limited
to asbestos, asbestos products, polychlorinated biphenyl (PCB) or other toxic
substances.

                                   ARTICLE 11
                                    INSURANCE

11.1 CONSTRUCTION MANAGER'S LIABILITY INSURANCE

11.1.1 The Construction Manager shall purchase from and maintain in a company or
companies lawfully authorized to do business in the jurisdiction in which the
Project is located such insurance as will protect the Construction Manager from
claims set forth below which may arise out of or result from the Construction
Manager's operations under this Agreement and for which the Construction Manager
may be legally liable.

     .1   claims under workers compensation, disability benefit and other
          similar employee benefit acts which are applicable to the operations
          to be performed;

     .2   claims for damages because of bodily injury, occupational sickness or
          disease, or death of the Construction Manager's employees;

     .3   claims for damages because of bodily injury, sickness or disease, or
          death of any person other than the Construction Manager's employees;

     .4   claims for damages insured by usual personal injury liability coverage
          which are sustained (1) by a person as a result of an offense directly
          or indirectly related to employment of such person by the Construction
          Manager, or (2) by another person;

     .5   claims for damages, other than to the Work itself, because of injury
          to or destruction of tangible property, including loss of use
          resulting therefrom;

     .6   claims for damages because of bodily injury, death of a person or
          property damage arising out of ownership, maintenance or use of a
          motor vehicle

11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for not
less than limits of liability specified in Article 14 or required by law,
whichever coverage is greater. Coverages, whether written on an occurrence or
claims-made basis, shall be maintained without interruption from date of
commencement of operations under this Agreement until date of final payment and
termination of any coverage required to be maintained after final payment.

                                   ARTICLE 12
                      PAYMENTS TO THE CONSTRUCTION MANAGER

12.1 DIRECT PERSONNEL EXPENSE

12.1.1 Direct Personnel Expense is defined as the direct salaries of the
Construction Manager's personnel engaged on the Project and the portion of the
cost of their mandatory and customary contributions and benefits related
thereto, such as employment taxes and other statutory employee bene-

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               B801/CMA-1992   8



fits, insurance, sick leave, holidays, vacations, pensions and similar
contributions and benefits

12.2 REIMBURSABLE EXPENSES

12.2.1 Reimbursable Expenses are in addition to compensation for Basic and
Additional Services and include expenses incurred by the Construction Manager
and Construction Manager's employees and consultants in the interest of the
Project, as identified in the following Clauses.

12.2.1.1 Expense of transportation in connection with the Project; expenses in
connection with authorized out-of-town travel; long-distance communications; and
fees paid for securing approval of authorities having jurisdiction over the
Project.

12.2.1.2 Expense of reproductions, postage, express deliveries, electronic
facsimile transmissions and handling of Drawings, Specifications and other
documents.

12.2.1.3 If authorized in advance by the Owner, expense of overtime work
requiring higher than regular rates.

12.2.1.4 Expense of additional insurance coverage or limits requested by the
Owner in excess of that normally carried by the Construction Manager.

12.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES

12.3.1 An initial payment as set forth in Paragraph 13.1 is the minimum payment
under this Agreement.

12.3.2 Subsequent payments for Basic Services shall be made monthly and, where
applicable, shall be in proportion to services performed within each phase of
service, on the basis set forth in Subparagraph 13.2.1.

12.3.3 If and to the extent that the time initially established in Subparagraph
13.5.1 of this Agreement is exceeded or extended through no fault of the
Construction Manager, compensation for any services rendered during the
additional period of time shall be computed in the manner set forth in
Subparagraph 13.3.1

12.3.4 When compensation is based on a percentage of Construction Cost and any
portions of the Project are deleted or otherwise not constructed, compensation
for those portions of the Project shall be payable to the extent services are
performed on those portions, in accordance with Subparagraph 13.2.1, based on
(1) the lowest bona fide bids or negotiated proposals, or (2) if no such bids or
proposals are received, the latest approved estimate of such portions of the
Project.

12.4 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES AND REIMBURSABLE EXPENSES

12.4.1 Payments on account of the Construction Manager's Additional Services and
for Reimbursable Expenses shall be made monthly upon presentation of the
Construction Manager's statement of services rendered or expenses incurred

12.5 PAYMENTS WITHHELD

12.5.1 No deductions shall be made from the Construction Manager's compensation
on account of penalty, liquidated damages or other sums withheld from payments
to Contractors, or on account of the cost of changes in Work other than those
for which the Construction Manager has been found to be liable.

12.6 CONSTRUCTION MANAGER'S ACCOUNTING RECORDS

12.6.1 Records of Reimbursable Expenses and expenses pertaining to Additional
Services and services performed on the basis of a multiple of Direct Personnel
Expense shall be available to the Owner or the Owner's authorized representative
at mutually convenient times

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


9   B801/CMA-1992



                                   ARTICLE 13
                              BASIS OF COMPENSATION

The Owner shall compensate the Construction Manager as follows:

13.1 AN INITIAL PAYMENT of _____________________________________________ Dollars
($____________) shall be made upon execution of this Agreement and credited to
the Owner's account at final payment.

13.2 BASIC COMPENSATION

13.2.1 FOR BASIC SERVICES, as described in Article 2, and any other services
included in Article 14 as part of Basic Services, Basic Compensation shall be
computed as follows:

For Pre-Construction Phase Services:

(Insert basis of compensation including stipulated sums multiples or
percentages)

For Construction Phase Services:

(Insert basis of compensation including stipulated sums multiples or
percentages)

                    
Stipulated Sum of      $780,382 for Construction Management
Not to Exceed Sum of   $700,000 for Project Contingency
   TOTAL               $1,480,382



13.3 COMPENSATION FOR ADDITIONAL SERVICES

13.3.1 FOR ADDITIONAL SERVICES OF THE CONSTRUCTION MANAGER, as described in
Article 3, and any other services included in Article 14 as Additional Services,
compensation shall be computed as follows:

(Insert basis of compensation including rates and/or multiples of Direct
Personnel Expense for Principals and employees and identify Principals and
classify employees if required Identify specific services to which particular
methods of compensation apply, if necessary.)

13.4 REIMBURSABLE EXPENSES

13.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph 12.2, and any other
items included in Article 14 as Reimbursable Expenses, a multiple of one (1.0)
times the expenses incurred by the Construction Manager and the Construction
Manager's employees and consultants in the interest of the Project.

13.5 ADDITIONAL PROVISIONS

13.5.1 IF THE BASIC SERVICES covered by this Agreement have not been completed
within 425 calender days (________) months of the date hereof, through no fault
of the Construction Manager, extension of the Construction Manager's services
beyond that time shall be compensated as provided in Subparagraphs 12.3.3 and
13.3.1

13.5.2 Payments are due and payable thirty (30) days from the date of the
Construction Manager's invoice. Amounts unpaid thirty one (31) days after the
invoice date shall bear interest at the rate entered below, or in the absence
thereof at the legal rate prevailing from time to time at the principal place of
business of the Construction Manager.

(Insert rate of interest agreed upon) One and one half percent per month

(Usury laws and requirements under the Federal Truth in lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Construction Manager's principal places of business the location of the Project
and elsewhere may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletions or modifications and also regarding
requirements such as written disclosures or waivers)

13.5.3 The rates and multiples set forth for Additional Services shall be
annually adjusted in accordance with normal salary review practices of the
Construction Manager

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                              B801/CMA-1992   10



                                   ARTICLE 14
                          OTHER CONDITIONS OR SERVICES

(Insert descriptions of other services identify Additional Services included
within Basic Compensation and modifications to the payment and compensation
terms included in this Agreement)

14.1 LIMITS ON INSURANCE

The insurance required by Article 11 shall be written for not less than the
following limits, or greater if required by law:

(Insert the specific dollar amounts for the appropriate insurance limits of
liability)

          See Attachment "A"

14.2 RELATED DOCUMENTS

Notwithstanding anything to the contrary contained herein, the terms and
conditions of Construction Manager's proposal dated November 14, 2006 shall take
precedence over any other contract document and in the event of a conflict
between said proposal and any other contract document the said proposal shall be
controlling.

14.2 EXECUTION OF AGREEMENT

The execution of this Agreement is contingent on the Owner securing a letter
from the Bank of New York confirming financing if this project in the amount of
a minimum of $17,500,000 including $700,000 in contingency funds.

This Agreement entered into as of the day and year first written above

OWNER                                   CONSTRUCTION MANAGER


/s/ Edward Gildea                       /s/ Michael Leader
- -------------------------------------   ----------------------------------------
(Signature)                             (Signature)

EDWARD GILDEA, PRESIDENT                MICHAEL LEADER, PRES.
(Printed name and title)                (Printed name and title)

(AIA LOGO)   CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS
             CAUTION PRINTED IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT
             BE OBSCURED AS MAY OCCUR WHEN DOCUMENTS ARE REPRODUCED. SEE
             INSTRUCTION SHEET FOR LIMITED LICENSE FOR REPRODUCTION OF THIS
             DOCUMENT.

AIA DOCUMENT B801/CMA - OWNER-CONSTRUCTION MANAGER AGREEMENT - 1992 EDITION -
AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING VIOLATES
U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                              B801/CMA-1992   11



                                 ATTACHMENT "A"

LIMITS ON INSURANCE

     a.   Workers Compensation
          Employers Liability
          $500,000 Each Accident
          $500,000 Disease Each Employee
          $500,000 Disease Aggregate

     b.   Commercial General Liability
          Bodily Injury and Property Damage Combined
          $1,000,000 Any One Occurrence
          $1,000,000 Any One Person or Organization
          $2,000,000 Products/Completed Operations Aggregate
          $2,000,000 General Aggregate
          $5,000 Medical Expense

     c.   Comprehensive Automobile Liability
          Bodily Injury and Property Damage Combined
          $1,000,000 each accident

     d.   Umbrella Liability
          Bodily Injury and Property Damage Combined
          $5,000,000 Products/Completed Operations Aggregate
          $5,000,000 General Aggregate
          $5,000,000 Any One Occurrence

EX-10.16

                                                                   Exhibit 10.16

                       RIDER AND SUPPLEMENTARY CONDITIONS

                                       TO

                ARMISTEAD MECHANICAL, INC. PROPOSAL LETTER DATED
           NOVEMBER 13, 2006 TO CONVERTED ORGANICS OF WOODBRIDGE, LLC.

                                       AND

           THE STANDARD FORM OF AGREEMENT BETWEEN OWNER AND CONTRACTOR
      DATED NOVEMBER 30, 2006 AIA A101/CMA (1992 EDITION) BETWEEN ARMISTEAD
           MECHANICAL, INC. AND CONVERTED ORGANICS OF WOODBRIDGE, LLC

                                       AND

               GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
                                  A201/CMA-1992

     AGREEMENT having an effective date of this 10th day of January 2007 between
Armistead Mechanical, Inc. whose address is 168 Hopper Avenue, Waldwick, NJ
07483 [hereinafter "Contractor"], and Converted Organics of Woodbridge, LLC,
having its principal place of business at 99 Madison Avenue, Fanwood, NJ 07023
[hereinafter "Owner"].

     This Rider and Supplementary Conditions amend, modify and supplement the
Armistead Mechanical, Inc. Proposal Letter dated November 13, 2006 to Converted
Organics of Woodbridge, LLC [hereinafter "Armistead Proposal"], the Form of
Agreement Between Owner and Contractor Armistead Mechanical, Inc. dated November
30, 2006 where the Basis of Payment is a Stipulated Sum, AIA Document A101/CMa
(1992 Edition) [hereinafter "Armistead Agreement" or "Agreement"], and the AIA
General Conditions of the Contract for Construction A201/CMa-1992.

     Except where indicated, each provision of this Rider and Supplementary
Conditions is an addition or modification to the terms of the foregoing Contract
Documents and as such the terms of this Rider and Supplementary Conditions
supersede any conflicting term(s) in the incorporated Armistead Mechanical, Inc.
Proposal Letter dated November 13, 2006 to Mr. Jack Walsdorf, Chief


                                        2



Operating Officer, Converted Organics of Woodbridge; the Standard Form of the
Armistead Mechanical, Inc. Agreement AIA A101/CMa-1992; and the General
Conditions of the Contract for Construction. The terms and conditions of this
Rider and Supplementary Conditions shall take precedence over the foregoing
Contract Documents and any other Contract Documents not specifically described.
In the event of a conflict between said Rider and Supplementary Conditions, and
any other Contract Documents, the said Rider and Supplementary Conditions shall
be controlling. All other Articles and provisions of the Armistead Proposal
Letter, of the AIA 101/CMa 1992 Agreement and General Conditions, not so
amended, modified or supplemented by this Rider and Supplementary Conditions
shall remain in full force and effect.

     This Rider and Supplementary Conditions shall be alternatively referred to
herein as "Rider." The Armistead Proposal, the AIA A101/CMa-1992 Armistead
Agreement, General Conditions and Rider shall be referred to from time to time
collectively as "Agreement." All references in the foregoing Contract Documents
to a contract or agreement shall be deemed references to the Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in the AIA A101/CMa-1992 Agreement, the Armistead Proposal Letter of
November 13, 2006 and this Rider and Supplementary Conditions and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties intending to be legally bound hereto agree as follows
in this Rider and Supplementary Conditions to the AIA A101/CMa-1992 Agreement:

                                      *****


                                        3



     The following supplements and modifies the Armistead Proposal Letter to
Converted Organics of Woodbridge, LLC dated November 13, 2006, a copy of which
is attached and incorporated as if fully set forth herein ["Armistead Proposal
Letter" or "Proposal"]. Where a portion of the Armistead Proposal Letter is
modified or deleted by this Rider and Supplementary Conditions, the unaltered
portions of the Proposal shall remain in effect. In the event of a conflict
between said Proposal and any other Contract Documents, with the exception of
the Rider and Supplementary Conditions, the Armistead Proposal shall be
controlling.

2.0  Scope of Work

     2.1  Equipment

          2.1.1 - Delete the following text:

               "...the attached project estimate dated 9/22/06."

          2.1.1 - Add the underlined test such that this article is restated as
               follows:

               "Receive rig in place and install all equipment as listed in the
               balance of this letter."

          2.1.2 - Delete the following text:

               "Functionality."

          2.1.2 - Add the underlined text such that this article is restated as
               follows:

               "Design of the equipment will be by others and functionality will
               be only as guaranteed by the equipment manufacturer as specified.
               Functionality of the equipment with the process scope is to be
               confirmed, and commissioned by others."

     2.2  Process Work

          2.2.12 - Add the underlined text such that this article is restated as
               follows:

               "Provide and install Ductwork for the Process Vapor collection
               System resized for lesser capacity, (10500 CFM) Rigging and
               installation of sodium Hypochlorite Feed Pump and Storage Tank
               (TK840) (G17) and Scrubber OC850, OC824 and OC852B.


                                        4



     2.5  Mechanical Equipment (Furnish and Install)

          2.5.12 - Add the following text to the end of this article:

               "Design and working drawings provided by others, the piping shall
               be furnished and installed by Armistead Mechanical, Inc. pursuant
               to the approved design specifications prepared by the design
               consultant".

          2.5.13 - Delete the following text:

               "and commissioning."

          2.5.14 - Add the underlined text such that this article is restated as
               follows:

               "Startup of mechanical/process utility systems will be provided
               under this contract. This includes the boiler systems, compressed
               air system, and cooling tower. Commissioning of the
               mechanical/process utility systems will be by others and not by
               Armistead Mechanical, Inc.

     3.0  Items Provided by Others

          3.10 All rock removal, contaminated soil removal and removal of
               unforeseen obstructions is excluded. Select backfill is excluded.

          3.11 Structural Steel.

          3.12 Roof Work which includes roof penetrations for the boiler stack
               odor control system, vapor control systems and miscellaneous vent
               penetrations associated with these systems. The roof will be
               installed and the warranty will be held with the building
               Landlord. Therefore this work will be coordinated through and
               with the Landlord representative.

          3.13 Engineering and Design of mechanical and controls required for
               permit, construction and clarification for coordination.

          3.14 Contractor not responsible for design and coordination of work
               for functionality of the licensed process and contractor takes no
               responsibility for process design or commissioning of process
               equipment and related appurtenances.


                                        5



          3.14 Contractor not responsible for design and coordination of work
               for functionality of the licensed process and contractor takes no
               responsibility for process design or commissioning of process
               equipment and related appurtenances.

4.0  Clarifications and Exclusions

          4.1.10 Any work in areas containing asbestos or any hazardous
               materials is excluded.

          4.1.11 Proposal is based on today's copper and steel market prices.
               Any substantial increase above current market rates will be
               addressed prior to acceptance of the proposal.

          4.1.12 Armistead Mechanical, Inc. will not guarantee the functionality
               of the licensed process, and takes no responsibility for process
               design.

          4.1.13 All subcontracted work shall be taxed on insurance and not
               taxed on labor.

          4.1.14 All process equipment shall not be taxed provided Owner
               supplies a Tax Exempt Certificate.

          4.1.15 All rock removal, contaminated soil removal and removal of
               unforeseen obstructions is excluded. Select backfill is excluded.

5.0  Compensation

          Costs Completed Open Book:

          Allowances (2.7) - should refer to "(2.6)" instead of (2.7):

          As to Liquidated Damages:

          Add the following underlined text such that this article reads as
          follows and is consistent with the AIA Standard Form of Agreement
          between Owner and Contractor:

          "A schedule penalty of $1000 per day shall apply for every unexcused
          day the contract time is exceeded. This penalty shall be limited to
          $100,000. The project contingency of $100,000 stated in the
          Contractor's proposal dated November 13, 2006 shall be used to fund
          this penalty. Any contingency from the $100,000 contingency fund
          remaining at the end of the project shall revert to Owner. The Owner's
          Construction Manager shall issue a change order on the Owner's behalf
          to deduct any remaining portion of the $100,000 contingency from the
          contractor's contract value."

                                     *******


                                        6



SECTION B - AS TO THE STANDARD FORM OF AGREEMENT BETWEEN OWNER AND CONTRACTOR
            AIA DOCUMENT A101/CMA -1992 CONSTRUCTION MANAGER- ADVISER EDITION
            BETWEEN ARMISTEAD MECHANICAL, INC. AND CONVERTED ORGANICS OF
            WOODBRIDGE, LLC.

     The following supplements in this Section B modify the November 30, 2006
Armistead Mechanical, Inc. and Converted Organics of Woodbridge, LLC Standard
Form of Agreement between Owner and Contractor AIA Document AlOl/CMa-1992
Construction Manager - Adviser Edition, a copy of which is attached and
incorporated as if fully set forth herein ["Armistead AIA Agreement,"] where a
portion of the Armistead AIA Agreement is modified or deleted by this Rider and
Supplementary Conditions, the unaltered portions of the Armistead AIA Agreement
shall remain in effect.

AS TO THE "ARCHITECT" DESIGNATED AS WESTON SOLUTIONS, INC. ON PAGE 1:

     The Standard Form of Agreement between Owner and Contractor A101/CMa-1992
designates the Architect to be Weston Solutions, Inc. The Construction
Partnership, Inc. [hereinafter "TCPI"], has been engaged to serve in several
capacities: Construction Manager, Facility Design Engineer; and General
Construction Trade Contractor. Weston Solutions, Inc. [hereinafter "Weston"],
has also been denominated as the Process Design Engineer. Under the AIA Contract
Documents both TCPI and Weston have a responsibility to serve as the "Architect"
for the design and construction phases of the Project in their separate but
related capacities. To date, Armistead has not been furnished with a copy of the
AIA B141/CMa-1992 Standard Form of Agreement Between Owner and Architect,
between Weston and the Owner. The Construction Phase responsibilities to be
performed by the "Architect" as that term is used in the Armistead Mechanical,
Inc. contract document, will be shared in a yet to be specified and defined
manner between TCPI as the Design Consultant responsible for "Facility
Engineering" and Weston as the Design Consultant responsible for Process
Engineering. Armistead shall not be responsible for


                                        7



coordinating or managing the division of design responsibilities or construction
phase design oversight and supervision. Delays and additional costs which
Armistead Mechanical, Inc. may encounter due to design and construction phase
coordination of design, inspection, oversight, management and other duties and
services assigned to the "Architect" by the AIA Contract Documents not being
timely or adequately performed by the "Architect" shall warrant and entitle
Armistead Mechanical, Inc., if reasonable and appropriate, to an extension of
time and additional compensation to be confirmed by Change Order. The Owner
warrants and undertakes to engage the services of Weston by means of entering
into a formal AIA B141/CMa-1992 Standard Form of Agreement Between Owner and
Architect which shall be modified to reconcile and coordinate the Project
Architect's responsibilities as contemplated and provided for in the Armistead
Mechanical, Inc. Contract Documents.

Article 1 - THE CONTRACT DOCUMENTS

     ORDER OF PRECEDENCE.

     The Order of Precedence of the Contract Documents is:

          1.   The agreed upon modifications, if any, to the AIA A101 /CMA-1992
               Agreement issued after the execution of the AIA A101/CMa
               Agreement and this Rider;

          2.   This executed Rider and Supplementary Conditions;

          3.   Written Armistead Mechanical, Inc. Proposal Letter dated November
               13, 2006, incorporated into the AIA A101/CMa-1992 Agreement and
               this Rider, a copy of which is referred to as Attachment A in the
               AIA A101/CMa-1992 Agreement (copy attached);

          4.   The executed Standard Form of AIA A101/CMa-1992 Agreement (copy
               attached);

          5.   AIA Document A201/CMa - 1992 General Conditions of the Contract
               for Construction


                                        8



          6.   Specifications List (As prepared by Weston Solutions, Inc.)
               incorporated into the AIA A101/CMa-1992 Agreement as Attachment
               B,

          7.   Drawings and specifications incorporated into the AIA
               A101/CMa-1992 Agreement as Attachment C.

Article 3 - DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

     Article 3.1 is silent as to the date of commencement. The execution of this
     Rider and the Agreement is contingent on: the Owner securing construction
     financing; the Owner issuing a Notice to Proceed within a reasonable time
     from the execution by the Contractor of this Rider and the Agreement; and
     the issuance by the Owner or its representative of an updated Project
     Schedule whose terms, detail, logic, and duration are feasible, reasonable
     and consistent with the last schedule published for the Converted Organics
     Project dated October 17, 2006, attached hereto and incorporated herein.

     Article 3.2 Revise the first sentence of the passage with respect to
     "schedule penalty" to Include the underlined text which shall provide as
     follows:

     "A schedule penalty of $1000 per day shall apply for every unexcused day
     the contract time is exceeded by the Contractors. The Contractor shall be
     entitled to receive extensions of time for excusable delay which shall be
     declared, reported and confirmed in writing to the Owner and Contractors by
     the Construction Manager each month. This penalty shall be limited to
     $100,000. The project contingency stated in the Contractor's proposal dated
     November 13, 2006 shall be used to fund this penalty. Any contingency
     remaining at the end of the project shall revert to the Owner. The Owner's
     Construction Manager shall issue a change order on the owner's behalf to
     deduct any remaining contingency from the contractor's contract value."

Article 4 - CONTRACT SUM

     Article 4.3 Unit Prices, refers to Attachment A which is the Armistead
     Proposal Letter dated November 13, 2006. That letter does not set forth
     unit prices. After the Owner satisfies the contingencies and at the time
     the Notice to Proceed is issued to Armistead Mechanical, Inc. to commence
     work, the Contractor shall submit its Unit Prices, if necessary and
     requested by the Owner.

Article 7 - MISCELLANEOUS PROVISIONS

     Article 7.2 Payments Past Due as that term is defined by the Contract,
     shall bear interest at the rate of 1.5% per month which rate was approved
     for TCPI.


                                        9



     Article 7.4 Other Provisions. The Execution of the Rider and Agreement
     between Owner and Contractor is also subject to and contingent on the Owner
     securing Construction financing and in particular a letter from the Bank
     of New York confirming financing of this project in the amount of a minimum
     of $17,500,000 including $700,000 in contingency funds.

Article 9 - ENUMERATION OF CONTRACT DOCUMENTS

     Article 9.1.4 As to Attachment "B", Section 15180, Piping Insulation. This
     section of work for Piping insulation was never provided to Contractor nor
     was this work ever specified in any other manner for the Contractor to
     quote. Contractor's November 13, 2006 Proposal Letter at Section 4.0
     Clarifications and Exclusions, 4.1 Mechanical Exclusions, Section 4.1.2
     specified "insulation of piping and equipment" to be excluded. Therefore,
     the reference Under Attachment B of the Specification List should be deemed
     removed and this work not included within the scope of Contractor's Work.
     The Contractor will submit a quotation and proposal for change order to the
     Owner to include this work in its Contract at such time as the design and
     approvals have been obtained and the specification furnished to the
     Contractor.

     Article 9.1.5 As to Attachment "B". Section 15050 Piping Material
     Classification Index where Process Piping is Specified as "CPVC,"
     substitute schedule "40 PVC" piping for "CPVC" piping. This change is based
     on Construction and Owner Representative, John Tucker, to agreement during
     proposal plans.

     Article 9.1.6 Drawings. The Contract references Attachment "B" which should
     be changed to refer to Attachment "C" which was attached to and
     incorporated into the November 30, 2006 AIA A101/CMa-1992 Owner Contractor
     Agreement.

                                   * * * * * *


                                       10



SECTION C - AS TO THE AIA DOCUMENT A201/CMA-1992 GENERAL CONDITIONS OF THE
            CONTRACT FOR CONSTRUCTION WHERE THE CONSTRUCTION MANAGER IS NOT A
            CONSTRUCTOR

     The following supplements in this Section C modify the General Conditions
of the Contract for Construction which is incorporated by reference into the
Armistead Mechanical, Inc. and Converted Organics of Woodbridge, LLC Standard
Form of Agreement between Owner and Contractor, AIA Document A101/CMa-1992
referred to more particularly herein above in Section B of this Rider and
Supplementary Conditions. Where a portion of the General Conditions is modified
or deleted by this Rider and Supplementary Conditions the unaltered portions of
the General Conditions shall remain in effect.

Article 1 - GENERAL PROVISIONS

     Add the following sentence to the end of Section 1.1.1:

     The Contract Documents executed in accordance with Section 1.5.1 shall
     prevail in case of an inconsistency with subsequent versions made through
     manipulatable electronic operations involving computers.

     Add Section 1.2.1.1 to Section 1.2.1:

          1.2.1.1 In the event of conflicts or discrepancies among the Contract
          Documents, interpretations will be based on the following priorities:

          1.   Addenda, agreed to and executed by the Contractor, with those of
               later date having precedence over those of earlier date.

          2.   Rider and the Supplementary Conditions.

          3.   The Agreement.

          4.   The General Conditions of the Contract for Construction.

          5.   The Specifications.

          6.   Drawings.


                                       11



     In the case of conflicts or discrepancies between Drawings and the
     Specifications or within either Document not clarified by Addendum, the
     Architect will determine which takes precedence in accordance with Section
     4.2.11.

Article 2 - OWNER

     2.2.5 The Contractor will be furnished, free of charge, 3 copies of
     Drawings and Project Manuals. Additional sets will be furnished at the cost
     of reproduction, postage and handling.

     Add Section 2.2.6 to Section 2.2:

     2.2.6 The Owner will procure and bear costs of structural tests and special
     inspections as required by the applicable building code.

Article 3 - CONTRACTOR

     3.5 Warranty

     If Substantial Completion of Contractor's Work is delayed, by anyone other
     than Contractor, beyond the date of Substantial Completion indicated in the
     Contract Documents, Owner shall request from the Contractor in writing an
     extension of the warranty beyond the Contract date for Substantial
     Completion. In the event that Contractor is required to purchase an
     extended warranty from the manufacturer of material or equipment, Owner
     shall pay Contractor for the cost of the extended warranty.

     Add the following sentence to the end of Section 3.5.1:

     In the event that the Design Professional specifies proprietary material or
     equipment, this warranty shall be limited to the warranty available from
     the manufacturer.

     Add the following sentence, as Section 3.5.2:

     In the event that a particular item of equipment provided by the Contractor
     is placed in continuous operation prior to the date of Substantial
     Completion indicated in the Contract Documents, the warranty and correction
     period for that item shall become effective on the date that continuous use
     begins.

     Add the following sentence as Section 3.5.3:

     The Contractor's warranty and any call-back obligations exclude liability
     for any direct, indirect or consequential damages incurred by the Design
     Professional or


                                       12



     Owner in the event that the Contractor is not able to correct its Work as a
     result of inclement weather, acts of God or any other cause beyond the
     Contractor's control.

     Add the following two sentences to Section 3.7.1:

     The Owner shall pay fees for public or private water, gas, electrical, and
     other utility extensions at the site. The Contractor shall secure and
     arrange for all necessary utility connections.

     3.8.2.2 Delete the semicolon at the end of Section 3.8.2.2 and add the
     following:

     except that if installation is included as part of an allowance in
     Divisions 1-16 of the Specifications, the installation and labor cost for
     greater or lesser quantities of Work shall be determined in accordance with
     Section 7.3.6;

     Since the quantity allowance is an assumed amount of Work in the Contract
     Sum and the unit price is the amount proposed by the Contractor to perform
     a greater or lesser increment of Work, the fair overhead and profit
     percentage for greater quantities is usually different from the percentage
     for lesser quantities of Work, which would result in a credit to the
     Contract Sum. If such conditions exist on a Project, Section 3.8.2.2 may be
     modified accordingly.

     3.10.1 A detailed description of the Contractor's construction and
     submittal schedules (CPM, bar graph or other), the process by which they
     are to be prepared and updated, and the extent of information required
     should be specified in the General Requirements (Division 1 of the
     Specifications).

     Add the following Section 3.10.1.1 to Section 3.10.1:

     3.10.1.1 The Owner may authorize construction activities to commence prior
     to completion of the Drawings and Specifications. If the Drawings and
     Specifications require further development beyond that duration specified
     in the original Progress Schedule dated October 17, 2006, copy attached for
     the design and activity, the Contractor shall: (1) allow time in the
     schedule for further development of the Drawings and Specifications by the
     Architect, including time for review by the Owner and Contractor and for
     the Contractor's coordination of Subcontractors' Work; and (2) furnish to
     the Owner in a timely manner information regarding anticipated market
     conditions and construction cost; availability of labor, materials and
     equipment; and proposed methods, sequences and time schedules for
     construction of the Work. Extension of time required for further
     development of the drawings and specification shall entitle the Contractor
     to an extension of time and additional compensation by change order if the
     delays are on the critical path..

     Article 3.18 Indemnification

     Add the following text to Section 3.18.2


                                       13



     The indemnification obligation shall be limited by a limitation on amount
     or type of damages, compensation or benefits payable by or for the
     Contractor under the New Jersey notwithstanding anything to the contrary
     Workers' Compensation act.

     Add the following text as new Section 3.18.4:

     Notwithstanding anything contained within the Contract Documents,
     Contractor shall not indemnify the Owner or Design Professional for injury
     or damages arising out of (1) preparing, approving or failing to prepare or
     approve maps, shop drawings, opinions, the preparation or approval of, or
     the failure to prepare or approve, maps, shop drawings, opinions, reports,
     surveys, field orders, change orders, or drawings and specifications; or
     (2) giving directions or instructions, or failing to give them, if that is
     the primary cause of the injury or damage.

Article 4 - ADMINISTRATION OF THE CONTRACT

     Article 4.7 Claims and Disputes

     Add the following text as a new Section 4.7.11 in Article 4.7:

     Owner shall be entitled to recover from Contractor as liquidated damages
     the sum of one thousand dollars ($1000) per day for each day Substantial
     Completion is delayed after the final adjusted Completion date. Damages may
     only be awarded under this provision if such delays are solely and
     proximately caused by the actions or inactions of Contractor, its
     subcontractors, agents or employees which action or inaction results in a
     critical path delay upon the Project final completion date or a failure of
     the Contractor's work on the Project to progress in a reasonable and
     orderly manner resulting in a critical path delay. Payment of liquidated
     damages, if any, shall be in lieu of and replacement of any other damages,
     of any type or nature, that Owner might claim, either directly, indirectly
     or consequentially from the failure of Contractor to complete its work on
     the Project on or before the agreed contractual completion date.

     Add the following as Article 4.9:

     In consideration for the Owner's agreement to arbitrate, then, should the
     Owner choose to consolidate an arbitration between the Owner and the Design
     Professional with an arbitration between the Owner and the Contractor, the
     Design Professional agrees to consolidate its arbitration with the Owner
     with any arbitration between the Owner and the Contractor if that
     arbitration arises out of or relates to the Design Professional's acts or
     omissions in relation to the Project or an alleged breach of the Agreement.

     No party shall be required to submit to arbitration, by way of
     consolidation, joinder or otherwise, with any third person not a party to
     this Agreement except where (1) another party to this Agreement has agreed
     to arbitration with such third person; (2) arbitrable disputes exist
     between two or more parties to this Agreement and between a party to this


                                       14



     Agreement and said third person; (3) all disputes to be consolidated
     involve common issues of fact such that failure to consolidate would create
     a substantial risk of inconsistent results.

     Add the following as Section 4.9.5:

     At either party's option, third parties may be joined in any of the dispute
     resolution processes listed above, by consolidation, joinder, or otherwise,
     who are subject to a valid alternative dispute resolution agreement with
     the party seeking joinder of such third-party.

Article 5 - SUBCONTRACTORS

Article 6 - CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS

     6.1.3 If separate contracts are to be awarded, or if the Owners forces are
     to perform construction or operations related to the Project, Section 6.1.3
     of the General Conditions requires that the Owner coordinate this
     construction with the Work of the Contractor. The details of this
     coordination should be set forth in the General Requirements of the
     Specifications, including the enumeration of those portions of the Work to
     be provided under this Article, and identification of separate contractors
     when known.

Articie 7 - CHANGES IN THE WORK.

     Add this following Section 7.3.6.6 to Section 7.3

     Items to be considered as part of cost as opposed to overhead, include
     costs for preparing Shop Drawings, reserves for future service liability,
     engineering and estimating costs, added costs for bonds and insurance, and
     travel and transportation expenses.

     Add the following Section 7.1.4 to Section 7.1:

     7.1.4 The combined overhead and profit included in the total cost to the
     Owner of a change in the Work shall be based on the following schedule:

          1.   The Contractor, for Work performed by the Contractor's own
               Forces, 15% profit.

          2.   For the Contractor, for Work performed by the Contractor's


                                       15



               Subcontractors, 10% of the amount due the Subcontractors.

          3.   For each Subcontractor involved, for Work performed by that
               Subcontractor's own forces, 15% of the cost.

          4.   For each Subcontractor involved, for Work performed by the
               Subcontractor's Sub-subcontractors, 10% of the amount due the
               Sub-subcontractor.

          5.   Cost to which overhead and profit is to be applied shall be
               determined is accordance with Section 7.3.6.

Article 8 - TIME

Article 9 - PAYMENTS AND COMPLETION


                                       16



     Add the following Section 9.8.4 to Section 9.8:

     Upon such acceptance and consent of surety, if any, the Owner shall make
     payment sufficient to increase the total payments to 100% of the Contract
     Sum, less such amounts as the Architect shall determine for incomplete Work
     and unsettled claims.

Article 10 - PROTECTION OF PERSONS AND PROPERTY

     Article 10.1 Safety Precaution and Programs

     Add the following passage as new Section 10.1.1.1 to 10.1:1.:

     10.1.1.1 Environmental Terms Defined:

     "Contaminants" shall include, without limitation, any toxic substance,
     hazardous substance, hazardous waste, pollution, pollutant or contaminant,
     as defined or referred to in the New Jersey Environmental Rights Act,
     N.J.S.A. 2A:35A-1, et seq.; the New Jersey Spill Compensation and Control
     Act, N.J.S.A. 58:10-23.11, et seq.; the New Jersey Air Pollution Control
     Act, N.J.S.A. 26:2C-1, et seq.; the New Jersey Water Pollution Control
     Act, N.J.S.A. 58:10A-1, et seq.; the New Jersey Brownfield and
     Contaminated Site Remediation Act, N.J.S.A. 58:10B-1, et seq.; the New
     Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq.; the
     Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901,
     et seq.; the Comprehensive Environmental Response, Compensation and
     Liability Act, as amended, 42 U.S.C. Section 9601, et seq.; and the Water
     Pollution and Control Act, 33 U.S.C. Section 1251, et seq., together with
     any amendments thereto, regulations promulgated thereunder and all
     successor legislation and regulations thereof, as well as words of similar
     purport or meaning referred to in any other federal, state, county or
     municipal statute, ordinance, rule or regulation, or which may arise under
     common law of New Jersey.

     "Environmental Activities" means all activities, performed or to be
     performed by the Owner, Contractor, third parties, unrelated parties, or
     governmental agencies related to the investigation, cleanup, or remediation
     of Contaminants, or to activities required to meet general compliance with
     Environmental Laws, and including but not limited to "stop-work" or such
     similar orders.

     "Environmental Laws" means each and every federal, state, county and
     municipal statute, ordinance, rule, regulation, order, directive or
     requirement, now existing or hereafter enacted or promulgated, together
     with all amending and successor statutes, ordinances, rules, regulations,
     orders, directives or requirements, of any governmental authority, or by
     common law, in any way related to Contaminants.


                                       17



     10.1.1.2 The term "Project Area" means the project site and premises leased
     by the Owner, including that Property which is contingent, adjacent, or
     remote to the project site on which the construction and services required
     by the Contract Documents Discussions shall be performed by the Contractor,
     or any other constructor representative, or agent of the Owner at any tier.

     10.1.1.3 Owner has represented to Contractor that the Project Area lies
     within a larger parcel or parcels of land ("Overall Property") whereon
     Contaminants are or were present. Further, Owner has represented to
     Contractor: i) that Environmental Activities are being conducted pursuant
     to Environmental Laws at the Overall Property; that the Project Area is
     believed to be free of any Contaminants; and iii) that the Project Area is
     not currently the subject of, or is currently affected by, any
     Environmental Activities. By entering into this agreement, Owner warrants
     to Contractor that, to the best of its information and belief, the Project
     Area is free of any Contaminates, Asbestos Containing Materials ("ACM"),
     Lead Containing Paint ("LCP"), and/or other substances or materials which
     are know to adversely affect human health or the environment in
     concentrations which require remediation, abatement and/or particular
     worker safety protocol, and that the Project Area is in a condition ready
     for the Work/installation to progress.

     10.1.1.4 No payment or damages, liquidated or otherwise, or compensation of
     any kind whatsoever, shall be made by or required of Contractor because of
     hindrance or delay in the start or prosecution of the Work if such
     hindrance or delay is caused by, arises from or is related to the presence
     or suspected presence of Contaminants at the Project Area and/or the
     Overall Property; to any Environmental Activities taking place at, or to
     take place at, the Project Area or Overall Property, or to any
     Environmental Law enforcement or compliance activities at or affecting the
     Project Area, whether or not such conditions or activities are know by or
     under the control of Owner. In addition to any other reasons which may
     excuse Contractor from performance of the Work in accordance with the
     completion deadlines or time-tables set forth in the relevant sections of
     this Agreement.

     10.1.1.5 It is further agreed that Contractor shall have no duty or
     responsibility whatsoever to investigate conditions at the Project Area or
     Overall Property related to Contaminants, and/or to participate in any way
     regarding Environmental Activities at the Project Area and/or the Overall
     Property. In the case that Contractor is required to participate in any
     such activities, Owner will immediately reimburse to Contractor all time,
     labor and material costs incurred by Contractor in carrying out such
     activities. In the case that any equipment must be moved, relocated or
     disassembled/re-assembled, to accommodate any Environmental Activities,
     then such work shall be treated as change orders and charged accordingly.

     10.1.1.6 It is further agreed that should there be any delay and additional
     cost incurred due to the delay in starting or prosecuting the Work that is
     caused by, arises from or is related to Environmental Activities, then any
     relevant completion deadlines or performance time tables set forth
     elsewhere in this agreement shall be extended by the length of delay so
     caused and additional cost incurred shall be equitably adjusted and
     reimbursed by way of change order.


                                       18



     10.1.1.7 In the case that any hindrance or delay in starting or prosecuting
     the Work does occur, and such hindrance or delay prevents the Work from
     resuming in earnest within 7 days thereafter, then Contractor may, at its
     option, cease work at the Project and will not be obligated to resume the
     Work until within 14 days after the Contractor receives notice from the
     Owner and the entity carrying out the interfering or hindering activity, if
     any there is, that the interfering event has ended and Work may safely and
     legally may resume. Notwithstanding the foregoing, if any hindrance or
     interference prevents the Work from being initiated or prosecuted for a
     period of time longer that sixty calendar days, then this agreement may be
     terminated by either party, and the termination provisions of this contract
     will apply.

     10.1.1.8 If the introduction onto the Project of Contaminants was not
     caused by the Contractor or any of its subcontractors or suppliers of any
     tier, or any person or entity under the control of the Contractor or any of
     its subcontractors or suppliers of any tier, the Owner shall indemnify and
     hold harmless the Contractor and any of its subcontractors or suppliers of
     any tier and any person or entity under the control of the Contractor and
     any of its subcontractors or suppliers of any tier from and against any and
     all direct claims, damages, losses, costs and expenses, including but not
     limited to consultants' fees and attorneys' fees, costs and expenses
     arising out of or relating to the performance of the Work in any area
     affected by Contaminants.

Article 11 - INSURANCE AND BONDS

     Add the following passage to section 11.1.2:

     No insurance was specified in the Contract documents as contemplated by
     this Section. Attachment "A" to the Standard Form of Agreement Between
     Owner and Construction Manager AIA Document B801/CMa Contract between TCPI
     and Converted Organics of Woodbridge, LLC, captioned "Limits on Insurance:
     lists four categories of Insurance: Workers Compensation; Commercial
     General Liability; Comprehensive Automobile Liability; and Umbrella
     Liability. Contractor shall provide insurance coverage as specified in TCPI
     "Attached A," restated below:

     Limits on Insurance

          a.   Workers Compensation
               Employers Liability
               $500,000 Each Accident
               $500,000 Disease Each Employee
               $500,000 Disease Aggregate

          b.   Commercial General Liability
               Bodily Injury Property Damage Combined
               $1,000,000 Any One Occurrence


                                       19



               $1,000,000 Any One Person or Organization
               $2,000,000 Products/Completed Operations Aggregate
               $2,000,000 General Aggregate
               $5,000,000 Medical Expense

          c.   Comprehensive Automobile Liability
               Bodily Injury and Property Damage Combined
               $ 1,000,000 each accident

          d.   Umbrella Liability
               Bodily Injury and Property Damage Combined
               $5,000,000 Products/Completed Operations Aggregate
               $5,000,000 General Aggregate
               $5,000,000 Any One Occurrence

     Add the following terms to Section 11.2.1:

     Builder Risk Coverage shall be supplied by the Owner for the project and
     proof of insurance and a copy of the Policy of Insurance shall be furnished
     to the Contractor.

     The Builders Risk Policy shall include coverage by endorsement or otherwise
     for "ordinance" or "law" Coverage.

Article 12 - UNCOVERING AND CORRECTION OF WORK

Article 13 - MISCELLANEOUS PROVISIONS

     Add new Article 13.5.7 to Article 13.5 Tests and Inspection:

     Article 13.5.7 Design Professional shall assign properly qualified
     professionals in the appropriate discipline to review submittals. Design
     Professional shall review and approve all submittals in a timely manner,
     but in no event more than twenty (20) days after submittal to Design
     Professional for conformance with the design concept of the Project, for
     compliance with the information given in the Contract Documents, for
     compatibility with adjacent and contiguous Work, systems, and services and
     with limitations of space, weight, and services. Submittals that are not
     approved by Design Professional are to be brought to the attention of the
     Owner concurrent with notification to the Contractor. If Design
     Professional approves submittals that Contractor has identified as a
     deviation from the Contract Documents, Design Professional shall notify the
     Owner in writing.


                                       20



Article 14 - TERMINATION OR SUSPENSION OF THE CONTRACT

     Add the following Sections 14.3.4 and 14.3.5 to Section 14.3:

     14.3.4 Contractor shall, as soon as practical after receiving notice of
     termination under this Section, submit to Owner its statement of Cost
     Incurred by Contractor in the Performance of the Work Terminated (as
     hereinafter defined). Owner shall, within thirty (30) Days after receipt of
     such statement, pay to Contractor all amounts included thereon. The phrase
     "Costs Incurred by Contractor in the Performance of the Work Terminated as
     used herein shall mean the following:

     (a)  Subcontract termination costs;

     (b)  Cancellation fees for equipment and materials ordered but not
          delivered;

     (c)  Cost of all materials and equipment ordered which cannot be canceled,
          less actual proceeds received upon the disposition thereof;

     (d)  Restocking fees incurred in returning materials ordered that have been
          delivered;

     (e)  Field work accomplished;

     (f)  Permit, engineering, bond, and inspection fees;

     (g)  Attorneys' fees and expenses incurred in terminating subcontracts and
          purchase orders;

     (h)  Other direct costs incurred by Contractor as a result of the
          termination;

     (i)  Profit on the Work not performed calculated by multiplying the sum of
          the items listed in subparagraphs (a)-(h) above by 15%; and

     (j)  Contractor's fixed overhead costs associated with the Work not
          performed calculated by multiplying Contractor's fixed overhead costs
          (a-h) by the fraction having as its numerator the value of this
          contract and as its denominator the value of all contracts then being
          performed by the Contractor.

     14.3.5 Contractor shall be entitled to receive reasonable profit for that
     portion of the work terminated by the Owner in accordance with the terms of
     this Article. Notwithstanding anything in the Contract documents to the
     contrary, the Contractor shall be entitled to recover from Owner reasonable
     profit and overhead on Work not executed if either Owner or Contractor
     terminate the Project for convenience.


                                       21



This Rider and Supplementary Conditions is entered into as of the day and year
first written above and is executed in a least four original copies of which one
is to be delivered to the Contractor, one each to the Construction Manager and
Architect for use in the administration of the Contract and Project and the
remainder to the Owner.

OWNER                                   CONTRACTOR

CONVERTED ORGANICS OF                   AMRISTEAD MECHANICAL, INC.
WOODBRIDGE, LLC


By: /s/ Edward Gildea                   By: /s/ Kevin Armistead
    ---------------------------------       ------------------------------------
    EDWARD GILDEA, PRES.                    KEVIN ARMISTEAD, SECRETARY/TREASURER
    (Print name and title)                  (Print name and title)
Date 11/12/07                           Date 1/11/07


                                       22



                              AIA Document A10l/CMa

                           STANDARD FORM OF AGREEMENT
                          BETWEEN OWNER AND CONTRACTOR

                 where the basis of payment is a STIPULATED SUM

                    1992 CONSTRUCTION MANAGER-ADVISER EDITION

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
           ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION,

The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction; Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.

AGREEMENT

made as of the Thirtieth day of November in the year of Two Thousand Six
(In words, indicate day, month and year.)

BETWEEN the Owner:
(Name and address)                          Converted Organics of
                                            Woodbridge, LLC 99 Madison
                                            Avenue Fanwood, NJ 07023

and the Contractor:
(Name and address)                          Armistead Mechanical; Inc.
                                            168 Hopper Avenue
                                            Waldwick, NJ 07483

For the following Project:
(Include detailed description of Project,
location, address and scope.)               Converted Organics, Inc.
                                            75 Crows Mill Road
                                            Keasbey, NJ

The Construction Manager is:
(Name and address)                          The Construction Partnership, Inc.
                                            436 Creamery Way, Suite 100
                                            Exton, PA 19341

THE ARCHITECT IS:
(Name and address)                          Weston Solutions, Inc.
                                            1 Wall Street
                                            Manchester, NH 03101

The Owner and Contractor agree as set forth below,

Copyright 1975,1980, (C)1992 by The American Institute of Architects, 1735 New
York Avenue, N.W., Washington, D.C. 20006-5292. Reproduction of the material
herein or substantial quotation of its provisions without the written permission
of the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution.

(LOGO)   AIA D0CUMENT A101/QMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION
         MANAGER-ADVISER EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
         ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 -
         WARNING: UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL
         SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   1



                                    ARTICLE 1
                             THE CONTRACT DOCUMENTS

The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.

                                    ARTICLE 2
                            THE WORK OF THIS CONTRACT

The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows: _____________________________

________________________________________________________________________________

________________________________________________________________________________

                                    ARTICLE 3
                 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below of provision is made for
the date to be fixed in a notice to proceed issued by the Owner.

(insert the date of commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)

     DATE OF COMMENCEMENT IS XXXX

Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.

3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than 425

(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)

subject to adjustments of this Contract Time as provided in the Contract
Documents.

(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)

A schedule penalty of $1000 per day shall apply for every day the contract time
is exceeded. This penalty shall be limited to $100,000. The project contingency
stated in the Contractor's proposal dated November 13, 2006 shall be used to
fund this penalty. Any contingency remaining at the end of the project shall
revert to the Owner. The Owner's Construction Manager shall issue a change order
on the Owner's behalf to deduct any remaining contingency from the contractor's
contract value.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   2



                                    ARTICLE 4
                                  CONTRACT SUM

4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Four Million Sixty Thousand
Seven Hundred Fifty Six Dollars ($4,060,756), subject to additions and
deductions as provided in the Contract Documents.

4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)

4.3 Unit prices, if any, are as follows:

     See Attachment "A"

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.

                                                               A101/CMA-1992   3



                                    ARTICLE 5
                                PROGRESS PAYMENTS

5.1 Based upon Applications for Payment submitted by the Contractor to the
Construction Manager, and upon Project Applications and Certificates for
Payment issued by the Construction Manager and Architect, the Owner shall make
progress payments on account of the Contract Sum to the Contractor as provided
below and elsewhere in the Contract Documents.

5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:

5.3 Provided an Application for Payment is submitted to the Construction Manager
not later than the 25th day of a month, the Owner shall make payment to the
Contractor not later than the 30th day of the following month. If an Application
for Payment is received by the Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than 30 days after the
Construction Manager receives the Application for Payment.

5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager or Architect may require.
This schedule, unless objected to by the Construction Manager or Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.

5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.

5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:

5.6.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the total Contract Sum allocated to that portion of the
Work in the Schedule of Values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions;

5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of ten
percent (10%);

5.6.3 Subtract the aggregate of previous payments made by the Owner; and

5.6.4 Subtract amounts, if any, for which the Construction Manager or Architect
has withheld or nullified a Certificate for Payment as provided in Paragraph
9.5 of the General Conditions.

5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:

5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to increase
the total payments to _______________ percent (____%) of the Contract Sum, less
such amounts as the Construction Manager recommends and the Architect determines
for incomplete Work and unsettled claims; and

5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.

5.8 Reduction or limitation of retainage, if any, shall be as follows:

(If it is intended, prior to Substantial Completion of the entire Work; to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5.6.1 and 5.6.2 above, and this is not explained elsewhere in the
Contract Documents, insert here provisions for such reduction or limitation.)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   4



                                    ARTICLE 6
                                  FINAL PAYMENT

Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Project Certificate for Payment has been issued
by the Construction Manager and Architect; such final payment shall be made by
the Owner not more than 30 days after the issuance of the final Project
Certificate for Payment, or as follows:

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.

7.2 Payments due and unpaid under the Contract shall bear interest from the date
payment is due at the rate stated below, or in the absence thereof, at the legal
rate prevailing from time to time at the place where the Project is located.

(Insert rate of interest agreed upon, if any.)

(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)

7.3 Temporary facilities and services:

(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents.)

7.4 Other Provisions:

(Here list any special provisions affecting the Contract.)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   5



                                    ARTICLE 8
                            TERMINATION OR SUSPENSION

8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.

8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.

                                    ARTICLE 9
                        ENUMERATION OF CONTRACT DOCUMENTS

9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:

9.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A101/CMa, 1992 Construction Manager-Adviser
Edition.

9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201/CMa, 1992 Construction Manager-Adviser Edition.

9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated ______________________________, and are as follows:



DOCUMENT   TITLE   PAGES
- --------   -----   -----
             



9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows:
(Either list the Specifications here or refer to an exhibit attached to this
Agreement.)



SECTION   TITLE   PAGES
- -------   -----   -----
            



          See Attachment "B"

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   6



9.1.5 The Drawings are as follows, and are dated _______ unless a different date
is shown below:
(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)



NUMBER   TITLE   DATE
- ------   -----   ----
           



See Attachment "B"

9.1.6 The Addenda, if any, are as follows:



NUMBER   DATE   PAGES
- ------   ----   -----
          



Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   7



9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:

(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)

     Contractor's Proposal 5A, dated November 13, 2006.

This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner.

OWNER                                   CONTRACTOR


/s/ EDWARD GILDEA                       /s/ KEVIN ARMISTEAD
- -------------------------------------   ----------------------------------------
(Signature)                             (Signature)

EDWARD GILDEA, PRES.                    KEVIN ARMISTEAD, SECRETARY/TREASURER
(Printed name and title)                (Printed name and title)

(AIA LOGO)   CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS
             CAUTION PRINTED IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT
             BE OBSCURED AS MAY OCCUR WHEN DOCUMENTS ARE REPRODUCED. SEE
             INSTRUCTION SHEET FOR LIMITED LICENSE FOR REPRODUCTION OF THIS
             DOCUMENT.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   8



                            ATTACHMENT "A"

ALLOWANCES

Allowance values shall be as stated in the Contractor's Proposal dated November
13, 2006. These amounts are estimated. At such time as the designs for these
allowances are completed, the Contractor shall submit lump sum quotations for
same. The Owner's Construction Manager shall issue a change order on behalf of
the Owner for any difference in the actual cost as compared to the allowance.



                                 ATTACHMENT "B"

SPECIFICATION LIST (AS PREPARED BY WESTON SOLUTIONS, INC.)



Title                                                    Revision
- -----                                                    --------
                                                      
11076 Compressed Air System                                  B
11450 Evaporator System (For Evaporative Chiller Only)       B
15050 Piping Material Classification Index                   B
15060 Piping Installation                                    B
15180 Piping Insulation                                      B
15710 Boiler
15750 Cooling Tower Water Treatment




                                 ATTACHMENT "C"

DRAWING LIST (AS PREPARED BY CONVERTED ORGANICS)

G-l  Solid Waste Receiving
G-2  Not Included
G-3  Macerator and Y Tank
G-4  Digesters
G-5  Digesters
G-6  Not Included
G-7  Primary Screen and Press Feed Tank
G-8  Rotary Press
G-9  Clarifier and Cooling Tower
G-10 Filtrate and Filtrate Catch Tank
G-11 Evaporator System
G-12 Dryer System
G-13 Not Included
G-14 Pelletizer and Bagger
G-15 Hot Water Recovery System
G-16 Wastewater Treatment
G-17 Process Vapor Collection (Provided for reference only See Allowance
     Description in Contractor's Proposal, Item 2.6.3)
G-18 Process Odor Control System
G-19 Boiler System
G-20 Compressed Air System



ARMISTEAD MECHANICAL, INC.

MECHANICAL CONTRACTORS & ENGINEERS          "Four Generations Of Family Service"
168 HOPPER AVENUE, WALDWICK, NJ 07483   324 NORTH PLANK ROAD, NEWBURGH, NY 12550
(201) 447-6740 Fax: (201) 447-6744            (845) 566-0770 Fax: (845) 566-1822
NJ Lic. No. 7130                                               RCNY Lic. No. 730

November 13, 2006

Mr. Jack Walsdorf
Chief Operating Officer
Converted Organics of Woodbridge, LLC
99 Madison Avenue
Fanwood, NJ 07023

Re: Converted Organics Woodbridge Facility
    Armistead Mechanical, Inc. Proposal No.: 2006-172
    Proposal 5A

Dear Mr. Walsdorf:

Armistead Mechanical, Inc. is pleased to provide you with this proposal for
construction services:

1.0  PROJECT DESCRIPTION

     Converted Organics is proposing to build an organic waste processing
     facility with a processing capability of 250 tons per day of organic
     feedstock into a solid and liquid fertilizer. The Facility is located at 75
     Crows Mill Road, adjacent to the Raritan River. A 60,000 square foot
     building will be constructed by the landlord to house the Converted
     Organics process. The process equipment, piping and infrastructure work
     provided under this contract.

2.0  SCOPE OF WORK

     2.1  EQUIPMENT

          2.1.1 Receive, rig in place and install all equipment as listed in the
               attached project estimate dated 9/22/06.

          2.1.2 Functionality of the equipment will be only as guaranteed by the
               equipment manufacturer as specified. Functionality of the
               equipment within the process scope is to be confirmed, and
               commissioned by others.

     2.2  PROCESS WORK

          2.2.1 Rigging and installation of Macerator Tank (TK312), pump and
               pulper (MA312) Y-Tank (TK324), Mixer (AG324) and Y-Tank transfer
               pump (PU322) (G3)

          2.2.2 Digesters will be field erected by others (DI430, 432 & 442),
               Shearators (SH430, 432 & 442 A-H) and Mixers (AG 430, 432 & 442)
               are to be rigged into place along with the Digester Heating Loop
               pump (PU422), Digester Recycle pump (PU420), Digester Transfer
               pump (PU424) and



               the Slurry Heat Exchanger (HEX430A). Note: Space will be left to
               accommodate future digesters DI 442 & DI 446. Steel required for
               brackets is covered within the listed allowance.

          2.2.3 Rigging and field installation of Primary Screen (SC540), Press
               feed Tank (TK560) and Mixer (AG560), Press feed tank recycle pump
               (PU546A) and Press feed Pump (PU566A). (G-7)

          2.2.4 Rigging and installation of the Flocculation Tank (TK570A),
               Mixer (AG570A) Rotary Press (PR574A), Cake Break Conveyor
               (CS610A), Live Bottom Storage Bin (BI614A), Live Bottom Dryer
               Metering Bin (BI614B), Polymer Feed Pump (PU572A), Solution Tank
               (TK576) and solution Make-up System (AG576). (G8)

          2.2.5 Rigging and installation of the Clarifier (TK738) and underflow
               pump (PU746A) (G9)

          2.2.6 Rigging and installation of Filtrate Tank (TK720), Mixer
               (AG720), Jet Mix Pump (PU734) and filtrate tank transfer pump
               (PU732A) (G10)

          2.2.7 Rigging and installation of the Evaporator (EV770) (which is
               shipped in five pieces), the Defoamant Drum Pump (PU786), Caustic
               CIP Transfer Pump (PU782), Acid CIP Pump (PU784), Liquid Product
               Storage Tank (TK774), Mixer (AG774) and Bulk Shipping Pump
               (PU790). (G11)

          2.2.8 Rigging and installation of Dry Feed Conveyor (CS614A&B), Dryer
               (DR614) Condensate Return Tank (TK614D) and Return Pump (PU614D),
               Sluice duct (SD614), Venturi Scrubber (VS614), Spray Tower
               (ST614), Dryer Exhaust Blower (BL614), Venturi Recirculation Pump
               (PU614A), Spray Tower Recirculation Pump (PU614B), Spray Tower
               Heat Exchanger (HEX614), Condensate Tank (TK614) and Condensate
               Transfer Pump (PU614C) (G12)

          2.2.9 Rigging and installation of Transfer Screw Conveyor (CS634),
               Pelletizer Bucket Elevator (CS638), Pelletizer (PE640),
               Pelletizer Cooler (BI642), Crumbler (CR600), Screen Transfer
               Auger (CS646), Screen Feed Bucket Elevator (CS647), Pellet Screen
               (SC648), Fines Transfer Auger (CS648), Bagger (BA664), Cyclone
               (C642), and Exhaust Fan (EF642) (G14)

          2.2.10 Rigging and installation of Hot Water Storage Tank (TK802), Jet
               Mix System (AG802), Jet Mix Pump (PU801B), Hot Water Tank
               Transfer Pumps (PU802A&B), and Hot Water Hydro pneumatic Tanks
               (TK806A&B) (G15)

          2.2.11 Furnish, Rigging and installation of Wastewater Cooling Heat
               Exchanger (HEX820) (Gl6)

          2.2.12 Provide Ductwork for Process Vapor collection System resized
               for lesser capacity. (10500 CFM) Rigging and installation of
               Sodium Hypochlorite Feed Pump and Storage Tank (TK840) (G17)

     2.3  PROCESS PIPING

          2.3.1 As per Specification 15050 piping has been allotted for the
               following Systems:

               2.3.1.1 Hot Condensate-Process from Macerator to HW Transfer
                    Pumps

               2.3.1.2 Sludge Biological

               2.3.1.3 Filtrate-Rotary Press through Clarifier to Evaporator

               2.3.1.4 Warm Condensate Process



               2.3.1.5 Sodium Hypochlorite

               2.3.1.6 Utility Water

     2.4  MECHANICAL PIPING

          2.4.1 As per Specification 15050 piping has been allotted for the
               following Systems:

               2.4.1.1 High Pressure Steam: 150#

               2.4.1.2 High Pressure Steam Condensate Return

               2.4.1.3 Low Pressure Steam: 15#

               2.4.1.4 Low pressure Condensate Return

               2.4.1.5 Cooling Tower supply and Return

               2.4.1.6 Chilled Water Recirculation

               2.4.1.7 Instrument Air

               2.4.1.8 Natural Gas

          2.4.2 Installation of in line control valves is included with the
               control valves provided under the allowance.

     2.5  MECHANICAL EQUIPMENT (FURNISH AND INSTALL)

          2.5.1 HP Steam Boiler BL980 and Blow down Tank

          2.5.2 Boiler Feed water Pumps PU 988 & 990

          2.5.3 Deaerator Tank TK-982

          2.5.4 Surge Tank TK-980 and Transfer Pumps PU-984 & 985

          2.5.5 Chemical Feed System CF-980

          2.5.6 Water Softener System WS-980

          2.5.7 Rotary Screw Air Compressor AC-882

          2.5.8 Storage TK-884

          2.5.9 Coalescing and Particulate filters F883 A & B

          2.5.10 Air Dryer System DR-886

          2.5.11 Evaporative Chiller CH-770 (Refurbished Cooling Tower furnished
               with Evaporator (EV-770)

          2.5.12 Piping will be installed along the floor as per discussions
               with Converted Organics, and similar to the installation
               completed in the Vancouver facility.



          2.5.13 Startup and commissioning of mechanical/process utility systems
               will be provided under this contract. This includes the boiler
               systems, compressed air system, and cooling tower

                    DELETED ELECTRICAL SECTION

     2.6  ALLOWANCES - ALLOWANCES are to be invoiced on a time and material
          basis. Armistead Mechanical, Inc. will monitor expenditures, and
          Converted Organics will be notified in advance, if the allowances are
          going to be overrun. Overruns in the allowance line items are to be
          reimbursed to the Armistead Mechanical, Inc.

          2.6.1 Instrumentation - A $250,000 allowance for instrumentation has
               been included for items above and beyond the instrumentation
               included with the equipment.

          2.6.2 Dry product monitoring system - A $45,000 allowance has been
               included in the budget for this equipment.

          2.6.3 Carbon side filters with integral fans - An allowance of
               $100,000 has been included for the carbon side filters.

          2.6.4 Unit Heaters - An allowance of $25,000 has been included for the
               unit heaters, and associated piping.

3.0  ITEMS PROVIDED BY OTHERS

     The following items are provided by others:

3.1  The building envelope will be provided by the landlord. The building must
     be constructed in a manner so that it can maintain the negative pressure
     required. All penetrations must be sealed properly.

3.2  Zoning permits, air permits, change of use permits and other environmental
     permits will be provided by others.

3.3  Vendor startup of the process equipment has not been included with their
     quotations; therefore any vendor startup required will have to be purchased
     by the owner directly.

3.4  Building demolition is to be completed by the landlord.

3.5  As stated above, the construction trailers to be provided will be turned
     over to be used as temporary offices for Converted Organics, in order for
     the building to be turned over.

3.6  The construction of the office area is not included in the price at this
     time, and therefore, can be handled as a Phase II construction activity. A
     meeting with the township will have to be held in order to confirm this
     plan of action.

3.7  It is assumed that the dryer and pelletizer room will not require blow out
     panels. Therefore, the room is constructed with 2-hour fire rated
     partitions, and explosion proof electrical fixtures.

3.8  Any work in areas containing asbestos or any hazardous materials is
     excluded.

3.9  Proposal is based according to today's copper and steel market prices. Any
     substantial increase above current market rates will be addressed prior to
     acceptance of the proposal.

4.0  CLARIFICATIONS AND EXCLUSIONS

     4.1  MECHANICAL EXCLUSIONS

          4.1.1 Dedicated Toilet Rooms and associated piping



          4.1.2 Insulation of piping and equipment

          4.1.3 Laboratory Rooms

          4.1.4 Automatic Temperature Controls

          4.1.5 Instrumentation - Armistead will provide flanges for control
               valves to be provided by others.

          4.1.6 Any HVAC Systems

          4.1.7 Installation and Operation of Process system is based on owner
               design and a building that maintains negative pressure.

          4.1.8 All refurbished Process equipment will be void of any asbestos

          4.1.9 All power, control and interconnecting wiring

     4.2  INSURANCE EXCLUSIONS

          4.2.1 Builder's Risk

          4.2.2 Pollution Liability

5.0  COMPENSATION

     Format for the contract is a GMP with negotiated lump sums shown in project
     reporting for Mechanical, Electrical and Construction Management including
     General Conditions. Open book items will be Equipment, General
     Construction, Engineering, Permitting, Contingency, and Bonding. Change
     orders from the Owner will be added to the project with negotiated fees.

     A $1000/day schedule penalty will apply for indefensible delays beyond the
     scheduled completion date to the limit of $100,000.

LUMP SUM COSTS:

                                                                
LUMP SUM FOR MECHANICAL WORK (2.1, 2.2, 2.3, 2.4, 2.5):.........   $3,550,550.00
COSTS COMPLETED OPEN BOOK:
EQUIPMENT:......................................................   $        0.00
ALLOWANCES (2.7):...............................................   $  420,000.00
CONTINGENCY.....................................................   $  100,000.00
                                                                   -------------
SUB-TOTAL:......................................................   $4,020,550.00
BONDING........................................................:   $   40,706.00
                                                                   -------------
TOTAL:..........................................................   $4,060,756.00



6.0  SCHEDULE

     The project schedule will be 14 months from Converted Organics of
     Woodbridge, LLC's Authorization to Proceed, provided that the Landlord
     turns over the site by 5/01/07.



Jack, thank you for the opportunity to provide this proposal. If this proposal
is acceptable, we will prepare a formal contract. I feel confident that we can
obtain the results you are looking for in the time frame you require.

If you have way questions on this proposal please call me at (201) 447-6740
ext. 2321

Respectfully,


/s/ Kevin T. Armistead
- -------------------------------------
Kevin T. Armistead
Secretary/Treasurer

AUTHORIZATION TO PROCEED:

If you would like Armistead Mechanical, Inc. to proceed with this project please
sign below and return a complete copy of this proposal to the attention of Kevin
Armistead.


/s/ Edward J. Gildea                    11/13/06
- -------------------------------------   Date
Authorized By

C.E.O.
Title



                               Converted Organics
                                 Woodbridge, NJ
                                   10/17/2006

                                [TIMELINE CHART]



                               Converted Organics
                                 Woodbridge, NJ
                                   10/17/2006

                                [TIMELINE CHART]



                               Converted Organics
                                 Woodbridge, NJ
                                   10/17/2006

                                [TIMELINE CHART]




DRAFT AIA(R) Document A201/CMa(TM) - 1992

GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION

where the Construction Manager is NOT a Constructor

FOR THE FOLLOWING PROJECT:
(Name and location or address):

ILLEGIBLE

THE OWNER:
(Name and address):

ILLEGIBLE

THE ARCHITECT:
(Name and address):

ILLEGIBLE

TABLE OF ARTICLES

  
1    GENERAL PROVISIONS

2    OWNER

3    CONTRACTOR

4    ADMINISTRATION OF THE CONTRACT

5    SUBCONTRACTORS

6    CONSTRUCTION BY OWNER OR BY OTHER CONTRACTORS

7    CHANGES IN THE WORK

8    TIME

9    PAYMENTS AND COMPLETION

10   PROTECTION OF PERSONS AND PROPERTY

11   INSURANCE AND BONDS

12   UNCOVERING AND CORRECTION OF WORK

13   MISCELLANEOUS PROVISIONS

14   TERMINATION OR SUSPENSION OF THE CONTRACT



ADDITIONS AND DELETIONS:

The author of this document has added information needed for its completion. The
author may also have revised the text of the original AIA standard form. An
Additions and Deletions Report that notes added information as well as revisions
to the standard from text is available from the author and should be reviewed.

This document has important legal consequences. Consultation with an attorney is
encouraged with respect to its completion or modification.

ELECTRONIC COPYING of any portion of this AIA(R) Document to another electronic
file is prohibited and constitutes a violation of copyright laws as set forth in
the footer of this document.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               1



INDEX

                             
ACCEPTANCE OF                   9.6.6, 9.9.3.
NONCONFORMING WORK              12.3
Acceptance of Work              9.6.6, 9.8.2,
                                9.9.3, 9.10.1,
                                9.10.3
ACCESS TO WORK                  3.16, 6.2.1,
                                12.1
Accident Prevention             4.6.6, 10
Acts and Omissions              3.2.1, 3.2.2,
                                3.3.2, 3.12.8,
                                3.18, 4.6.6,
                                4.6.2., 4.7.9,
                                8.3.1, 10.1.4,
                                10.2.5,
                                13.4.2, 13.7,
                                14.1
Addenda                         1.1.1, 3.11
ADDITIONAL COSTS, CLAIMS        4.7.6, 4.7.7,
FOR                             4.7.9, 6.1.1,
                                10.3
Additional Inspections and      4.6.10, 9.8.2,
Testing                         12.2.1, 13.5
ADDITIONAL TIME, CLAIMS         4.7.6, 4.7.8,
FOR                             4.7.9, 8.3.2,
                                10.3
ADMINISTRATION OF               3.3.3, 4, 9.4,
THE CONTRACT                    9.5
Advertisement or Invitation     1.1.1
to Bid
Aesthetic Effect                4.6.20, 4.9.1
ALLOWANCES                      3.8
All-risk Insurance              11.3.1.1
APPLICATIONS FOR PAYMENT        4.6.9, 7.3.7,
                                9.2, 9.3, 9.4,
                                9.5.1, 9.6.3,
                                9.8.3, 9.10.1,
                                9.10.3,
                                9.10.4,
                                11.1.3, 14.2.4
Approvals                       2.4, 3.3.3,
                                3.5, 3.10.3,
                                3.12.4
                                through
                                3.12.8,
                                3.18.3,
                                4.6.12, 9.3.2,
                                11.3.1.4,
                                13.4.2, 13.5
ARBITRATION                     4.5, 4.7.4,
                                4.9, 8.3.1,
                                10.1.2,
                                11.3.9,
                                11.3.10
ARCHITECT                       4.1
Architect, and Certificate      4.6.9
of Payment
Architect, Definition of        4.1.1
Architect, Extent of            2.4.1, 3.12.6,
Authority                       4.6.6, 4.7.2,
                                5.2, 6.3,
                                7.1.2, 7.2.1,
                                7.4, 9.2,
                                9.3.1, 9.4,
                                9.5, 9.6.3,
                                9.8.2, 9.8.3,
                                9.10.1,
                                9.10.3, 12.1,
                                12.2.1,
                                13.5.1,
                                13.5.2,
                                14.2.2, 14.2.4
Architect, Limitations of       3.3.3, 3.12.8,
Authority and                   3.12.11,
Responsibility                  4.6.5, 4.6.6,
                                4.6.10,
                                4.6.12,
                                4.6.17,
                                4.6.19,
                                4.6.20, 4.7.2,
                                5.2.1, 7.4,
                                9.6.4
Architect's Additional          2.4, 9.8.2,
Services and Expenses           11.3.1.1,
                                12.2.1,
                                12.2.4,
                                13.5.2,
                                13.5.3, 14.2.4
Architect's Administration      4.6, 4.7.6,
of the Contract                 4.7.7, 4.8,
                                9.4, 9.5
Architect's Approvals           2.4.1, 3.5.1,
                                3.10.3,
                                3.12.6,
                                3.12.8,
                                3.18.3, 4.6.12
Architect's Authority to        3.5.1, 4.6.10,
Reject Work                     12.1.2, 12.2.1
Architect's Copyright           1.3
Architect's Decisions           4.6.10,
                                4.6.12,
                                4.6.18,
                                4.6.19,
                                4.6.20, 4.7.2,
                                4.7.6, 4.8.1,
                                4.8.4, 4.9,
                                6.3, 8.1.3,
                                8.3.1, 9.2,
                                9.4, 9.5.1,
                                9.8.2, 9.9.1,
                                10.1.2,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               2



                             
                                13.5.2,
                                14.2.2, 14.2.4
Architect's Inspections         4.6.5, 4.6.16,
                                4.7.6, 9.4.3,
                                9.8.2, 9.9.2,
                                9.10.1, 13.5
Architect's Instructions        4.6.10,
                                4.6.12, 7.4.1,
                                9.4.3, 12.1,
                                13.5.2
Architect's Interpretations     4.6.18,
                                4.6.19, 4.7.7
Architect's On-Site             4.6.5, 4.6.9,
Observations                    4.7.6, 9.4.3,
                                9.5.1, 9.10.1,
                                13.5
Architect's Project             4.6.17
Representative
Architect's Relationship        1.1.2, 3.2.1,
with Contractor                 3.2.2, 3.3.3,
                                3.5.1, 3.7.3,
                                3.11, 3.12.8,
                                3.12.11, 3.16,
                                3.18, 4.6.6,
                                4.6.7, 4.6.10,
                                4.6.12,
                                4.6.19, 5.2,
                                6.2.2, 7.3.4,
                                9.8.2, 10.1.2,
                                10.1.4,
                                10.1.5,
                                11.3.7, 12.1,
                                13.5
Architect's Relationship        1.1.2, 2.4.1,
with Construction Manager       3.12.6,
                                3.12.8, 4.6.8,
                                4.6.10,
                                4.6.14,
                                4.6.16,
                                4.6.18, 6.3.1,
                                9.7.1, 9.8,
                                9.9.1, 9.9.2,
                                9.10.1,
                                9.10.2,
                                9.10.3,
                                12.2.4,
                                13.5.1,
                                13.5.2,
                                13.5.4, 14.2.4
Architect's Relationship        1.1.2, 4.6.6,
with Subcontractors             4.6.7, 4.6.10,
                                5.3.1,
                                9.6.3, 9.6.4,
                                11.3.7
Architect's Representations     9.4.3, 9.5.1,
                                9.10.1
Architect's Site Visits         4.6.5, 4.6.9,
                                4.6.16, 4.7.6,
                                9.4.3, 9.5.1,
                                9.8.2, 9.9.2,
                                9.10.1, 13.5
Asbestos                        10.1.2,
                                10.1.3, 10.1.4
Attorneys' Fees                 3.18.1,
                                9.10.2, 10.1.4
Award of Separate               6.1.1
Contracts
AWARD OF SUBCONTRACTS           5.2
AND OTHER CONTRACTS FOR
PORTIONS OF THE WORK
BASIC DEFINITIONS               1.1
Bidding Requirements            1.1.1, 1.1.7,
                                5.2.1, 11.4.1
BOILER AND MACHINERY            11.3.2
INSURANCE
Bonds, Lien                     9.10.2
Bonds, Performance and          7.3.6.4,
Payment                         9.10.3,
                                11.3.9, 11.4
Building Permit                 2.2.3, 3.7.1
CAPITALIZATION                  1.4
Certificate of Substantial      9.8.2
Completion
CERTIFICATES FOR PAYMENT        4.6.8, 4.6.9,
                                9.3.3, 9.4,
                                9.5, 9.6.1,
                                9.6.6, 9.7.1,
                                9.8.3, 9.10.1,
                                9.10.3, 13.7,
                                14.1.1.3,
                                14.2.4
Certificates of Inspection,     3.12.11,
Testing or Approval             13.5.4
Certificates of Insurance       9.3.2, 9.10.2,
                                11.1.3
CHANGE ORDERS                   1.1.1, 2.4.1,
                                3.8.2.4,
                                3.11.1,
                                4.6.13, 4.7.3,
                                5.2.3, 7.1,
                                7.2, 7.3.2,
                                8.3.1, 9.3.1.1,
                                9.10.3,
                                11.3.1.2,
                                11.3.4,
                                11.3.9, 12.1.2
Change Orders, Definition       7.2.1
of
CHANGES                         7.1
CHANGES IN THE                  3.11, 4.6.13,
WORK                            4.6.14, 7,
                                8.3.1, 9.3.1.1,
                                10.1.3
Claim, Definition of            4.7.1



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               3



                             
CLAIMS AND DISPUTES             4.7, 4.8, 4.9,
                                6.2.5, 8.3.2,
                                9.3.1.2, 9.3.3,
                                9.10.4, 10.1.4
CLAIMS AND TIMELY               4.9.6
ASSERTION OF CLAIMS
CLAIMS FOR ADDITIONAL           4.7.6, 4.7.7,
COST                            4.7.9, 6.1.1,
                                10.3
CLAIMS FOR ADDITIONAL           4.6.9, 4.7.6,
TIME                            4.7.8, 4.7.9,
                                8.3.2
CLAIMS FOR CONCEALED OR          4.7.6
UNKNOWN CONDITIONS
Claims for Damages              3.18, 4.7.9,
                                6.1.1, 6.2.5,
                                8.3.2, 9.5.1.2,
                                10.1.4
Claims Subject to               4.7.2, 4.8.4,
Arbitration                     4.6.1
CLEANING UP                     3.15, 6.3
COMMENCEMENT OF                 13.7
STATUTORY LIMITATION
PERIOD
Commencement of the             2.12, 2.2.1,
Work, Conditions Relating       3.2.1, 3.2.2,
to                              3.7.1, 3.10.1
                                3.12.6, 4.7.7,
                                5.2.1, 6.2.2,
                                8.1.2, 8.2.2,
                                9.2, 11.1.3,
                                11.3.6, 11.4.1
Commencement of the             8.1.2
Work Definition of
Communications, Owner to        2.2.6
Architect
Communications, Owner to        2.2.6
Construction Manager
Communications
Facilitating Contract
Administration                  3.9.1 4.6.7,
                                5.2.1
Completion, Conditions          3.11, 3.15,
Relating to                     4.6.5, 4.6.16,
                                4.7.2, 9.4.2,
                                9.8, 9.9.1,
                                9.10, 11.3.5,
                                12.2.2, 13.7.1
COMPLETION,                     9
PAYMENTS AND
COMPLETION, SUBSTANTIAL         4.6.16,
                                4.7.5.2, 8.1.1,
                                8.1.3, 8.2.3,
                                9.8, 9.9.1,
                                12.2.2, 13.7
Compliance with Laws            1.3, 3.6, 3.7,
                                3.13, 4.1.1,
                                10.2.2, 11.1,
                                11.3, 13.1,
                                13.5.1,
                                13.5.2, 13.6,
                                14.1.1,
                                14.2.1.3
Concealed or Unknown            4.7.6
Conditions
Conditions of the Contract      1.1.1, 1.1.7,
                                6.1.1
Consent, Written                1.3.1, 3.12.8,
                                3.14.2, 4.7.4,
                                4.9.5, 9.3.2,
                                9.8.2, 9.9.1,
                                9.10.2,
                                9.10.3, 10.12,
                                10.1.3,
                                11.3.1,
                                11.3.1.4,
                                11.3.11, 13.2,
                                13.4.2
CONSTRUCTION BY                 1.1.4, 6
OWNER OR BY OTHER
CONTRACTORS
Construction Change             7.3.1
Directive, Definition of
CONSTRUCTION CHANGE             1.1.1, 4.6.13,
DIRECTIVES                      7.1, 7.3,
                                9.3.1.1
CONSTRUCTION MANAGER            4.2
Construction Manager, and       2.2.3
Building Permits
Construction Manager,           4.7.2
Claims against
Construction Manager,           4.6.7
Communications through
Construction Manager, and       3.10.1, 3.10.2
Construction Schedule
Construction Manager,           4.2.1
Definition of
Construction Manager, and       3.11.1
Documents and Samples at
the Site
Construction Manager,           3.12.6,
Extent of Authority             3.12.8, 4.3,
                                4.6.3, 4.6.11,
                                7.1.2, 7.2.1,
                                7.3.1, 8.3.1,
                                9.2.1, 9.3.1,
                                9.4.1, 9.4.3,
                                9.8.2, 9.8.3,
                                9.9.1, 12.1,
                                12.2.1,
                                12.2.4,
                                14.2.2, 14.2.4
Construction Manager            4.6.6, 4.6.10,
Limitations of Authority        13.4.2



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               4



                             
and Responsibility
Construction Manager, and       3.10.3
Submittals
Construction Manager's          12.2.1, 12.2.4
Additional Services and
Expenses
Construction Manager's          4.6, 9.4, 9.5
Administration of the
Contract
Construction Manager's          2.4.1, 3.10.3
Approval
Construction Manager's          4.6.10, 12.2.1
Authority to Reject Work
Construction Manager's          7.3.6, 7.3.7,
Decisions                       7.3.8, 9.3.1,
                                9.4.1, 9.5.1
Construction Manager's          4.6.10, 9.4.3,
Inspections                     9.8.2, 9.9.2,
                                12.1.1
Construction Manager's          9.5.1
On-Site Observations
Construction Manager's          1.1.2, 4.6.8,
Relationship with Architect     4.6.10,
                                4.6.11,
                                4.6.14,
                                4.6.16,
                                4.6.18, 6.3.1,
                                9.2.1, 9.4.2,
                                9.4.3, 9.51,
                                9.6.1, 9.6.3,
                                9.8.2, 9.8.3,
                                9.9.1, 9.10.1,
                                9.10.2,
                                9.10.3,
                                11.1.3,
                                12.2.4,
                                13.5.1,
                                13.5.2,
                                13.5.4,
                                14.2.2, 14.2.4
Construction Manager's          3.2.1, 3.2.2
Relationship with               3.3.1, 3.3.3,
Contractor                      3.5.1, 3.7.3,
                                3.10.1,
                                3.10.2,
                                3.10.3,
                                3.11.1,
                                3.12.5,
                                3.12.6,
                                3.12.8,
                                3.12.9,
                                3.12.10,
                                3.12.11,
                                3.13.2,
                                3.14.2,
                                3.15.2,
                                3.16.1,
                                3.17.1,
                                3.18.1,
                                3.18.3, 4.6.3,
                                4.6.4, 4.6.6,
                                4.6.11, 5.2,
                                6.2.1, 6.2.2,
                                7.1.2, 7.2.1,
                                7.3.4, 7.3.6,
                                7.3.9, 8.3.1,
                                9.2.1, 9.3.1,
                                9.4.1, 9.4.2,
                                9.4.3, 9.7.1,
                                9.8.2, 9.9.1,
                                9.10.1,
                                9.10.2,
                                9.10.3,
                                10.1.1,
                                10.1.2,
                                10.1.5,
                                10.2.6,
                                11.3.7, 12.1,
                                13.5.1,
                                13.5.2,
                                13.5.3, 13.5.4
Construction Manager's          2.2.3, 4.6.1,
Relationship with Owner         4.6.2, 10.1.6
Construction Manager's
Relationship with Other
Contractors and Owner's         4.6.3
Own Forces
Construction Manager's          4.6.10, 5.3.1,
Relationship with               9.6.3, 9.6.4
Subcontractors
Construction Manager's          9.4.3, 9.5.1
Representations
Construction Manager's          9.4.4, 9.5.1
Site Visits
Construction Schedules,         3.10, 4.6.3,
Contractor's                    4.6.4
CONTINGENT ASSIGNMENT OF        5.4
SUBCONTRACTS
CONTINUING CONTRACT             4.7.4
PERFORMANCE
Contract, Definition of         1.1.2
CONTRACT,                       4.7.7, 5.4.1.1,
TERMINATION OR                  14
SUSPENSION OF THE
Contract Administration         3.3.3, 4, 9.4,
                                9.5
Contract Award and              3.7.1, 3.10,
Execution, Conditions           5.2, 9.2,
Relating to                     11.1.3,
                                11.3.6, 11.4.1
CONTRACT DOCUMENTS, THE         1.1, 1.2, 7
Contract Documents,             1.3, 2.2.5, 5.3
Copies Furnished and Use
of



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               5



                             
Contract Documents,             1.1.1
Definition of
Contract Performance            4.7.4, 4.9.3
During Arbitration
Contract Sum                    3.8, 4.7.6,
                                4.7.7, 4.8.4,
                                5.2.3, 7.2,
                                7.3, 9.1, 9.7,
                                11.3.1,
                                12.2.4, 12.3,
                                14.2.4
Contract Sum, Definition of     9.1.1
Contract Time                   4.7.6, 4.7.8.1,
                                4.8.4, 7.2.1.3,
                                7.3, 8.2.1,
                                8.3.1, 9.7,
                                12.1.1
Contract Time, Definition of    8.1.1
CONTRACTOR                      3
Contractor, Definition of       3.1.1, 6.1.2
Contractor's Bid                1.1.1
CONTRACTOR'S                    3.10
CONSTRUCTION SCHEDULES
Contractor's Employees          3.3.2, 3.4.2,
                                3.8.1, 3.9,
                                3.18, 4.6.6,
                                4.6.10, 8.1.2,
                                10.2, 10.3,
                                11.1.1,
                                14.2.1.1
CONTRACTOR'S LIABILITY          11.1, 11.3.1.5
INSURANCE
Contractor's Relationship       3.12.5,
with Other Contractors and      3.14.2, 4.6.3,
Owner's Own Forces              4.6.7, 12.2.5
Contractor's Relationship       1.2.4, 3.3.2,
with Subcontractors             3.18.1,
                                3.18.2, 5.2,
                                5.3, 5.4,
                                9.6.2, 11.3.7,
                                11.3.8,
                                14.2.1.2
Contractor's Relationship       1.1.2, 3.2.1,
with the Architect              3.2.2, 3.3.3,
                                3.5.1, 3.7.3,
                                3.10.1,
                                3.10.3,
                                3.11.1,
                                3.12.6,
                                3.12.8,
                                3.12.9,
                                3.16.1, 3.18,
                                4.6.6, 4.6.7,
                                4.6.10,
                                4.6.12,
                                4.6.19, 5.2,
                                6.2.2, 7.3.4,
                                9.2, 9.3.1,
                                9.8.2,
                                9.10.3, 10.1.2,
                                10.1.5,
                                10.2.6,
                                11.3.7, 12.1,
                                13.5
Contractor's Relationship       1.1.2, 3.2.1,
with the Construction           3.2.2, 3.3.1,
Manager                         3.3.3, 3.5.1,
                                3.7.3, 3.7.4,
                                3.10.1,
                                3.10.2,
                                3.10.3,
                                3.11.1,
                                3.12.5,
                                3.12.6,
                                3.12.8,
                                3.12.9,
                                3.12.11,
                                3.13.2,
                                3.14.2,
                                3.15.2,
                                3.16.1,
                                3.17.1,
                                3.18.1,
                                3.18.3, 4.6.3,
4.6.4, 4.6.6, 5.2, 6.2.1,
6.2.2, 7.1.2, 7.2.1, 7.3.4,
7.3.6, 7.3.9, 8.3.1, 9.2.1,
9.3.1, 9.4.1, 9.4.2, 9.4.3,
9.7.1, 9.8.2, 9.9.1,
9.10.1, 9.10.2, 9.10.3,
10.1.1, 10.1.2, 10.1.5,
10.2.6, 11.3.7, 12.1, 13.5.1,
13.5.2, 13.5.3, 13.5.4
Contractor's                    1.2.2, 3.5.1,
Representations                 3.12.7, 6.2.2,
                                8.2.1, 9.3.3
Contractor's Responsibility
for Those Performing the Work   3.3.2, 3.18,
                                4.6.6, 10
Contractor's Review of          1.2.2, 3.2,
Contract Documents              3.7.3
Contractor's Right to Stop      9.7
the Work
Contractor's Right to           14.1
Terminate the Contract
Contractor's Submittals         3.10, 3.11,
                                3.12, 4.6.12,
                                5.2.1, 5.2.3,
                                7.3.6, 9.2,
                                9.3.1, 9.8.2,
                                9.9.1, 9.10.2,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               6



                             
                                9.10.3,
                                10.1.2, 11.4.2
Contractor's Superintendent     3.9, 10.2.6
Contractor's Supervision        1.2.4, 3.3,
and Construction                3.4, 4.6.6,
Procedures                      8.2.2, 8.2.3,
                                10
Contractual Liability           11.1.1.7,
Insurance                       11.2.1,
                                11.3.1.5
Coordination and                1.2.2, 1.2.4,
Correlation                     3.3.1, 3.10,
                                3.12.7, 6.2.1
Copies Furnished of             1.3, 2.2.5,
Drawings and                    3.11
Specifications
Correction of Work              2.3, 2.4,
                                3.2.1, 4.6.1,
                                9.8.2, 9.9.1,
                                12.1.2, 12.2,
                                13.7.1.3
Cost, Definition of             7.3.6
Costs                           2.4, 3.2.1,
                                3.7.4, 3.8.2,
                                3.15.2., 4.7.6,
                                4.7.7, 4.7.8.1
                                5.2.3, 6.1.1,
                                6.2.3, 6.3.1,
                                7.3.3.3, 7.3.6,
                                7.3.7, 9.7,
                                9.8.2, 9.10.2,
                                11.3.1.2, 11.3.
                                1.3, 11.3.4,
                                11.3.9, 12.1,
                                12.2.1,
                                12.2.4,
                                12.2.5, 13.5,
                                14
CUTTING AND PATCHING            3.14, 6.2.6
Damage to Construction of
Owner or Other
Contractors                     3.14.2, 6.2.4,
                                9.5.1.5,
                                10.2.1.2,
                                10.2.5, 10.3,
                                11.1, 11.3,
                                12.2.5
Damage to the Work              3.14.2, 9.9.1,
                                10.2.1.2,
                                10.2.5, 10.3,
                                11.3
Damages, Claims for             3.18, 4.6.9,
                                6.1.1, 6.2.5,
                                8.3.2, 9.5.1.2,
                                10.1.4
Damages for Delay               6.1.1, 8.3.3,
                                9.5.1.6, 9.7
Date of Commencement of         8.1.2
the Work, Definition of
Date of Substantial             8.1.3
Completion, Definition of
Day, Definition of              8.1.4
Decisions of the Architect      4.6, 4.7, 6.3,
                                8.1.3, 8.3.1,
                                9.2, 9.4,
                                9.5.1, 9.8.2,
                                9.9.1, 10.1.2,
                                13.5.2,
                                14.2.2, 14.2.4
Decisions of the                4.3, 7.3.6,
Construction Manager            7.3.7, 7.3.8,
                                9.3.1, 9.4.1,
                                9.4.3, 9.5.1
DECISIONS TO WITHHOLD           9.5, 9.7,
CERTIFICATION                   14.1.1.3
Defective or
Nonconforming Work,
Acceptance,
Rejection and Correction of     2.3, 2.4,
                                3.5.1, 4.6.1,
                                4.6.10, 4.7.5,
                                9.5, 9.8.2,
                                9.9.1, 10.2.5,
                                12, 13.7.1.3
Defective Work, Definition      3.5.1
of
Definitions                     1.1, 2.1.1,
                                3.1, 3.5.1,
                                3.12.1,
                                3.12.2,
                                3.12.3, 4.1.1,
                                4.2.1, 4.7.1,
                                5.1, 6.1.1,
                                7.2.1, 7.3.1,
                                7.3.6, 8.1,
                                9.1, 9.8.1
DELAYS AND EXTENSIONS OF        4.7.1, 4.7.8.1,
TIME                            4.7.8.2, 6.1.1,
                                6.2.3, 7.2.1,
                                7.3.1.3, 7.3.4,
                                7.3.5, 7.3.8,
                                7.3.9, 8.1.1,
                                8.3, 10.3.1,
                                14.1.1.4
Disputes                        4.7, 4.8, 4.9,
                                6.2.5, 6.3,
                                7.3.8, 9.3.1.2
Documents and Samples at        3.11
the Site
Drawings, Definition of         1.1.5
Drawings and
Specifications, Use and
Ownership of                    1.1.1, 1.3,
                                2.2.5, 3.11,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               7



                             
                                5.3
Duty to Review Contract         3.2
Documents and Field
Conditions
Effective Date of Insurance     8.2.2, 11.1.2
EMERGENCIES                     4.7.7, 10.3
Employees, Contractor's         3.3.2., 3.4.2,
                                3.8.1, 3.9,
                                3.18.1,
                                3.18.2, 4.6.6,
                                4.6.10, 8.1.2,
                                10.2, 10.3,
                                11.1.1,
                                14.2.1.1
Equipment, Labor,               1.1.3, 1.1.6,
Materials and                   3.4, 3.5.1,
                                3.8.2, 3.12.2,
                                3.12.3,
                                3.12.7,
                                3.12.11, 3.13,
                                3.15.1,
                                4.6.12, 6.2.1,
                                7.3.6, 9.3.2,
                                9.3.3, 11.3,
                                12.2.4,
                                14.1.2,
                                14.2.1, 14.2.2
Execution and Progress of       1.2.3, 3.4.1,
the Work                        3.5.1, 4.6.5,
                                4.6.6, 4.7.4,
                                4.7.8, 6.2.2,
                                7.1.3, 8.2,
                                8.3, 9.5,
                                9.9.1, 10.2.3,
                                10.2.4
EXECUTION, CORRELATION          1.2, 3.7.1
AND INTENT OF THE
CONTRACT DOCUMENTS
Extensions of Time              4.7.1, 4.7.8,
                                7.2.1.3, 8.3,
                                10.3.1
Failure of Payment by           9.5.1.3,
Contractor                      14.2.1.2
Failure of Payment by           4.7.7, 9.7,
Owner                           14.1.3
Faulty Work (See
Defective or
Nonconforming Work)
FINAL COMPLETION AND            4.6.1, 4.6.16,
FINAL PAYMENT                   4.7.2, 4.7.5,
                                9.10, 11.1.2,
                                11.1.3,
                                11.3.5,
                                12.3.1, 13.7
Financial Arrangements,         2.2.1
Owner's
Fire and Extended               11.3.1.1,
Coverage Insurance              11.3.5, 11.3.7
GENERAL                         1
PROVISIONS
GOVERNING LAW                   13.1
Guarantees (See Warranty
and Warranties)
Hazardous Materials             10.1, 10.2.4
Identification of Contract      1.2.1
Documents
Identification of               5.2.1
Subcontractors and
Suppliers
INDEMNIFICATION                 3.17, 3.18,
                                9.10.2,
                                10.1.4,
                                11.3.1.2,
                                11.3.7
INFORMATION AND SERVICES        2.1.2, 2.2,
REQUIRED OF THE OWNER           4.7.4, 6.2.6,
                                9.3.2, 9.6.1,
                                9.6.4, 9.8.3,
                                9.9.2, 9.10.3,
                                10.1.4, 11.2,
                                11.3, 13.5.1,
                                13.5.2
INJURY OR DAMAGE TO             4.7.9
PERSON OR PROPERTY
Inspections                     3.3.3, 3.3.4,
                                3.7.1, 4.6.5,
                                4.6.6, 4.6.16,
                                4.7.6, 9.4.3,
                                9.8.2, 9.9.2,
                                9.10.1,
                                12.1.1, 13.5
Instructions to Bidders         1.1.1
Instructions to the             3.8.1, 4.6.13,
Contractor                      5.2.1, 7, 12.1,
                                13.5.2
Insurance                       4.7.9, 6.1.1,
                                7.3.6.4, 9.3.2,
                                9.8.2, 9.9.1,
                                9.10.2, 11
INSURANCE, BOILER AND           11.3.2
MACHINERY
INSURANCE, CONTRACTOR'S         11.1,
LIABILITY                       11.3.1.13
Insurance, Effective Date       8.2.2, 11.1.2
of
INSURANCE, LOSS OF USE          11.3.3
INSURANCE, OWNER'S              11.2, 11.3.1.3
LIABILITY
INSURANCE, PROPERTY             10.2.5, 11.3
Insurance, Stored Materials     9.3.2,
                                11.3.1.4
INSURANCE AND                   11
BONDS
Insurance Companies,            9.9.1, 11.3.11



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               8



                             
Consent to Partial
Occupancy
Insurance Companies,            11.3.10
Settlement with
Intent of the Contract          1.2.3, 3.12.4,
Documents                       4.6.10,
                                4.6.12,
                                4.6.19,
                                4.6.20, 7.4
INTEREST                        13.6
INTERPRETATION                  1.2.5, 1.4,
                                1.5, 4.1.1,
                                4.7.1, 5.1,
                                6.1.2, 8.1.4
Interpretations, Written        4.6.18,
                                4.6.19, 4.7.7
Joinder and Consolidation       4.9.5
of Claims Required
JUDGMENT ON FINAL               4.9.1, 4.9.4.1,
AWARD                           4.9.7
LABOR AND MATERIALS,            1.1.3, 1.1.6,
EQUIPMENT                       3.4, 3.5.1,
                                3.8.2, 3.12.2,
                                3.12.3,
                                3.12.7,
                                3.12.11, 3.13,
                                3.15.1,
                                4.6.12, 6.2.1,
                                7.3.6, 9.3.2,
                                9.3.3, 12.2.4,
                                14.1.2,
                                14.2.1, 14.2.2
Labor Disputes                  8.3.1
Laws and Regulations            1.3, 3.6, 3.7,
                                3.13, 4.1.1,
                                4.9.5, 4.9.7,
                                9.9.1, 10.2.2,
                                11.1, 11.3,
                                13.1, 13.4.1,
                                13.5.1,
                                13.5.2, 13.6
Liens                           2.1.2, 4.7.2,
                                4.7.5.1, 8.2.2,
                                9.3.3, 9.10.2
LIMITATION ON                   4.9.5
CONSOLIDATION OR JOINDER
Limitations, Statutes of        4.9.4.2,
                                12.2.6, 13.7
Limitations of Authority        3.3.1, 4.6.12,
                                4.6.17, 5.2.2,
                                5.2.4, 7.4,
                                11.3.10
Limitations of Liability        2.3, 3.2.1,
                                3.5.1, 3.7.3,
                                3.12.8,
                                3.12.11, 3.17,
                                3.18, 4.6.10,
                                4.6.12,
                                4.6.19, 6.2.2,
                                9.4.3, 9.6.4,
                                9.10.4,
                                10.1.4,
                                10.2.5,
                                11.1.2,
                                11.2.1,
                                11.3.7,
                                13.4.2, 13.5.2
Limitations of Time,            2.2.1, 2.2.4,
General                         3.2.1, 3.7.3,
                                3.8.2, 3.10,
                                3.12.5,
                                3.15.1, 4.6.1,
                                4.6.12,
                                4.6.18, 4.7.2,
                                4.7.3, 4.7.4,
                                4.7.6, 4.7.9,
                                4.6.4.2, 5.2.1,
                                5.2.3, 6.2.4,
                                7.3.4, 7.4,
                                8.2, 9.2, 9.5,
                                9.6.2, 9.8,
                                9.10, 11.1.3,
                                11.3.1,
                                11.3.2,
                                11.3.5,
                                11.3.6,
                                12.2.1,
                                12.2.2, 13.5,
                                13.7, 14.3
Limitation of Time,             2.1.2, 2.2.1,
Specific                        2.4, 3.10,
                                3.11, 3.15.1,
                                4.6.1, 4.6.1.8,
                                4.7, 4.8, 4.9,
                                5.3, 5.4,
                                7.3.6, 7.3.9,
                                8.2, 9.3.1,
                                9.3.3, 9.4.1,
                                9.6.1, 9.7,
                                9.8.2, 9.10.2,
                                11.1.3,
                                11.3.6,
                                11.3.10,
                                11.3.11,
                                12.2.2,
                                12.2.4,
                                12.2.6, 13.7,
                                14.1, 14.2.2
LOSS OF USE INSURANCE           11.3.3
Material Suppliers              1.3.1, 3.12.1,
                                4.6.7, 4.6.10,
                                5.2.1, 9.3.1,
                                9.3.1.2, 9.3.3,
                                9.4.3, 9.6.5,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                               9



                             
                                9.10.4
Materials, Hazardous            10.1, 10.2.4
Materials, Labor,               1.1.3, 1.1.6,
Equipment and                   3.4.1, 3.5.1,
                                3.8.2, 3.12.2,
                                3.12.3,
                                3.12.7,
                                3.12.11, 3.13,
                                3.15.1,
                                4.6.12, 6.2.1,
                                7.3.6, 9.3.2,
                                9.3.3, 12.2.4,
                                14.1.2,
                                14.2.1, 14.2.2
Means, Methods,
Techniques, Sequences and
Procedures of Construction      3.3.1, 4.6.6,
                                4.6.12, 9.4.3
MINOR CHANGES IN THE            1.1.1, 4.6.13,
WORK                            4.7.7, 7.1, 7.4
MISCELLANEOUS                   13
PROVISIONS
Modifications, Definition       1.1.1
of
Modifications to the            1.1.1, 1.1.2,
Contract                        3.7.3, 3.11,
                                4.1.2, 4.6.1,
                                5.2.3, 7,
                                8.3.1, 9.7
MUTUAL RESPONSIBILITY           6.2
NONCONFORMING WORK,             12.3
ACCEPTANCE OF
Nonconforming Work,             2.3.1, 4.7.5.2,
Rejection and Correction of     9.5.2, 9.8.2,
                                12, 13.7.1.3
Notice                          2.3, 2.4,
                                3.2.1, 3.2.2,
                                3.7.3, 3.7.4,
                                3.9, 3.12.8,
                                3.12.9, 3.17,
                                4.7, 4.8.4,
                                4.9, 5.2.1,
                                5.3, 5.4.1.1,
                                8.2.2, 9.4.1,
                                9.5.1, 9.7,
                                9.10, 10.1.2,
                                10.2.6,
                                11.1.3, 11.3,
                                12.2.2,
                                12.2.4, 13.3,
                                13.5.1,
                                13.5.2, 14,
NOTICE, WRITTEN                 2.3, 2.4, 3.9,
                                3.12.8,
                                3.12.9, 4.7,
                                4.8.4, 4.9,
                                5.2.1, 5.3,
                                5.4.1.1, 8.2.2,
                                9.4.1, 9.5.1,
                                9.7, 9.10,
                                10.1.2,
                                10.2.6,
                                11.1.3, 11.3,
                                12.2.2,
                                12.2.4, 13.3,
                                13.5.2, 14
Notice of Testing and           13.5.1, 13.5.2
Inspections
Notice to Proceed               8.2.2
NOTICES, PERMITS, FEES          2.2.3, 3.7,
AND                             3.13, 7.3.6.4,
                                10.2.2
Observations, Architect's       4.6.5, 4.6.9,
On-Site                         4.6.10, 4.7.6,
                                9.4.4, 9.5.1,
                                9.10.1,
                                12.1.1, 13.5
Observations, Construction      9.4.4, 12.1.1
Manager's On-Site
Observations, Contractor's      1.2.2, 3.2.2
Occupancy                       9.6.6, 9.8.1,
                                9.9, 11.3.11
On-Site Inspections by the      4.6.5, 4.6.16,
Architect                       4.7.6, 9.4.4,
                                9.8.2, 9.9.2,
                                9.10.1
On-Site Observations by         4.6.5, 4.6.9,
the Architect                   4.7.6, 9.4.4,
                                9.5.1, 9.10.1,
                                13.5
On-Site Observations by         9.4.4, 9.5.1
the Construction Manager
Orders, Written                 2.3, 3.9,
                                4.7.7, 7,
                                8.2.2, 11.3.9,
                                12.1, 12.2,
                                13.5.2, 14.3.1
Other Contracts and             1.1.4, 3.14.2,
Contractors                     4.6.7, 4.9.5,
                                6, 11.3.7,
                                12.12, 12.2.5
OWNER                           2
Owner, Definition of            2.1
OWNER, INFORMATION AND          2.1.2, 2.2,
SERVICES REQUIRED OF THE        4.6.2, 4.6.4,
                                6.9, 10.1.4,
                                10.1.6, 11.2,
                                11.3, 13.5.1,
                                14.1.1.5,
                                14.1.3
Owner's Authority               3.8.1, 5.2.1,
                                5.2.4, 5.4.1,
                                7.3.1, 8.2.2,
                                9.3.1, 9.3.2,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              10



                             
                                11.4.1,
                                12.2.4,
                                13.5.2, 14.2,
                                14.3.1
Owner's Financial               2.2.1,
Capability                      14.1.1.5
OWNER'S LIABILITY               11.2
INSURANCE
Owner's Loss of Use             11.3.3
Insurance
Owner's Relationship with       1.1.2, 5.2.1,
Subcontractors                  5.4.1, 9.6.4
OWNER'S RIGHT TO CARRY          2.4, 12.2.4,
OUT THE WORK                    14.2.2.2
OWNER'S RIGHT TO CLEAN          6.3
UP
OWNER'S RIGHT TO                6.1
PERFORM CONSTRUCTION
WITH OWN FORCES AND TO
AWARD OTHER CONTRACTS
OWNER'S RIGHT TO STOP THE       2.3, 4.7.7
WORK
Owner's Right to Suspend        14.3
the Work
Owner's Right to Terminate      14.2
the Contract
OWNERSHIP AND USE OF            1.1.1, 1.3,
ARCHITECT'S DRAWINGS,           2.2.5, 5.3
SPECIFICATIONS AND OTHER
DOCUMENTS
PARTIAL OCCUPANCY OR USE        9.6.6, 9.9,
                                11.3.11
PATCHING, CUTTING AND           3.14, 6.2.6
PATENTS, ROYALTIES AND          3.17
PAYMENT, APPLICATIONS           4.6.9, 9.2,
FOR                             9.3, 9.4,
                                9.5.1, 9.8.3,
                                9.10.1,
                                9.10.3,
                                9.10.4, 14.2.4
PAYMENT, CERTIFICATES FOR       4.6.9, 4.6.16,
                                9.3.3, 9.4,
                                9.5, 9.6.1,
                                9.6.6, 9.7.1,
                                9.8.3, 9.10.1,
                                9.10.3, 13.7,
                                14.1.1.3,
                                14.2.4
PAYMENT, FAILURE OF             4.7.7, 9.5.1.3,
                                9.7, 9.10.2,
                                14.1.1.3,
                                14.2.1.2
PAYMENT, FINAL                  4.6.1, 4.6.16,
                                4.7.2, 4.7.5,
                                9.10, 11.1.2.,
                                11.1.3,
                                11.3.5, 12.3.1
PAYMENT BOND,                   7.3.6.4,
PERFORMANCE BOND AND            9.10.3,
                                11.3.9, 11.4
PAYMENTS, PROGRESS              4.7.4, 9.3,
                                9.6, 9.8.3,
                                9.10.3, 13.6,
                                14.2.3
PAYMENTS AND                    9, 14
COMPLETION
Payments to                     5.4.2, 9.5.1.3,
Subcontractors                  9.6.2, 9.6.3,
                                9.6.4, 11.3.8,
                                14.2.1.2
PCB                             10.1.2,
                                10.1.3, 10.1.4
Performance Bond and            7.3.6.4,
Payment Bond                    9.10.3,
                                11.3.9, 11.4
PERMITS, FEES AND NOTICES       2.2.3, 3.7,
                                3.13, 7.3.6.4,
                                10.2.2,
PERSONS AND                     10
PROPERTY,
PROTECTION OF
Polychlorinated Biphenyl        10.1.2,
                                10.1.3, 10.1.4
Product Data, Definition of     3.12.2
PRODUCT DATA AND                3.11, 3.12,
SAMPLES, SHOP DRAWINGS          4.2.7
PROGRESS AND COMPLETION         4.6.5, 4.7.4,
                                8.2
PROGRESS PAYMENTS               4.7.4, 9.3,
                                9.6, 9.8.3,
                                9.10.3, 13.6,
                                14.2.3
PROJECT, DEFINITION OF THE      1.1.4
PROJECT MANUAL,                 1.1.7
DEFINITION OF THE
Project Manuals                 2.2.5
Project Representatives         4.6.17
PROPERTY INSURANCE              10.2.5, 11.3
PROTECTION OF                   10
PERSONS AND
PROPERTY
Regulations and Laws            1.3, 3.6, 3.7,
                                3.13, 4.1.1,
                                4.9.7, 10.2.2,
                                11.1, 11.3,
                                13.1, 13.4,
                                13.5.1,
                                13.5.2, 13.6,
                                14
Rejection of Work               3.5.1, 4.6.10,
                                12.2.
Releases of Waivers and         9.10.2
Liens
Representations                 1.2.2, 3.5.1,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              11



                             
                                3.12.7, 6.2.2,
                                8.2.1, 9.3.3,
                                9.4.3, 9.5.1,
                                9.8.2, 9.10.1
Representatives                 2.1.1, 3.1.1,
                                3.9, 4.1.1,
                                4.6.1, 4.6.17,
                                5.1.1, 5.1.2,
                                13.2.1
RESOLUTION OF CLAIMS AND        4.8, 4.9
DISPUTES
Responsibility for Those        3.3.2, 4.6.6,
Performing the Work             6.2., 10
Retainage                       9.3.1, 9.6.2,
                                9.8.3, 9.9.1,
                                9.10.2, 9.10.3
REVIEW OF CONTRACT              1.2.2, 3.2,
DOCUMENTS AND FIELD             3.7.3, 3.12.7
CONDITIONS BY CONTRACTOR
Review of Contractor's
Submittals by
Owner, Construction             3.10.1,
Manager and Architect           3.10.3, 3.11,
                                3.12, 4.6.12.
                                4.6.16, 5.2.1,
                                5.2.3, 9.2,
                                9.8.2
Review of Shop Drawings,        3.12.5
Product Data and Samples
by Contractor
RIGHTS AND REMEDIES             1.1.2, 2.3,
                                2.4, 3.5.1,
                                3.15.2,
                                4.6.10, 4.7.6,
                                4.9, 5.3, 6.1,
                                6.3, 7.3.1,
                                8.3.1, 9.5.1,
                                9.7, 10.2.5,
                                10.3, 12.2.2,
                                12.2.4, 13.4,
                                14
ROYALTIES AND PATENTS           3.17
RULES AND NOTICES FOR           4.9.2
ARBITRATION
SAFETY OF PERSONS AND           10.2
PROPERTY
SAFETY PRECAUTIONS AND          4.6.6, 4.6.12,
PROGRAMS                        10.1
Samples, Definition of          3.12.3
SAMPLES, SHOP DRAWINGS,         3.11, 3.12,
PRODUCT DATA AND                4.6.12
SAMPLES AT THE SITE,            3.11
DOCUMENTS AND
SCHEDULE OF VALUES              9.2, 9.3.1
Schedules, Construction         3.10
Separate Contracts and          1.1.4
Contractors
Shop Drawings, Definition       3.12.1
of
SHOP DRAWINGS, PRODUCT          3.11, 3.12,
DATA AND SAMPLES                4.6.11,
                                4.6.12, 4.6.15
Site, Use of                    3.13, 6.1.1,
                                6.2.1
Site Inspections                1.2.2, 3.3.4,
                                4.6.5, 4.6.16,
                                4.7.6, 9.8.2,
                                9.10.1, 13.5
Site Visits, Architect's        4.6.5, 4.6.9,
                                4.7.6, 9.4,
                                9.5.1, 9.8.2,
                                9.9.2, 9.10.1,
                                13.5
Special Inspections and         4.6.10,
Testing                         12.2.1, 13.5
SPECIFICATIONS, DEFINITION      1.1.6
OF THE
SPECIFICATIONS, THE             1.1.1, 1.1.6,
                                1.1.7, 1.2.4,
                                1.3, 3.11
Statute of Limitations          4.9.4.2,
                                12.2.6, 13.7
Stopping the Work               2.3, 4.7.7,
                                9.7, 10.1.2,
                                10.3, 14.1
Stored Materials                6.2.1, 9.3.2,
                                10.2.1.2,
                                11.3, 1.4,
                                12.2.4
Subcontractor, Definition       5.1.1
of
SUBCONTRACTORS                  5
Subcontractors, Work by         1.2.4, 3.3.2,
                                3.12.1, 4.6.6,
                                4.6.10, 5.3,
                                5.4
SUBCONTRACTUAL RELATIONS        5.3, 5.4,
                                9.3.1.2, 9.6.2,
                                9.6.3, 9.6.4,
                                10.2.1,
                                11.3.7,
                                11.3.8,
                                14.1.1,
                                14.2.1.2,
                                14.1.3
Submittals                      1.3, 3.2.3,
                                3.10, 3.11,
                                3.12, 4.6.12
                                5.2.1, 5.2.3,
                                7.3.6, 9.2,
                                9.3.1, 9.8.2,
                                9.9.1, 9.10.2,
                                9.10.3, 11.1.3
SUBROGATION, WAIVERS OF         6.1.1, 11.3.5,



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              12



                             
                                11.3.7
SUBSTANTIAL COMPLETION          4.6.16, 8.1.1,
                                8.1.3, 8.2.3,
                                9.8, 9.9.1,
                                12.2.1,
                                12.2.2, 13.7
Substantial Completion,         9.8.1
Definition of
Substitution of                 5.2.3, 5.2.4
Subcontractors
Substitution of Architect       4.4
Substitution of                 4.4
Construction Manager
Substitutions of Materials      3.5.1
Sub-subcontractor,              5.1.2
Definition of
Subsurface Conditions           4.7.6
SUCCESSORS AND ASSIGNS          13.2
SUPERINTENDENT                  3.9, 10.2.6
SUPERVISION AND                 1.2.4, 3.3,
CONSTRUCTION PROCEDURES         3.4, 4.6.6,
                                4.7.4, 6.2.4,
                                7.1.3, 7.3.4,
                                8.2, 8.3.1, 10,
                                12, 14
Surety                          4.8.1, 4.8.4,
                                5.4.1.2,
                                9.10.2,
                                9.10.3, 14.2.2
Surety, Consent of              9.10.2, 9.10.3
Surveys                         2.2.2, 3.18.3
SUSPENSION BY THE OWNER         14.3
FOR CONVENIENCE
Suspension of the Work          4.7.7, 5.4.2,
                                14.1.1.4, 14.3
Suspension or Termination       4.7.7, 5.4.1.1,
of the Contract                 14
TAXES                           3.6, 7.3.6.4
TERMINATION BY THE              14.1
CONTRACTOR
TERMINATION BY THE              5.4.1.1, 14.2
OWNER FOR CAUSE
Termination of the              4.4
Architect
Termination of the              4.4
Construction Manager
Termination of the              14.2.2
Contractor
TERMINATION OR                  14
SUSPENSION OF THE
CONTRACT
TESTS AND INSPECTIONS           3.3.3, 4.6.10,
                                4.6.16, 9.4.3,
                                12.2.1, 13.5
TIME                            8
TIME, DELAYS AND                4.7.8, 7.2.1,
EXTENSIONS OF                   8.3
Time Limits, Specific           2.1.2, 2.2.1,
                                2.4, 3.10,
                                4.6.18, 4.7,
                                4.8.1, 4.8.3,
                                4.8.4, 4.9.1,
                                4.9.4.1,
                                4.9.4.2, 5.3,
                                5.4, 7.3.5,
                                7.3.9, 8.2,
                                9.2, 9.3.1,
                                9.3.3, 9.4.1,
                                9.6.1, 9.7,
                                9.8.2, 9.10.2,
                                11.1.3,
                                11.3.6,
                                11.3.10,
                                12.2.2,
                                12.2.4,
                                12.2.6, 13.7,
                                14
TIME LIMITS ON CLAIMS           4.7.2, 4.7.3,
                                4. 7.6, 4.7.9.
                                4.8, 4.9
Title to Work                   9.3.2, 9.3.3
UNCOVERING AND                  12
CORRECTION OF
WORK
UNCOVERING OF WORK              12.1
Unforeseen Conditions           4.7.6, 8.3.1,
                                10.1
Unit Prices                     7.1.4, 7.3.3.2,
Use of Documents                1.1.1, 1.3,
                                2.2.5, 3.12.7,
                                5.3
USE OF SITE                     3.13, 6.1.1,
                                6.2.1
VALUES, SCHEDULE OF             9.2, 9.3.1
WAIVER OF CLAIMS: FINAL         4.7 5, 4.9.1,
PAYMENT                         9.10.3
Waiver of Claims by the         13.4.2
Architect
Waiver of Claims by the         9.10.4,
Contractor                      11.3.7, 13.4.2
Waiver of Claims by the         4.7.5, 4.9.1,
Owner                           9.9.3, 9.10.3,
                                11.3.3,
                                11.3.5,
                                11.3.7, 13.4.2
Waiver of Liens                 9.10.2
WAIVERS OF SUBROGATION          6.1.1, 11.3.5,
                                11.3.7
WARRANTY AND                    3.5, 4.6.16,
WARRANTIES                      4.7.5, 9.3.3,
                                9.8.2, 9.9.1,
                                12.2.2,
                                13.7.1.3



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              13



                             
Weather Delays                  4.7.8.2
WHEN ARBITRATION MAY            4.9.4
BE DEMANDED
Work, Definition of             1.1.3
WRITTEN CONSENT                 1.3.1, 3.12.8,
                                3.14.2, 4.7.4,
                                4.9.5, 9.3.2,
                                9.8.2, 9.9.1,
                                9.10.2,
                                9.10.3,
                                10.1.2,
                                10.1.3,
                                11.3.1,
                                11.3.1.4,
                                11.3.11, 13.2,
                                13.4.2
Written Interpretations         4.6.18,
                                4.6.19, 4.7.7
Written Notice                  2.3, 2.4, 3.9,
                                3.12.8,
                                3.12.9, 4.7.1,
                                4.7.6, 4.7.9,
                                4.8.4, 4.9.4.1,
                                5.2.1, 5.3,
                                5.4.1.1, 8.2.2,
                                9.4, 9.5.1,
                                9.7, 9.10,
                                10.1.2,
                                10.2.6,
                                11.1.3, 11.3,
                                12.2.2,
                                12.2.4, 13.3,
                                13.5.2, 14
Written Orders                  2.3, 3.9,
                                4.7.7, 8.2.2,
                                11.3.9, 12.1,
                                12.2, 13.5.2,
                                14.3.1



AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              14



ARTICLE 1 GENERAL PROVISIONS

SECTION 1.1 BASIC DEFINITIONS

SECTION 1.1.1 THE CONTRACT DOCUMENTS

The Contract Documents consists of the Agreement between Owner and Contractor
(hereinafter the Agreement), Conditions of the Contract (General, Supplementary
and other Conditions), Drawings, Specifications, addenda issued prior to
execution of the Contract, other documents listed in the Agreement and
Modifications issued after execution of the Contract. A Modification is (1) a
written amendment to the Contract signed by both parties, (2) a Change Order,
(3) a Construction Change Directive or (4) a written order for a minor change in
the Work issued by the Architect. Unless specifically enumerated in the
Agreement, the Contract Documents do not include other documents such as bidding
requirements (advertisement or invitation to bid, Instructions to Bidders,
sample forms, the Contractor's bid or portions of addenda relating to bidding
requirements).

SECTION 1.1.2 THE CONTRACT

The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be amended or modified only by a Modification. The
Contract Documents shall not be construed to create a contractual relationship
of any kind (1) between the Architect and Contractor, (2) between the
Construction Manager and Contractor, (3) between the Architect and Construction
Manager, (4) between the Owner and a Subcontractor or Sub-subcontractor or (5)
between any persons or entities other than the Owner and Contractor. The
Construction Manager and Architect shall, however, be entitled to performmance
and enforcement of obligations under the Contract intended to facilitate
performance of their duties.

SECTION 1.1.3 THE WORK

The term "Work" means the construction and services required by the Contract
Documents, whether completed or partially completed, and includes all other
labor, materials, equipment and services provided or to be provided by the
Contractor to fulfill the Contractor's obligations. The Work may constitute the
whole or a part of the Project.

SECTION 1.1.4 THE PROJECT

The Project is the total construction of which the Work performed under the
Contract Documents may be the whole or a part and which may include construction
by other Contractors and by the Owner's own forces including persons or entities
under separate contracts not administered by the Construction Manager.

SECTION 1.1.5 THE DRAWINGS

The Drawings are the graphic and pictorial portions of the Contract Documents,
wherever located and whenever issued, showing the design, location and
dimensions of the Work, generally including plans, elevations, sections,
details, schedules and diagrams.

SECTION 1.1.6 THE SPECIFICATIONS

The Specifications are that portion of the Contract Documents consisting of the
written requirements for materials, equipment, construction system, standards
and workmanship for the Work, and performance of related services.

SECTION 1.1.7 THE PROJECT MANUAL

The Project manual is the volume usually assembled for the Work which may
include the bidding requirements, sample forms, Conditions of the Contract and
Specifications.

SECTION 1.2 EXECUTION, CORRELATION AND INTENT

SECTION 1.2.1 The Contract Documents shall be signed by the Owner and Contractor
as provided in the Agreement. If either the Owner or Contractor or both do not
sign all the Contract Documents, the Architect shall identify such unsigned
Documents upon request.

SECTION 1.2.2 Execution of the Contract by the Contractor is a representation
that the Contractor has visited the site, become familiar with local conditions
under which the Work is to be performed and correlated personal observations
with requirements of the Contract Documents.

SECTION 1.2.3 The intent of the Contract Documents is to include all items
necessary for the proper execution and completion of the Work by the Contractor.
The Contract Documents are complementary, and what is required by one shall be
as binding as if required by all; performance by the Contractor shall be
required only to the extent.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              15



consistent with the Contract Documents and reasonably inferable from them as
being necessary to produce the intended results.

SECTION 1.2.4 Organization of the Specifications into divisions, sections and
articles, and arrangement of Drawings shall not control the Contractor in
dividing the Work among Subcontractors or in establishing the extent of Work to
be performed by any trade.

SECTION 1.2.5 Unless otherwise stated in the Contract Documents, words which
have well-known technical or construction industry meanings are used in the
Contract Documents in accordance with such recognized meanings.

SECTION 1.3 OWNERSHIP AND USE OF ARCHITECT'S DRAWINGS, SPECIFICATIONS AND OTHER
DOCUMENTS

SECTION 1.3.1 The Drawings, Specifications and other documents prepared by the
Architect are instruments of the Architect's service through which the Work to
be executed by the Contractor is described. The Contractor may retain one
contract record set. Neither the Contractor nor any subcontractor, Sub-
subcontractor, or material or equipment supplier shall own or claim a copyright
in the Drawings, Specifications and other documents prepared by the Architect,
and unless otherwise indicated the Architect shall be deemed the author of them
and will retain all common law, statutory and other reserved rights, in addition
to the copyright. All copies of them, except the Contractor's record set, shall
be returned or suitably accounted for to the Architect, on request, upon
completion of the Work. The Drawings, Specifications and other documents
prepared by the Architect, and copies thereof furnished to the Contractor, are
for use solely with respect to this Project. They are not to be used by the
Contractor or any Subcontractor, Sub-subcontractor or material or equipment
supplier on other projects or for addition to this Project outside the scope of
the Work without the specific written consent of the Owner and Architect. The
Contractor, Subcontractors, Sub-subcontractors and material or equipment
suppliers are granted a limited license to use and reproduce applicable portions
of the Drawings, Specifications and other documents prepared by the Architect
appropriate to and for use in the execution of their Work under the Contract
Documents. All copies made under this license shall bear the statutory copyright
notice, if any, shown on the Drawings, Specifications and other documents
prepared by the Architect. Submittal or distribution to meet official regulatory
requirements or for other purposes in connection with this Project is not to be
construed as publication in derogation of the Architect's copyright or other
reserved rights.

SECTION 1.4 CAPITALIZATION

SECTION 1.4.1 Terms capitalized in these General Conditions include those which
are (1) specifically defined, (2) the titles of numbered articles or (3) the
titles of other documents published by the American Institute of Architects.

SECTION 1.5 INTERPRETATION

SECTION 1.5.1 In the interest of brevity the Contract Documents frequently omit
modifying words such as "all" and "any" and articles such as "the" and "an," but
the fact that a modifier or an article is absent from one statement and appears
in another is not intended to affect the interpretation of either statement.

ARTICLE 2 OWNER

SECTION 2.1 DEFINITION

SECTION 2.1.1 The Owner is the person or entity identified as such in the
Agreement and is referred to throught out the Contract Documents as if singular
in number. The term "Owner" means the Owner or the Owner's authorized
representative.

SECTION 2.1.2 The Owner upon reasonable written request shall furnish to the
Contractor in writing information which is necessary and relevant for the
Contractor to evaluate, give notice of or enforce mechanic's lien rights. Such
information shall include a correct statement of the record legal title to the
property on which the project is located, usually referred to as the site, and
the Owner's interest therein at the time of execution of the Agreement and,
within five days after any change, information of such change in title, recorded
or unrecorded.

SECTION 2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER

SECTION 2.2.1 The Owner shall, at the request of the Contractor, prior to
execution of the Agreement and promtly from time to time thereafter, furnish to
the Contractor reasonable evidence that financial arrangements have been made to
fulfill the Owner's obligations under the Contract.

[Note: Unless such reasonable evidence were furnished on request prior to the
execution of the Agreement, the prospective contractor would not be required to
execute the Agreement or to commence the Work.]

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              16



SECTION 2.2.2 The Owner shall furnish surveys describing physical
characteristics, legal limitations and utility locations for the site of the
Project, and a legal description of the site.

SECTION 2.2.3 Except for permits and fees which are the responsibility of the
Contractor under the Contract Documents, the Owner shall secure and pay for
necessary approvals, easements, assessments and charges required for
construction, use or occupancy of permanent structures or for permanent changes
in existing facilities. Unless otherwise provided under the Contract Documents,
the Owner, through the Construction Manager, shall secure and pay for the
building permit.

SECTION 2.2.4 Information or services under the Owner's control shall be
furnished by the Owner with reasonable promptness to avoid delay in orderly
progress of the Work.

SECTION 2.2.5 Unless otherwise provided in the Contract Documents, the
Contractor will be furnished, free of charge, such copies of Drawings and
Project Manuals as are reasonably necessary for execution of the Work.

SECTION 2.2.6 The Owner shall forward all communications to the Contractor
through the Construction manager and shall contemporaneously provide the same
communications to the Architect.

SECTION 2.2.7 The foregoing are in addition to other duties and responsibilities
of the Owner enumerated herein and especially those in respect to Article 6
(Construction by Owner or by Other Contractors), Article 9 (Payments and
Completion) and Article 11 (Insurance and Bonds).

SECTION 2.3 OWNER'S RIGHT TO STOP THE WORK

SECTION 2.3.1 If the Contractor fails to correct Work which is not in accordance
with the requirements of the Contract Documents as required by Section 12.2 or
persistently fails to carry out Work in accordance with the Contract Documents,
the Owner, by written order signed personally or by an agent specifically so
empowered by the Owner in writing, may order the Contractor to stop the Work, or
any portion thereof, until the cause for such order has been eliminated;
however, the right of the Owner to stop the Work shall not give rise to a duty
on the part of the Owner to exercise this right for the benefit of the
Contractor or any other person or entity.

SECTION 2.4 OWNER'S RIGHT TO CARRY OUT THE WORK

SECTION 2.4.1 If the Contractor defaults or neglects to carry out the Work in
accordance with the Contract Documents and fails within a seven-day period after
receipt of written notice from the Owner to commence and continue correction of
such default or neglect with diligence and promptness, the Owner may after such
seven-day period give the Contractor a second written notice to correct such
deficiencies within a second seven-day period. If the Contractor within such
second seven-day period after receipt of such second notice fails to commence
and continue to correct any deficiencies, the Owner may, without prejudice to
other remedies the Owner may have, correct such deficiencies. In such case an
appropriate Change Order shall be issued deducting from payments then or
thereafter due the Contractor the cost of correcting such deficiencies,
including compensation for the Construction Manager's and Architect's and their
respective consultants' additional services and expenses made necessary by such
default, neglect or failure. Such action by the Owner and amounts charged to the
Contractor are both subject to prior approval of the Architect, after
consultation with the Construction Manager. If payments then or thereafter due
the Contractor are not sufficient to cover such amounts, the Contractor shall
pay the difference to the Owner.

ARTICLE 3 CONTRACTOR

SECTION 3.1 DEFINITION

SECTION 3.1.1 The Contractor is the person or entity identified as such in the
Agreement and is referred to throughout this Agreement as if singular in number.
The term "Contractor" means the Contractor or the Contractor's authorized
representative.

SECTION 3.1.2 The plural term "Contractors" refers to persons or entities who
perform construction under Conditions of the Contract that are administered by
the Construction Manager, and that are identical or substantially similar to
these Conditions.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_l which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              17



SECTION 3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR

SECTION 3.2.1 The Contractor shall carefully study and compare the Contract
Documents with each other and with information furnished by the Owner pursuant
to Section 2.2.2 and shall at once report to the Construction Manager and
Architect errors, inconsistencies or omissions discovered. The Contractor shall
not be liable to the Owner, Construction Manager or Architect for damage
resulting from errors, inconsistencies or omissions in the Contract Documents
unless the Contractor recognized such error, inconsistency or omission and
knowingly failed to report it to the Construction Manager and Architect. If the
Contractor performs any construction activity knowing it involves a recognized
error, inconsistency or omission in the Contract Documents without such notice
to the Construction Manager and Architect, the Contractor shall assume
appropriate responsibility for such performance and shall bear an appropriate
amount of the attributable costs for correction.

SECTION 3.2.2 The Contractor shall take field measurements and verify field
conditions and shall carefully compare such field measurements and conditions
and other information known to the Contractor with the Contract Documents before
commencing activities. Errors, inconsistencies or omissions discovered shall be
reported to the Construction Manager and Architect at once.

SECTION 3.2.3 The Contractor shall perform the Work in accordance with the
Contract Documents and submittals approved pursuant to Section 3.12.

SECTION 3.3 SUPERVISION AND CONSTRUCTION PROCEDURES

SECTION 3.3.1 The Contractor shall supervise and direct the Work, using the
Contractor's best skill and attention. The Contractor shall be solely
responsible for and have control over construction means, methods, techniques,
sequences and procedures and for coordinating all portions of the Work under
this Contract, subject to overall coordination of the Construction Manager as
provided in Sections 4.6.3 and 4.6.4.

SECTION 3.3.2 The Contractor shall be responsible to the Owner for acts and
omissions of the Contractor's employees, Subcontractors and their agents and
employees, and other persons performing portions of the Work under a contract
with the Contractor.

SECTION 3.3.3 The Contractor shall not be relieved of obligations to perform the
Work in accordance with the Contract Documents either by activities or duties of
the Construction Manager or Architect in their administration of the Contract,
or by tests, inspections or approvals required or performed by persons other
than the Contractor.

SECTION 3.3.4 The Contractor shall inspect portions of the Project related to
the Contractor's Work in order to determine that such portions are in proper
condition to receive subsequent Work.

SECTION 3.4 LABOR AND MATERIALS

SECTION 3.4.1 Unless otherwise provided in the Contract Documents, the
Contractor shall provide and pay for labor, materials, equipment, tools,
construction equipment and machinery, water, heat, utilities, transportation,
and other facilities and services necessary for proper execution and completion
of the Work, whether temporary or permanent and whether or not incorporated or
to be incorporated in the Work.

SECTION 3.4.2 The Contractor shall enforce strict discipline and good order
among the Contractor's employees and other persons carrying out the Contract.
The Contractor shall not permit employment of unfit persons or persons not
skilled in tasks assigned to them.

SECTION 3.5 WARRANTY

SECTION 3.5.1 The Contractor warrants to the Owner, Construction Manager and
Architect that materials and equipment furnished under the Contract will be of
good quality and new unless otherwise required or permitted by the Contract
Documents, that the Work will be free from defects not inherent in the quality
required or permitted, and that the Work will conform with the requirements of
the Contract Documents. Work not conforming to these requirements, including
substitutions not properly approved and authorized, may be considered defective.
The Contractor's warranty excludes remedy for damage or defect caused by abuse,
modifications not executed by the Contractor, improper or insufficient
maintenance, improper operation, or normal wear and tear under normal usage. If
required by the Construction Manager or Architect, the Contractor shall furnish
satisfactory evidence as to the kind and quality of materials and equipment.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_l which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              18



SECTION 3.6 TAXES

SECTION 3.6.1 The Contractor shall pay sales, consumer, use and similar taxes
for the Work or portions thereof provided by the Contractor which are legally
enacted when bids are received or negotiations concluded, whether or not yet
effective or merely scheduled to go into effect.

SECTION 3.7 PERMITS, FEES AND NOTICES

SECTION 3.7.1 Unless otherwise provided in the Contract Documents, the Owner
shall secure and pay for the building permit and the Contractor shall secure and
pay for all other permits and governmental fees, licenses and inspections
necessary for proper execution and completion of the Work which are customarily
secured after execution of the Contract and which are legally required when bids
are received or negotiations concluded.

SECTION 3.7.2 The Contractor shall comply with and give notices required by
laws, ordinances, rules and regulations and lawful orders of public authorities
bearing on performance of the Work.

SECTION 3.7.3 It is not the Contractor's responsibility to ascertain that the
Contract Documents are in accordance with applicable laws, statutes, ordinances,
building codes, and rules and regulations. However, if the Contractor observes
that portions of the Contract Documents are at variance therewith, the
Contractor shall promptly notify the Construction Manager, Architect and Owner
in writing, and necessary changes shall be accomplished by appropriate
Modification.

SECTION 3.7.4 If the Contractor performs Work knowing it to be contrary to laws,
statutes, ordinances, building codes, and rules and regulations without such
notice to the Construction Manager, Architect and Owner, the Contractor shall
assume full responsibility for such Work and shall bear the attributable costs.

SECTION 3.8 ALLOWANCES

SECTION 3.8.1 The Contractor has not included in the Contract Sum any allowances
stated in the Contract Documents. Items covered by allowances shall be supplied
for such amounts and by such persons or entities as the Owner may direct, but
the Contractor shall not be required to employ persons or entities against which
the Contractor makes reasonable objection.

SECTION 3.8.2 Unless otherwise provided in the Contract Documents:

     .1   materials and equipment under an allowance shall be selected promptly
          by the Owner to avoid delay in the Work;

     .2   allowances shall cover the cost to the Contractor of materials and
          equipment delivered at the site and all required taxes, less
          applicable trade discounts;

     .3   Contractor's costs for unloading and handling at the site, labor,
          installation costs, overhead, profit and other expenses contemplated
          for stated allowance amounts shall be included in the Contract Sum and
          not in the allowances;

     .4   whenever costs are more than or less than allowances, the Contract Sum
          shall be adjusted accordingly by Change Order. The amount of the
          Change Order shall reflect (1) the difference between actual costs and
          the allowances under Section 3.8.2.2 and (2) changes in Contractor's
          costs under Section 3.8.2.3.

SECTION 3.9 SUPERINTENDENT

SECTION 3.9.1 The Contractor shall employ a competent superintendent and
necessary assistants who shall be in attendance at the Project site during
performance of the Work. The superintendent shall represent the Contractor, and
communications given to the superintendent shall be as binding as if given to
the Contractor. Important communications shall be confirmed in writing. Other
communications shall be similarly confirmed on written request in each case.

SECTION 3.10 CONTRACTOR'S CONSTRUCTION SCHEDULE

SECTION 3.10.1 The Contractor, promptly after being awarded the Contract, shall
prepare and submit for the Owner's and Architect's information and the
Construction Manager's approval a Contractor's Construction Schedule for the
Work. Such schedule shall not exceed time limits current under the Contract
Documents, shall be revised at appropriate intervals as required by the
conditions of the Work and Project, shall be related to the entire Project
construction schedule to the extent required by the Contract Documents, and
shall provide for expeditious and practicable execution of the Work.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              19



SECTION 3.10.2 The Contractor shall cooperate with the Construction Manager in
scheduling and performing the Contractor's Work to avoid conflict, delay in or
interference with the Work of other Contractors or the construction or
operations of the Owner's own forces.

SECTION 3.10.3 The Contractor shall prepare and keep current, for the
Construction Manager's and Architect's approval, a schedule of submittals which
is coordinated with the Contractor's Construction Schedule and allows the
Construction Manager and Architect reasonable time to review submittals.

SECTION 3.10.4 The Contractor shall conform to the most recent schedules.

SECTION 3.11 DOCUMENTS AND SAMPLES AT THE SITE

SECTION 3.11.1 The Contractor shall maintain at the site for the Owner one
record copy of the Drawings, Specifications, addenda, Change Orders and other
Modifications, in good order and marked currently to record changes and
selections made during construction, and in addition approved Shop Drawings,
Product Data, Samples and similar required submittals. These shall be available
to the Construction Manager and Architect and shall be delivered to the
Construction Manager for submittal to the Owner upon completion of the Work.

SECTION 3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES

SECTION 3.12.1 Shop Drawings are drawings, diagrams, schedules and other data
specially prepared for the Work by the Contractor or a Subcontractor,
Sub-subcontractor, manufacturer, supplier or distributor to illustrate some
portion of the Work.

SECTION 3.12.2 Product Data are illustrations, standard schedules, performance
charts, instructions, brochures, diagrams and other information furnished by the
Contractor to illustrate materials or equipment for some portion of the Work.

SECTION 3.12.3 Samples are physical examples which illustrate materials,
equipment or workmanship and establish standards by which the Work will be
judged.

SECTION 3.12.4 Shop Drawings, Product Data, Samples and similar submittals are
not Contract Documents. The purpose of their submittal is to demonstrate for
those portions of the Work for which submittals are required the way the
Contractor proposes to conform to the information given and the design concept
expressed in the Contract Documents. Review by the Architect is subject to the
limitations of Section 4.6.12.

SECTION 3.12.5 The Contractor shall review, approve and submit to the
Construction Manager, in accordance with the schedule and sequence approved by
the Construction Manager, Shop Drawings, Product Data, Samples and similar
submittals required by the Contract Documents. The Contractor shall cooperate
with the Construction Manager in the coordination of the Contractor's Shop
Drawings, Product Data, Samples and similar submittals with related documents
submitted by other Contractors. Submittals made by the Contractor which are not
required by the Contract Documents may be returned without action.

SECTION 3.12.6 The Contractor shall perform no portion of the Work requiring
submittal and review of Shop Drawings, Product Data, Samples or similar
submittals until the respective submittal has been approved by the Construction
Manager and Architect. Such Work shall be in accordance with approved
submittals.

SECTION 3.12.7 By approving and submitting Shop Drawings, Product Data, Samples
and similar submittals, the Contractor represents that the Contractor has
determined and verified materials, field measurements and field construction
criteria related thereto, or will do so, and has checked and coordinated the
information contained within such submittals with the requirements of the Work
and of the Contract Documents.

SECTION 3.12.8 The Contractor shall not be relieved of responsibility for
deviations from requirements of the Contract Documents by the Construction
Manager's and Architect's approval of Shop Drawings, Product Data, Samples or
similar submittals unless the Contractor has specifically informed the
Construction Manager and Architect in writing of such deviation at the time of
submittal and the Construction Manager and Architect have given written approval
to the specific deviation. The Contractor shall not be relieved of
responsibility for errors or omissions in Shop Drawings, Product Data, Samples
or similar submittals by the Construction Manager's and Architect's approval
thereof.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              20



SECTION 3.12.9 The Contractor shall direct specific attention, in writing or on
resubmitted Shop Drawings, Product Data, Samples or similar submittals, to
revisions other than those requested by the Construction Manager and Architect
on previous submittals.

SECTION 3.12.10 Informational submittals upon which the Construction Manager and
Architect are not expected to take responsive action may be so identified in the
Contract Documents.

SECTION 3.12.11 When professional certification of performance criteria of
materials, systems or equipment is required by the Contract Documents, the
Construction Manager and Architect shall be entitled to rely upon the accuracy
and completeness of such calculations and certifications.

SECTION 3.13 USE OF SITE

SECTION 3.13.1 The Contractor shall confine operations at the site to areas
permitted by law, ordinances, permits and the Contract Documents and shall not
unreasonably encumber the site with materials or equipment.

SECTION 3.13.2 The Contractor shall coordinate the Contractor's operations with,
and secure the approval of, the Construction Manager before using any portion of
the site.

SECTION 3.14 CUTTING AND PATCHING

SECTION 3.14.1 The Contractor shall be responsible for cutting, fitting or
patching required to complete the Work or to make its parts fit together
properly.

SECTION 3.14.2 The Contractor shall not damage or endanger a portion of the Work
or fully or partially completed construction of the Owner's own forces or of
other Contractors by cutting, patching, excavating or otherwise altering such
construction. The Contractor shall not cut or otherwise alter such construction
by other Contractors or by the Owner's own forces except with written consent of
the Construction Manager, Owner and such other Contractors; such consent shall
not be unreasonably withheld. The Contractor shall not unreasonably withhold
from the other Contractors or the Owner the Contractor's consent to cutting or
otherwise altering the Work.

SECTION 13.5 CLEANING UP

SECTION 13.5.1 The Contractor shall keep the premises and surrounding area free
from accumulation of waste materials or rubbish caused by operations under the
Contract. At completion of the Work the Contractor shall remove from and about
the Project waste materials, rubbish, the Contractor's tools, construction
equipment, machinery and surplus materials.

SECTION 3.15.2 If the Contractor fails to clean up as provided in the Contract
Documents, the Construction Manager may do so with the Owner's approval and the
cost thereof shall be charged to the Contractor.

SECTION 3.16 ACCESS TO WORK

SECTION 3.16.1 The Contractor shall provide the Owner, Construction Manager and
Architect access to the Work in preparation and progress wherever located.

SECTION 3.17 ROYALTIES AND PATENTS

SECTION 3.17.1 The Contractor shall pay all royalties and license fees. The
Contractor shall defend suits or claims for infringement of patent rights and
shall hold the Owner, Construction Manager and Architect harmless from loss on
account thereof, but shall not be responsible for such defense or loss when a
particular design, process or product of a particular manufacturer or
manufacturers is required by the Contract Documents. However, if the Contractor
has reason to believe that the required design, process or product is an
infringement of a patent, the Contractor shall be responsible for such loss
unless such information is promptly furnished to the Architect.

SECTION 3.18 INDEMNIFICATION

SECTION 3.18.1 To the fullest extent permitted by law, the Contractor shall
indemnify and hold harmless the Owner, Construction Manager, Architect,
Construction Manager's and Architect's consultants, and agents and employees of
any of them from and against claims, damages, losses and expenses, including but
not limited to attorneys' fees, arising out of or resulting from performance of
the Work, provided that such claim, damage, loss or expense is attributable to
bodily injury, sickness, disease or death, or to injury to or destruction of
tangible property (other than the Work itself) including loss of use resulting
therefrom, but only to the extent caused in whole or in part by

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              21



negligent acts of omissions of the Contractor, a Subcontractor, anyone directly
or indirectly employed by them or anyone for whose acts they may be liable,
regardless of whether or not such claim, damage, loss or expense is caused in
part by a party indemnified hereunder. Such obligation shall not be construed to
negate, abridge or reduce other rights or obligations of indemnity which could
otherwise exist as to a party or person described in this Section 3.18.

SECTION 3.18.2 In claims against any person or entity indemnified under this
Section 3.18 by an employee of the Contractor, a Subcontractor, anyone directly
or indirectly employed by them or anyone for whose acts they may be liable, the
indemnification obligation under this Section 3.18 shall not be limited by a
limitation on amount or type of damages, compensation or benefits payable by or
for the Contractor or a Subcontractor under workers' compensation acts,
disability benefit acts or other employee benefit acts.

SECTION 3.18.3 The obligations of the Contractor under this Section 3.18 shall
not extend to the liability of the Construction Manager, Architect, their
consultants, and agents and employees of any of them arising out of (1) the
preparation or approval of maps, drawings, opinions, reports, surveys, Change
Orders, designs or specifications, or (2) the giving of or the failure to give
directions or instructions by the Construction Manager, Architect, their
consultants, and agents and employees of any of them provided such giving or
failure to give is the primary cause of the injury or damage.

ARTICLE 4 ADMINISTRATION OF THE CONTRACT

SECTION 4.1 ARCHITECT

SECTION 4.1.1 The Architect is the person lawfully licensed to practice
architecture or an entity lawfully practicing architecture identified as such in
the Agreement and is referred to throughout the Contract Documents as if
singular in number. The term "Architect" means the Architect or the Architect's
authorized representative.

SECTION 4.2 CONSTRUCTION MANAGER

SECTION 4.2.1 The Construction Manager is the person or entity identified as
such in the Agreement and is referred to throughout the Contractor Documents as
if singular in number. The term "Construction Manager" means the Construction
Manager or the Construction Manager's authorized representative.

SECTION 4.3 Duties, responsibilities and limitations of authority of the
Construction Manager and Architect as set-forth in the Contract Documents shall
not be restricted, modified or extended without written consent of the Owner,
Construction Manager, Architect and Contractor. Consent shall not be
unreasonably withheld.

SECTION 4.4 In case of termination of employment of the Construction Manager or
Architect, the Owner shall appoint a construction manager or architect against
whom the Contractor makes no reasonable objection and whose status under the
Contract Documents shall be that of the former construction manager or
architect, respectively.

SECTION 4.5 Disputes arising under Sections 4.3 and 4.4 shall be subject to
arbitration.

SECTION 4.6 ADMINISTRATION OF THE CONTRACT

SECTION 4.6.1 The Construction Manager and Architect will provide administration
of the Contract as described in the Contract Documents, and will be the Owner's
representatives (1) during construction, (2) until final payment is due and (3)
with the Owner's concurrence, from time to time during the correction period
described in Section 12.2. The Construction Manager and Architect will advise
and consult with the Owner and will have authority to act on behalf of the Owner
only to the extent provided in the Contract Documents, unless otherwise modified
by written instrument in accordance with other provisions of the Contract.

SECTION 4.6.2 The Construction Manager will determine in general that the Work
is being performed in accordance with the requirements of the Contract
Documents, will keep the Owner informed of the progress of the Work, and will
endeavor to guard the Owner against defects and deficiencies in the Work.

SECTION 4.6.3 The Construction Manager will provide for coordination of the
activities of other Contractors and of the Owner's own forces with the Work of
the Contractor, who shall cooperate with them. The Contractor shall participate
with other Contractors and Construction Manager and Owner in reviewing their
construction schedules when directed to do so. The Contractor shall make any
revisions to the construction schedule deemed

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              22



necessary after a joint review and mutual agreement. The construction schedules
shall constitute the schedules to be used by the Contractor, other Contractors,
the Construction Manager and the Owner until subsequently revised.

SECTION 4.6.4 The Construction Manager will schedule and coordinate the
activities of the Contractors in accordance with the latest approved Project
construction schedule.

SECTION 4.6.5 The Architect will visit the site at intervals appropriate to the
stage of construction to become generally familiar with the progress and quality
of the completed Work and to determine in general if the Work is being performed
in a manner indicating that the Work, when completed, will be in accordance with
the Contract Documents. However, the Architect will not be required to make
exhaustive or continuous on-site inspections to check quality or quantity of the
Work. On the basis of on-site observations as an architect, the Architect will
keep the Owner informed of progress of the Work, and will endeavor to guard the
Owner against defects and deficiencies in the Work.

SECTION 4.6.6 The Construction Manager, except to the extent required by Section
4.6.4, and Architect will not have control over or charge of and will not be
responsible for construction means, methods, techniques, sequences or
procedures, or for safety precautions and programs in connection with the Work,
since these are solely the Contractors responsibility as provided in Section
3.3, and neither will be responsible for the Contractor's failure to carry out
the Work in accordance with the Contract Documents. Neither the Construction
Manager nor the Architect will have control over or charge of or be responsible
for acts or omissions of the Contractor, Subcontractors, or their agents or
employees, or of any other persons performing portions of the Work.

SECTION 4.6.7 Communications Facilitating Contract Administration. Except as
otherwise provided in the Contract Documents or when direct communications have
been specially authorized, the Owner and Contractor shall communicate through
the Construction Manager, and shall contemporaneously provide the same
communications to the Architect. Communications by and with the Architect's
consultants shall be through the Architect. Communications by and with
Subcontractors and material suppliers shall be through the Contractor.
Communications by and with other Contractors shall be through the Construction
Manager and shall be contemporaneously provided to the Architect.

SECTION 4.6.8 The Construction Manager will review and certify all Applications
for Payment by the Contractor, including final payment. The Construction Manager
will assemble each of the Contractor's Applications for Payment with similar
Applications from other Contractors into a Project Application and Project
Certificate for Payment. After reviewing and certifying the amounts due the
Contractors, the Construction Manager will submit the Project Application and
Project Certificate for Payment, along with the applicable Contractors'
Applications and Certificates for Payment, to the Architect.

SECTION 4.6.9 Based on the Architect's observations and evaluations of
Contractors' Applications for Payment, and the certifications of the
Construction Manager, the Architect will review and certify the amounts due the
Contractors and will issue a Project Certificate for Payment.

SECTION 4.6.10 The Architect will have authority to reject Work which does not
conform to the Contract Documents, and to require additional inspection or
testing, in accordance with Sections 13.5.2 and 13.5.3, whether or not such Work
is fabricated, installed or completed, but will take such action only after
notifying the Construction Manager. Subject to review by the Architect, the
Construction Manager will have the authority to reject Work which does not
conform to the Contract Documents. Whenever the Construction Manager considers
it necessary or advisable for implementation of the intent of the Contract
Documents, the Construction Manager will have authority to require additional
inspection or testing of the Work in accordance with Sections 13.5.2. and
13.5.3, whether or not such Work is fabricated, installed or completed. The
foregoing authority of the Construction Manager's will be subject to the
provisions of Sections 4.6.18 through 4.6.20 inclusive, with respect to
interpretations and decisions of the Architect. However, neither the Architect's
nor the Construction Manager's authority to act under this Section 4.6.10 nor a
decision made by either of them in good faith either to exercise or not to
exercise such authority shall give rise to a duty or responsibility of the
Architect or the Construction Manager to the Contractor, Subcontractors,
material and equipment suppliers, their agents or employees, or other persons
performing any of the Work.

SECTION 4.6.11 The Construction Manager will receive from the Contractor and
review and approve all Shop Drawings, Product Data and Samples, coordinate them
with information received from other Contractors, and transmit to the

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              23



Architect those recommended for approval. The Construction Manager's actions
will be taken with such reasonable promptness as to cause no delay in the Work
of the Contractor or in the activities of other Contractors, the Owner, or the
Architect.

SECTION 4.6.12 The Architect will review and approve or take other appropriate
action upon the Contractor's submittals such as Shop Drawings, Product Data and
Samples, but only for the limited purpose of checking for conformance with
information given and the design concept expressed in the Contract Documents.
The Architect's action will be taken with such reasonable promptness as to cause
no delay in the Work of the Contractor or in the activities of the other
Contractors, the Owner, or the Construction Manager, while allowing sufficient
time in the Architect's professional judgment to permit adequate review. Review
of such submittals is not conducted for the purpose of determining the accuracy
and completeness of other details such as dimensions and quantities, or for
substantiating instructions for installation or performance of equipment or
systems, all of which remain the responsibility of the Contractor as required by
the Contract Documents. The Architect's review of the Contractor's submittals
shall not relieve the Contractor of the obligations under Sections 3.3, 3.5 and
3.12. The Architect's review shall not constitute approval of safety precautions
or, unless otherwise specifically stated by the Architect, of any construction
means, method techniques, sequences or procedures. The Architect's approval of a
specific item shall not indicate approval of an assembly of which the item is a
component.

SECTION 4.6.13 The Construction Manager will prepare Change Orders and
Construction Change Directives.

SECTION 4.6.14 Following consultation with the Construction Manager, the
Architect will take appropriate action on Change Orders or Construction Change
Directives in accordance with Article 7 and will have authority to order minor
changes in the Work as provided in Section 7.4.

SECTION 4.6.15 The Construction Manager will maintain at the site for the Owner
one record copy of all Contracts, Drawings, Specifications, addenda, Change
Orders and other Modifications, in good order and marked currently to record all
changes and selections made during construction, and in addition approved Shop
Drawings, Product Data, Samples and similar required submittals. These will be
available to the Architect and the Contractor, and will be delivered to the
Owner upon completion of the Project.

SECTION 4.6.16 The Construction Manager will assist the Architect in conducting
inspections to determine the dates of Substantial Completion and final
completion, and will receive and forward to the Architect written warranties and
related documents required by the Contract and assembled by the Contractor. The
Construction Manager will forward to the Architect a final Project Application
and Project Certificate for Payment upon compliance with the requirements of the
Contract Documents.

SECTION 4.6.17 If the Owner and Architect agree, the Architect will provide one
or more project representatives to assist in carrying out the Architect's
responsibilities at the site. The duties, responsibilities and limitations of
authority of such project representatives shall be as set forth in an exhibit to
be incorporated in the Contract Documents.

SECTION 4.6.18 The Architect will interpret and decide matters concerning
performance under the requirements of the Contract Documents on written request
of the Construction Manager, Owner or Contractor. The Architects response to
such requests will be made with reasonable promptness and within any time limits
agreed upon. If no agreement is made concerning the time within which
interpretations required of the Architect shall be furnished in compliance with
this Section 4.6, then delay shall not be recognized on account of failure by
the Architect to furnish such interpretations until 15 days after written
request is made for them.

SECTION 4.6.19 Interpretations and decisions of the Architect will be consistent
with the intent of and reasonably inferable from the Contract Documents and will
be in writing or in the form of drawings. When making such interpretations and
decisions, the Architect will endeavor to secure faithful performance by both
Owner and Contractor, will not show partiality to either and will not be liable
for results of interpretations or decisions so rendered in good faith.

SECTION 4.6.20 The Architect's decisions on matters relating to aesthetic effect
will be final if consistent with the intent expressed in the Contract Documents.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              24



SECTION 4.7 CLAIMS AND DISPUTES

SECTION 4.7.1 Definition. A Claim is a demand or assertion by one of the parties
seeking, as a matter of right, adjustment or interpretation of Contract terms,
payment of money, extension of time or other relief with respect to the terms of
the Contract. The term "Claim" also includes other disputes and matters in
question between the Owner and Contractor arising out of or relating to the
Contract. Claims must be made by written notice. The responsibility to
substantiate Claims shall rest with the party making the Claim.

SECTION 4.7.2 Decision of Architect. Claims, including those alleging an error
or omission by the Construction Manager or Architect, shall be referred
initially to the Architect for action as provided in Section 4.8. A decision by
the Architect, as provided in Section 4.8.4, shall be required as a condition
precedent to arbitration or litigation of a Claim between the Contractor and
Owner as to all such matters arising prior to the date final payment is due,
regardless of (1) whether such matters relate to execution and progress of the
Work or (2) the extent to which the Work has been completed. The decision by the
Architect in response to a Claim shall not be a condition precedent to
arbitration or litigation in the event (1) the position of Architect is vacant,
(2) the Architect has not received evidence or has failed to render a decision
within agreed time limits, (3) the Architect has failed to take action required
under Section 4.8.4 within 30days after the Claim is made, (4) 45 days have
passed after the Claim has been referred to the Architect or (5) the Claim
relates to a mechanic's lien.

SECTION 4.7.3 Time Limits on Claims. Claims by either party must be made within
21 days after occurrence of the event giving rise to such Claim or within 21
days after the claimant first recognizes the condition giving rise to the Claim,
whichever is later. Claims must be made by written notice. An additional Claim
made after the initial Claim has been implemented by Change Order will not be
considered unless submitted in a timely manner.

SECTION 4.7.4 Continuing Contract Performance. Pending final resolution of a
Claim including arbitration, unless otherwise agreed in writing the Contractor
shall proceed diligently with performance of the Contract and the Owner shall
continue to make payments in accordance with the Contract Documents.

SECTION 4.7.5 Waiver of Claims: Final Payment. The making of final payment shall
constitute a waiver of Claims by the Owner except those arising from:

     .1   liens, Claims, security interests or encumbrances arising out of the
          Contract and unsettled;

     .2   failure of the Work to comply with the requirements of the Contract
          Documents; or

     .3   terms of special warranties required by the Contract Documents.

SECTION 4.7.6 Claims for Concealed or Unknown Conditions. If conditions are
encountered at the site which are (1) subsurface or otherwise concealed physical
conditions which differ materially from those indicated in the Contract
Documents or (2) unknown physical conditions of an unusual nature, which differ
materially from those ordinarily found to exist and generally recognized as
inherent in construction activities of the character provided for in the
Contract Documents, then notice by the observing party shall be given to the
other party promptly before conditions are disturbed and in no event later than
21 days after first observance of the conditions. The Architect will promptly
investigate such conditions and, if they differ materially and cause an increase
or decrease in the Contractor's cost of, or time required for, performance of
any part of the Work, will recommend an equitable adjustment in the Contract Sum
or Contract Time, or both. If the Architect determines that the conditions at
the site are not materially different from those indicated in the Contract
Documents and that no change in the terms of the Contract is justified, the
Architect shall so notify the Owner and Contractor in writing, stating the
reasons. Claims by either party in opposition to such determination must be made
within 21 days after the Architect has given notice of the decision. If the
Owner and Contractor cannot agree on an adjustment in the Contract Sum or
Contract Time, the adjustment shall be referred to the Architect for initial
determination, subject to further proceedings pursuant to Section 4.8.

SECTION 4.7.7 Claims for Additional Cost. If the Contractor wishes to make Claim
for an increase in the Contract Sum, written notice as provided herein shall be
given before proceeding to execute the Work. Prior notice is not required for
Claims relating to an emergency endangering life or property arising under
Section 10.3. If the Contractor believes additional cost is involved for reasons
including but not limited to (1) a written interpretation from the Architect,
(2) an order by the Owner to stop the Work where the Contractor was not at
fault, (3) a written order for a minor change in the Work issued by the
Architect, (4) failure of payment by the Owner, (5) termination of the Contract
by the Owner, (6) Owner's suspension or (7) other reasonable grounds, Claim
shall be filed in accordance with the procedure established herein.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_1 which expires on 6/27/2007, and is not
for resale.

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                                                                              25



SECTION 4.7.8 Claims for Additional Time.

SECTION 4.7.8.1 If the Contractor wishes to make Claim for an increase in the
Contract Time, written notice as provided herein shall be given. The
Contractor's Claim shall include an estimate of cost and of probable effect of
delay on progress of the Work. In the case of a continuing delay only one Claim
is necessary.

SECTION 4.7.8.2 If adverse weather conditions are the basis for a Claim for
additional time, such Claim shall be documented by data substantiating that
weather condition were abnormal for the period of time and could not have been
reasonably anticipated, and that weather condition had an adverse effect on the
scheduled construction.

SECTION 4.7.9 Injury or Damage to Person or Property. If either party to the
Contract suffers injury or damage to person or property because of an act or
omission of the other party, of any of the other party's employees or agents, or
of others for whose acts such party is legally liable, written notice of such
injury or damage, whether or not insured, shall be given to the other party
within a reasonable time not exceeding 21 days after first observance. The
notice shall provide sufficient detail to enable the other party to investigate
the matter. If a Claim for additional cost or time related to this Claim is to
be asserted, it shall be filed as provided in Sections 4.7.7 or 4.7.8.

SECTION 4.8 RESOLUTION OF CLAIMS AND DISPUTES

Section 4.8.1 The Architect will review Claims and take one or more of the
following preliminary actions within ten days of receipt of a Claim: (1) request
additional supporting data from the claimant, (2) submit a schedule to the
parties indicating when the Architect expects to take action, (3) reject the
Claim in whole or in part, stating reason for rejection, (4) recommend approval
of the Claim by the other party or (5) suggest a compromise. The Architect may
also, but is not obligated to, notify the surety, if any, of the nature and
amount of the Claim.

SECTION 4.8.2 If a Claim has been resolved, the Architect will prepare or obtain
appropriate documentation.

SECTION 4.8.3 If a Claim has not been resolved, the party making the Claim
shall, within ten days after the Architect's preliminary response, take one or
more of the following actions: (1) submit additional supporting data requested
by the Architect, (2) modify the initial Claim or (3) notify the Architect that
the initial Claim stands.

SECTION 4.8.4 If a Claim has not been resolved after consideration of the
foregoing and of further evidence presented by the parties or requested by the
Architect, the Architect will notify the parties in writing that the Architect's
decision will be made within seven days, which decision shall be final and
binding on the parties but subject to arbitration. Upon expiration of such time
period, the Architect will render to the parties the Architect's written
decision relative to the Claim, including any change in the Contract Sum or
Contract Time or both. If there is a surety and there appears to be a
possibility of a Contractor's default, the Architect may, but is not obligated
to, notify the surety and request the surety's assistance in resolving the
controversy.

SECTION4.9 ARBITRATION

Section 4.9.1 Controversies and Claims Subject to Arbitration. Any controversy
or Claim arising out of or related to the Contract, or the breach thereof, shall
be settled by arbitration in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof, except controversies or Claims relating to
aesthetic effect and except those waived as provided for in Section 4.7.5. Such
controversies or Claims upon which the Architect has given notice and rendered a
decision as provided in Section 4.8.4 shall be subject to arbitration upon
written demand of either party. Arbitration may be commenced when 45 days have
passed after a Claim has been referred to the Architect as provided in Section
4.7 and no decision has been rendered.

SECTION 4.9.2 Rules and Notices for Arbitration. Claims between the Owner and
Contractor not resolved under Section 4.8 shall, if subject to arbitration under
Section 4.9.1, be decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association currently in
effect, unless the parties mutually agree otherwise. Notice of demand for
arbitration shall be filed in writing with the other party to the Agreement
between the Owner and Contractor and with the American Arbitration Association,
and copies shall be filed with the Construction Manager and Architect.

SECTION 4.9.3 Contract Performance During Arbitration. During arbitration
proceedings, the Owner and Contractor shall comply with Section 4.7.4.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              26



Section 4.9.4 When Arbitration May Be Demanded. Demand for arbitration of any
Claim may not be made until the earlier of (1) the date on which the Architect
has rendered a final written decision on the Claim, (2) the tenth day after the
parties have presented evidence to the Architect or have been given reasonable
opportunity to do so, if the Architect has not rendered a final written decision
by that date, or (3) any of the five events described in Section 4.7.2.

Section 4.9.4.1 When a written decision of the Architect states that (1) the
decision is final but subject to arbitration and (2) a demand for arbitration of
a Claim covered by such decision must be made within 30 days after the date on
which the party making the demand receives the final written decision, then
failure to demand arbitration within said 30 days' period shall result in the
Architect's decision becoming final and binding upon the Owner and Contractor.
If the Architect renders a decision after arbitration proceedings have been
initiated, such decision may be entered as evidence, but shall not supersede
arbitration proceedings unless the decision is acceptable to all parties
concerned.

Section 4.9.4.2 A demand for arbitration shall be made within the time limits
specified in Sections 4.9.1 and 4.9.4 and Section 4.9.4.1 as applicable, and in
other cases within a reasonable time after the Claim has arisen, and in no event
shall it be made after the date when institution of legal or equitable
proceedings based on such Claim would be barred by the applicable statute of
limitations as determined pursuant to Section 13.7.

Section 4.9.5 Limitation on Consolidation or Joinder. No arbitration arising out
of or relating to the Contract Documents shall include, by consolidation or
joinder or in any other manner, the Construction Manager, the Architect, or the
Construction Manager's or Architect's employees or consultants, except by
written consent containing specific reference to the Agreement and signed by the
Construction Manager, Architect, Owner, Contractor and any other person or
entity sought to be joined. No arbitration shall include, by consolidation or
joinder or in any other manner, parties other than the Owner, Contractor, other
Contractors as described in Article 6 and other persons substantially involved
in a common question of fact or law whose presence is required if complete
relief is to be accorded in arbitration. No persons or entities other than the
Owner, Contractor or other Contractors as defined in Section 3.1.2 shall be
included as an original third party or additional third party to an arbitration
whose interest or responsibility is insubstantial. Consent to arbitration
involving an additional person or entity shall not constitute consent to
arbitration of a dispute not described therein or with a person or entity not
named or described therein. The foregoing agreement to arbitrate and other
agreements to arbitrate with an additional person or entity duly consented to by
parties to the Agreement shall be specifically enforceable under applicable law
in any court having jurisdiction thereof.

Section 4.9.6 Claims and Timely Assertion of Claims. A party who files a notice
of demand for arbitration must assert in the demand all Claims then known to
that party on which arbitration is permitted to be demanded. When a party fails
to include a Claim through oversight, inadvertence or excusable neglect, or when
a Claim has matured or been acquired subsequently, the arbitrator or arbitrators
may permit amendment.

Section 4.9.7 Judgment on Final Award. The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.

ARTICLE 5 SUBCONTRACTORS

Section 5.1 DEFINITIONS

Section 5.1.1 A Subcontractor is a person or entity who has a direct contract
with the Contractor to perform a portion of the Work at the site. The term
"Subcontractor" is referred to throughout the Contract Documents as if singular
in number and means a Subcontractor or an authorized representative of the
Subcontractor. The term "Subcontractor" does not include other Contractors or
subcontractors of other Contractors.

Section 5.1.2 A Sub-subcontractor is a person or entity who has a direct or
indirect contract with a Subcontractor to perform a portion of the Work at the
site. The term "Sub-subcontractor" is referred to throughout the Contract
Documents as if singular in number and means a Sub-subcontractor or an
authorized representative of the Sub-subcontractor.

SECTION 5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK

Section 5.2.1 Unless otherwise stated in the Contract Documents or the bidding
requirements, the Contractor, as soon as practicable after award of the
Contract, shall furnish in writing to the Construction Manager for review by the
Owner, Construction Manager and Architect the names of persons or entities
(including those who are to furnish

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              27



materials or equipment fabricated to a special design) proposed for each
principal portion of the Work. The Construction Manager will promptly reply to
the Contractor in writing stating whether or not the Owner, Construction Manager
or Architect, after due investigation, has reasonable objection to any such
proposed person or entity. Failure of the Construction Manager to reply promptly
shall constitute notice of no reasonable objection.

SECTION 5.2.2 The Contractor shall not contract with a proposed person or entity
to whom the Owner; Construction Manager or Architect has made reasonable and
timely objection. The Contractor shall not be required to contract with anyone
to whom the Contractor has made reasonable objection.

SECTION 5.2.3 If the Owner, Construction Manager or Architect has reasonable
objection to a person or entity proposed by the Contractor, the Contractor shall
propose another to whom the Owner, Construction Manager or Architect has no
reasonable objection. The Contract Sum shall be increased or decreased by the
difference in cost occasioned by such change and an appropriate Change Order
shall be issued. However, no increase in the Contract Sum shall be allowed for
such change unless the Contractor has acted promptly and responsively in
submitting names as required.

SECTION 5.2.4 The Contractor shall not change a Subcontractor, person or entity
previously selected if the Owner, Construction Manager or Architect makes
reasonable objection to such change.

SECTION 5.3 SUBCONTRACTUAL RELATIONS

SECTION 5.3.1 By appropriate agreement, written where legally required for
validity, the Contractor shall require each Subcontractor, to the extent of the
Work to be performed by the Subcontractor, to be bound to the Contractor by
terms of the Contract Documents, and to assume toward the Contractor all the
obligations and responsibilities which the Contractor, by these Documents,
assumes toward the Owner, Construction Manager and Architect. Each subcontract
agreement shall preserve and protect the rights of the Owner, Construction
Manager and Architect under the Contract Documents with respect to the Work to
be performed by the Subcontractor so that subcontracting thereof will not
prejudice such rights, and shall allow to the Subcontractor, unless specifically
provided otherwise in the subcontract agreement, the benefit of all rights,
remedies and redress against the Contractor that the Contractor, by the Contract
Documents, has against the Owner. Where appropriate, the Contractor shall
require each Subcontractor to enter into similar agreements with
Sub-subcontractors. The Contractor shall make available to each proposed
Subcontractor, prior to the execution of the subcontract agreement, copies of
the Contract Documents to which the Subcontractor will be bound, and, upon
written request of the Subcontractor, identify to the Subcontractor terms and
conditions of the proposed subcontract agreement which may be at variance with
the Contract Documents. Subcontractors shall similarly make copies of applicable
portions of such documents available to their respective proposed
Sub-subcontractors.

SECTION 5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS

SECTION 5.4.1 Each subcontract agreement for a portion of the Work is assigned
by the Contractor to the Owner provided that:

     .1   assignment is effective only after termination of the Contract by the
          Owner for cause pursuant to Section 14.2 and only for those
          subcontract agreements which the Owner accepts by notifying the
          Subcontractor in writing; and

     .2   assignment is subject to the prior rights of the surety, if any,
          obligated under bond relating to the Contract.

SECTION 5.4.2 If the Work has been suspended for more than 30 days, the
Subcontractor's compensation shall be equitably adjusted.

ARTICLE 6 CONSTRUCTION BY OWNER OR BY OTHER CONTRACTORS

SECTION 6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION WITH OWN FORCES AND TO AWARD
OTHER CONTRACTS

SECTION 6.1.1 The Owner reserves the right to perform construction or operations
related to the Project with the Owner's own forces, which include persons or
entities under separate contracts not administered by the Construction Manager.
The Owner further reserves the right to award other contracts in connection with
other portions of the Project or other construction or operations on the site
under Conditions of the Contract identical or substantially similar to these
including those portions related to insurance and waiver of subrogation. If the
Contractor claims that delay or additional cost is involved because of such
action by the Owner, the Contractor shall make such Claim as provided elsewhere
in the Contract Documents.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              28



SECTION 6.1.2 When the Owner performs construction or operations with the
Owner's own forces including persons or entities under separate contracts not
administered by the Construction Manager, the Owner shall provide for
coordination of such forces with the Work of the Contractor, who shall cooperate
with them.

SECTION 6.1.3 Unless otherwise provided in the Contract Documents, when the
Owner performs construction or operations related to the Project with the
Owner's own forces, the Owner shall be deemed to be subject to the same
obligations and to have the same rights, which apply to the Contractor under the
Conditions of the Contract including, without excluding others, those stated in
this Article 6 and in Articles 3, 10, 11 and 12.

SECTION 6.2 MUTUAL RESPONSIBILITY

SECTION 6.2.1 The Contractor shall afford the Owner's own forces, Construction
Manager and other Contractors reasonable opportunity for introduction and
storage of their materials and equipment and performance of their activities,
and shall connect and coordinate the Contractor's construction and operations
with theirs as required by the Contract Documents.

SECTION 6.2.2 If part of the Contractor's Work depends for proper execution or
results upon construction or operations by the Owner's own forces or other
Contractors, the Contractor shall, prior to proceeding with that portion of the
Work, promptly report to the Construction Manager and Architect apparent
discrepancies or defects in such other construction that would render it
unsuitable for such proper execution and results. Failure of the Contractor so
to report shall constitute an acknowledgment that the Owner's own forces or
other Contractors' completed or partially completed construction is fit and
proper to receive the Contractor's Work, except as to defects not then
reasonably discoverable.

SECTION 6.2.3 Costs caused by delays or by improperly timed activities or
defective construction shall be borne by the party responsible therefor.

SECTION 6.2.4 The Contractor shall promptly remedy damage wrongfully caused by
the Contractor to completed construction or partially completed construction or
to property of the Owner or other Contractors as provided in Section 10.2.5.

SECTION 6.2.5 Claims and other disputes and matters in question between the
Contractor and other Contractors shall be subject to the provisions of Section
4.7 provided the other Contractors have reciprocal obligations.

SECTION 6.2.6 The Owner and other Contractors shall have the same
responsibilities for cutting and patching as are described for the Contractor in
Section 3.14.

SECTION 6.3 OWNER'S RIGHT TO CLEAN UP

SECTION 6.3.1 If a dispute arises among the Contractor, other Contractors and
the Owner as to the responsibility under their respective contracts for
maintaining the premises and surrounding area free from waste materials and
rubbish as described in Section 3.15, the Owner may clean up and allocate the
cost among those responsible as the Construction Manager, in consultation with
the Architect, determines to be just.

ARTICLE 7 CHANGES IN THE WORK

SECTION 7.1 CHANGES

SECTION 7.1.1 Changes in the Work may be accomplished after execution of the
Contract, and without invalidating the Contract, by Change Order, Construction
Change Directive or order for a minor change in the Work, subject to the
limitations stated in this Article 7 and elsewhere in the Contract Documents.

SECTION 7.1.2 A Change Order shall be based upon agreement among the Owner,
Construction Manager, Architect and Contractor; a Construction Change Directive
requires agreement by the Owner, Construction Manager and Architect and may or
may not be agreed to by the Contractor; an order for a minor change in the Work
may be issued by the Architect alone.

SECTION 7.1.3 Changes in the Work shall be performed under applicable provisions
of the Contract Documents, and Contractor shall proceed promptly, unless
otherwise provided in the Change Order, Construction Change Directive or order
for a minor change in the work.

AIA Document A201/CMa(TM) - 1992. Copyright(C) 1992 by The American Institute of
Architects. All rights reserved. WARNING: This AIA(R) Document is protected by
U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              29



SECTION 7.1.4 If unit prices are stated in the Contract Documents or
subsequently agreed upon, and if quantities originally contemplated are so
changed in a proposed Change Order or Construction Change Directive that
application of such unit prices to quantities of Work proposed will cause
substantial inequity to the Owner or Contractor, the applicable unit prices
shall be equitably adjusted.

SECTION 7.2 CHANGE ORDERS

SECTION 7.2.1 A Change Order is a written instrument prepared by the
Construction Manager and signed by the Owner, Construction Manager, Architect
and Contractor, stating their agreement upon all of the following:

     .1   a change in the Work;

     .2   the amount of the adjustment in the Contract Sum, if any; and

     .3   the extent of the adjustment in the Contract Time, if any.

SECTION 7.2.2 Methods used in determining adjustments to the Contract Sum may
include those listed in Section 7.3.3.

SECTION 7.3 CONSTRUCTION CHANGE DIRECTIVES

SECTION 7.3.1 A Construction Change Directive is a written order prepared by the
Construction Manager and signed by the Owner, Construction Manager and
Architect, directing a change in the Work and stating a proposed basis for
adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may
by Construction Change Directive, without invalidating the Contract, order
changes in the Work within the general scope of the Contract consisting of
additions, deletions or other revisions, the Contract Sum and Contract Time
being accordingly.

SECTION 7.3.2 A Construction Change Directive shall be used in the absence of
total agreement on the terms of a Change Order.

SECTION 7.3.3 If the Construction Change Directive provides for an adjustment to
the Contract Sum, the adjustment shall be based on one of the following methods;

     .1   mutual acceptance of a lump sum properly itemized and supported by
          sufficient substantiating data to permit evaluation;

     .2   unit prices stated in the Contract Documents or subsequently agreed
          upon;

     .3   cost to be determined in a manner agreed upon by the parties and a
          mutually acceptable fixed or percentage fee; or

     .4   as provided in Section 7.3.6.

SECTION 7.3.4 Upon receipt of a Construction Change Directive, the Contractor
shall promptly proceed with the change in the Work involved and advise the
Construction Manager and Architect of the Contractor's agreement-or disagreement
with the method, if any, provided in the Construction Change Directive for
determining the proposed adjustment in the Contract Sum or Contract Time.

SECTION 7.3.5 A Construction Change Directive signed by the Contractor indicates
the agreement of the Contractor therewith, including adjustment in Contract Sum
and Contract Time or the method for determining them. Such agreement shall be
effective immediately and shall be recorded as a Change Order.

SECTION 7.3.6 If the Contractor does not respond promptly or disagrees with the
method for adjustment in the Contract Sum, the method and the adjustment shall
be determined by the Construction Manager on the basis of reasonable
expenditures and savings of those performing the Work attributable to the
change, including, in case of an increase in the Contract Sum, a reasonable
allowance for overhead and profit. In such case, and also under Section 7.3.3.3,
the Contractor shall keep and present, in such form as the Construction Manager
may prescribe an itemized accounting together with appropriate supporting data.
Unless otherwise provided in the Contract Documents, costs for the purposes of
this Section 7.3.6 shall be limited to the following:

     .1   costs of labor, including social security, old age and unemployment
          insurance, fringe benefits required by agreement or custom, and
          workers compensation insurance;

     .2   costs of materials, supplies and equipment, including cost of
          transportation, whether incorporated or consumed;

     .3   rental costs of machinery and equipment, exclusive of hand tools,
          whether rented from the Contractor or others;

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              30



     .4   costs of premiums for all bonds and insurance, permit fees, and sales,
          use or similar taxes related to the Work; and

     .5   additional costs of supervision and field office personnel directly
          attributable to the change.

     .6   costs for preparation shop drawings, engineering & estimating

SECTION 7.3.7 Pending final determination of cost to the Owner, amounts not in
dispute may be included in Applications for Payment. The amount of credit to be
allowed by the Contractor to the Owner for a deletion or change which results in
a net decrease in the Contract Sum shall be actual net cost as confirmed by the
Construction Manager. When both additions and credits covering related Work or
substitutions are involved in a change, the allowance for overhead and profit
shall be figured on the basis of net increase, if any, with respect to that
change.

SECTION 7.3.8 If the Owner and Contractor do not agree with the adjustment in
Contract Time or the method for determining it, the adjustment or the method
shall be referred to the Construction Manager for determination.

SECTION 7.3.9 When the Owner and Contractor agree with the determination made by
the Construction Manager concerning the adjustments in the Contract Sum and
Contract Time, or otherwise reach agreement upon the adjustments, such agreement
shall be effective immediately issued through the Construction Manager and shall
be recorded by preparation and execution of an appropriate Change Order.

SECTION 7.4 MINOR CHANGES IN THE WORK

SECTION 7.4.1 The Architect will have authority to order minor changes in the
Work not involving adjustment in the Contract Sum or extension of the Contract
Time and not inconsistent with the intent of the Contract Documents. Such
changes shall be effected by written order issued through the Construction
Manager and shall be binding on the Owner and Contractor. The Contractor shall
carry out such written orders promptly.

ARTICLE 8 TIME

SECTION 8.1 DEFINITIONS

SECTION 8.1.1 Unless otherwise provided, Contract Time is the period of time,
including authorized adjustments, allotted in the Contract Documents for
Substantial Completion of the Work.

SECTION 8.1.2 The date of commencement of the Work is the date established in
the Agreement. The date shall not be postponed by the failure to act of the
Contractor or of persons or entities for whom the Contractor is responsible.

SECTION 8.1.3 The date of Substantial Completion is the date certified by the
Architect in accordance with Section 9.8

SECTION 8.1.4 The term "day" as used in the Contract Documents shall mean
calendar day unless otherwise specifically defined.

SECTION 8.2 PROGRESS AND COMPLETION

SECTION 8.2.1 Time limits stated in the Contract Documents are of the essence of
the Contract. By executing the Agreement the Contractor confirms that the
Contract Time is a reasonable period for performing the Work.

SECTION 8.2.2 The Contractor shall not knowingly, except by agreement or
instruction of the Owner in writing, prematurely commence operation on the site
or elsewhere prior to the effective date of insurance required by Article II to
be furnished by the Contractor. The date of commencement of the Work shall not
be changed by the effective date of such insurance. Unless the date of
commencement is established by a notice to proceed given by the Owner, the
Contractor shall notify the Owner in writing not less than five days or other
agreed period before commencing the Work to permit the timely filing of
mortgages, mechanic's liens and other security interests.

SECTION 8.2.3 The Contractor shall proceed expeditiously with adequate forces
and shall achieve Substantial Completion within the Contract Time.

SECTION 8.3 DELAYS AND EXTENSIONS OF TIME

SECTION 8.3.1 If the Contractor is delayed at any time in progress of the Work
by an act or neglect of the Owner's own forces, Construction Manager, Architect,
any of the other Contractors or an employee of any of them, or by changes
ordered in the Work, or by labor disputes, fire, unusual delay in deliveries,
unavoidable casualties or other causes beyond the Contractor's control, or by
delay authorized by the Owner pending arbitration, or by other causes which

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.:1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              31



the Architect, based on the recommendation of the Construction Manager,
determines may justify delay, then the Contract Time shall be extended by Change
Order for such reasonable time as the Architect may determine.

SECTION 8.3.2 Claims relating to time shall be made in accordance with
applicable provisions of Section 4.7.

SECTION 8.3.3 This Section 8.3 does not preclude recovery of damages for delay
by either party under other provisions of the Contract Documents.

ARTICLE 9 PAYMENTS AND COMPLETION

SECTION 9.1 CONTRACT SUM

SECTION 9.1.1 The Contract Sum is stated in the Agreement and, including
authorized adjustments, is the total amount payable by the Owner to the
Contractor for performance of the Work under the Contract Documents.

SECTION 9.2 SCHEDULE OF VALUES

SECTION 9.2.1 Before the first Application for Payment, the Contractor shall
submit to the Architect, through the Construction Manager, a schedule of values
allocated to various portions of the Work, prepared in such form and supported
by such data to substantiate its accuracy as the Construction Manager and
Architect may require. This schedule, unless objected to by the Construction
Manager or Architect, shall be used as a basis for reviewing the Contractor's
Applications for Payment.

SECTION 9.3 APPLICATIONS FOR PAYMENT

SECTION 9.3.1 At least fifteen days before the date established for each
progress payment, the Contractor shall submit to the Construction Manager an
itemized Application for Payment for Work completed in accordance with the
schedule of values. Such application shall be notarized, if required, and
supported by such data substantiating the Contractor's right to payment as the
Owner, Construction Manager or Architect may require, such as copies of
requisitions from Subcontractors and material suppliers, and reflecting
retainage if provided for elsewhere in the Contract Documents.

SECTION 9.3.1.1 Such applications may include requests for payment on account of
changes in the Work which have been properly authorized by Construction Change
Directives but not yet included in Change Orders.

SECTION 9.3.1.2 Such applications may not include requests for payment of
amounts the Contractor does not intend to pay to a Subcontractor or material
supplier because of a dispute or other reason.

SECTION 9.3.2 Unless otherwise provided in the Contract Documents, payments
shall be made on account of materials and equipment delivered and suitably
stored at the site for subsequent incorporation in the Work. If approved in
advance by the Owner, payment may similarly be made for materials and equipment
suitably stored off the site at a location agreed upon in writing. Payment for
materials and equipment stored on or off the site shall be conditioned upon
compliance by the Contractor with procedures satisfactory to the Owner to
establish the Owner's title to such materials and equipment or otherwise protect
the Owner's interest, and shall include applicable insurance, storage and
transportation to the site for such materials and equipment stored off the site.

SECTION 9.3.3 The Contractor warrants that title to all Work covered by an
Application for Payment will pass to the Owner no later than the time of
payment. The Contractor further warrants that upon submittal of an Application
for Payment all Work for which Certificates for Payment have been previously
issued and payments received from the Owner shall, to the best of the
Contractor's knowledge, information and belief, be free and clear of liens,
claims, security interests or encumbrances in favor of the Contractor,
Subcontractors, material suppliers, or other persons or entities making a claim
by reason of having provided labor, materials and equipment relating to the
Work.

SECTION 9.4 CERTIFICATES FOR PAYMENT

SECTION 9.4.1 The Construction Manager will assemble a Project Application for
Payment by combining the Contractor's applications with similar applications for
progress payments from other Contractors and, after certifying the amounts due
on such applications, forward them to the Architect within seven days.

SECTION 9.4.2 Within seven days after the Architect's receipt of the Project
Application for Payment, the Construction Manager and Architect will either
issue to the Owner a Project Certificate for Payment, with a copy to the
Contractor, for such amount as the Construction Manager and Architect determine
is properly due, or notify the Contractor and Owner in writing of the
Construction Manager's and Architect's reasons for withholding certification

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              32



in whole or in part as provided in Section 9.5.1. Such notification will be
forwarded to the Contractor by the Construction Manager.

SECTION 9.4.3 The issuance of a separate Certificate for Payment or a Project
Certificate for Payment will constitute representations made separately by the
Construction Manager and Architect to the Owner, based on their individual
observations at the site and the data comprising the Application for Payment
submitted by the Contractor, that the Work has progressed to the point indicated
and that, to the best of the Construction Manager's and Architect's knowledge,
information and belief, quality of the Work is in accordance with the Contract
Documents. The foregoing representations are subject to an evaluation of the
Work for conformance with the Contract Documents upon Substantial Completion, to
results of subsequent tests and inspections, to minor deviations from the
Contract Documents correctable prior to completion and to specific
qualifications expressed by the Construction Manager or Architect. The issuance
of a separate Certificate for Payment or a Project Certificate for Payment will
further constitute a representation that the Contractor is entitled to payment
in the amount certified. However, the issuance of a separate Certificate for
Payment or a Project Certificate for Payment will not be a representation that
the Construction Manager or Architect has (1) made exhaustive or continuous
on-site inspections to check the quality or quantity of the Work, (2) reviewed
the Contractor's construction means, methods, techniques, sequences or
procedures, (3) reviewed copies of requisitions received from Subcontractors and
material suppliers and other data requested by the Owner to substantiate the
Contractor's right to payment or (4) made examination to ascertain how or for
what purpose the Contractor has used money previously paid on account of the
Contract Sum.

SECTION 9.5 DECISIONS TO WITHHOLD CERTIFICATION

SECTION 9.5.1 The Construction Manager or Architect may decide not to certify
payment and may withhold Certificate for Payment in whole or in part, to the
extent reasonably necessary to protect the Owner, if in the Construction
Manager's or Architect's opinion the representations to the Owner required by
Section 9.4.3 cannot be made. If the Construction Manager or Architect is unable
to certify payment in the amount of the Application, the Construction Manager or
Architect will notify the Contractor and Owner as provided in Section 9.4.2. If
the Contractor, Construction Manager and Architect cannot agree on a revised
amount, the Construction Manager and Architect will promptly issue a Certificate
for Payment for the amount for which the Construction Manager and Architect are
able to make such representations to the Owner. The Construction Manager or
Architect may also decide not to certify payment or, because of subsequently
discovered evidence or subsequent observations, may nullify the whole or a part
of a Certificate for Payment previously issued, to such extent as may be
necessary in the Construction Manager's or Architect's opinion to protect the
Owner from loss because of:

     .1   defective Work not remedied;

     .2   third party claims filed or reasonable evidence indicating probable
          filing of such claims;

     .3   failure of the Contractor to make payments properly to Subcontractors
          or for labor, materials or equipment;

     .4   reasonable evidence that the Work cannot be completed for the unpaid
          balance of the Contract Sum;

     .5   damage to the Owner or another contractor;

     .6   reasonable evidence that the Work will not be completed within the
          Contract Time, and that the unpaid balance would not be adequate to
          cover actual or liquidated damages for the anticipated delay: or

     .7   persistent failure to carry out the Work in accordance with the
          Contract Documents.

SECTION 9.5.2 When the above reasons for withholding certification are removed,
certification will be made for amounts previously withheld.

SECTION 9.6 PROGRESS PAYMENTS

SECTION 9.6.1 After the Construction Manager and Architect have issued a Project
Certificate for Payment, the Owner shall make payment in the manner and within
the time provided in the Contract Documents, and shall so notify the
Construction Manager and Architect.

SECTION 9.6.2 The Contractor shall promptly pay each Subcontractor, upon receipt
of payment from the Owner, out of the amount paid to the Contractor on account
of such Subcontractor's portion of the Work, the amount to which said
Subcontractor is entitled, reflecting percentages actually retained from
payments to the Contractor on account of such Subcontractor's portion of the
Work. The Contractor shall, by appropriate agreement with each Subcontractor,
require each Subcontractor to make payments to Sub-subcontractors in similar
manner.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No.1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              33



SECTION 9.6.3 The Construction Manager will, on request, furnish to a
Subcontractor, if practicable, information regarding percentages of completion
or amounts applied for by the Contractor and action taken thereon by the Owner,
Construction Manager and Architect on account of portions of the Work done by
such Subcontractor.

SECTION 9.6.4 Neither the Owner, Construction Manager nor Architect shall have
an obligation to pay or to see to the payment of money to a Subcontractor except
as may otherwise be required by law.

SECTION 9.6.5 Payment to material suppliers shall be treated in a manner similar
to that provided in Sections 9.6.2, 9.6.3 and 9.6.4.

SECTION 9.6.6 A Certificate for Payment, a progress payment, or partial or
entire use or occupancy of the Project by the Owner shall not constitute
acceptance of Work not in accordance with the Contract Documents.

SECTION 9.7 FAILURE OF PAYMENT

SECTION 9.7.1 If, through no fault of the Contractor, 1) the Construction
Manager and Architect do not issue a Project Certificate for Payment within
fourteen days after the Construction Manager's receipt of the Contractor's
Application for Payment or 2) the Owner does not pay the Contractor within seven
days after the date established in the Contract Documents the amount certified
by the Construction Manager and Architect or awarded by arbitration, then the
Contractor may, upon seven additional days' written notice to the Owner,
Construction Manager and Architect, stop the Work until payment of the amount
owing has been received. The Contract Time shall be extended appropriately and
the Contractor Sum shall be increased by the amount of the Contractor's
reasonable costs of shut-down, delay and start-up, which shall be accomplished
as provided in Article 7.

SECTION 9.8 SUBSTANTIAL COMPLETION

SECTION 9.8.1 Substantial Completion is the stage in the progress of the Work
when the Work or designated portion thereof is sufficiently complete in
accordance with the Contract Documents so the Owner can occupy or utilize the
Work for its intended use.

SECTION 9.8.2 When the Contractor considers that the Work, or a portion thereof
which the Owner agrees to accept separately, is substantially complete, the
Contractor and Construction Manager shall jointly prepare and submit to the
Architect a comprehensive list of items to be completed or corrected. The
Contractor shall proceed promptly to complete and correct items on the list.
Failure to include an item on such list does not alter the responsibility of the
Contractor to complete all Work in accordance with the Contract Documents. Upon
receipt of the list, the Architect, assisted by the Construction Manager, will
make an inspection to determine whether the Work or designated portion thereof
is substantially complete. If the Architect's inspection discloses any item,
whether or not included on the list, which is not in accordance with the
requirements of the Contract Documents, the Contractor shall before issuance of
the Certificate of Substantial Completion, complete or correct such item upon
notification by the Architect. The Contractor shall then submit a request for
another inspection by the Architect, assisted by the Construction Manager, to
determine Substantial Completion. When the Work or designated portion thereof is
substantially complete, the Architect will prepare a Certificate of Substantial
Completion which shall establish the date of Substantial Completion, shall
establish responsibilities of the Owner and Contractor for security,
maintenance, heat, utilities, damage to the Work and insurance, and shall fix
the time within which the Contractor shall finish all items on the list
accompanying the Certificate. Warranties required by the Contract Documents
shall commence on the date of substantial Completion of the Work or designated
portion thereof unless otherwise provided in the Certificate of Substantial
Completion. The Certificate of Substantial Completion shall be submitted to the
Owner and Contractor for their written acceptance of responsibilities assigned
to them in such Certificate.

SECTION 9.8.3 Upon Substantial Completion of the Work or designated portion
thereof and upon application by the Contractor and certification by the
Construction Manager and Architect, the Owner shall make payment, reflecting
adjustment in retainage, if any, for such Work or portion thereof as provided in
the Contract Documents.

SECTION 9.9 PARTIAL OCCUPANCY OR USE

SECTION 9.9.1 The Owner may occupy or use any completed or partially completed
portion of the Work at any stage when such portion is designated by separate
agreement with the Contractor, provided such occupancy or use is consented to by
the insurer as required under Section 11.3.11 and authorized by public
authorities having jurisdiction over the Work. Such partial occupancy or use may
commence whether or not the portion is substantially complete, provided the
Owner and Contractor have accepted in writing the responsibilities assigned to
each of them for payments,

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              34



retainage if any, security, maintenance, heat, utilities, damage to the Work and
insurance, and have agreed in writing concerning the period for correction of
the Work and commencement of warranties required by the Contract Documents. When
the Contractor considers a portion substantially complete, the Contractor and
Construction Manager shall jointly prepare and submit a list to the Architect as
provided under Section 9.8.2. Consent of the Contractor to partial occupancy or
use shall not be unreasonably withheld. The stage of the progress of the Work
shall be determined by written agreement between the Owner and Contractor or, if
no agreement is reached, by decision of the Architect after consultation with
the Construction Manager.

SECTION 9.9.2 Immediately prior to such partial occupancy or use, the Owner,
Construction Manager, Contractor and Architect shall jointly inspect the area to
be occupied or portion of the Work to be used in order to determine and record
the condition of the Work.

SECTION 9.9.3 Unless otherwise agreed upon, partial occupancy or use of a
portion or portions of the Work shall not constitute acceptance of Work not
complying with the requirements of the Contract Documents.

SECTION 9.10 FINAL COMPLETION AND FINAL PAYMENT

SECTION 9.10.1 Upon completion of the Work, the Contractor shall forward to the
Construction Manager a written notice that the Work is ready for final
inspection and acceptance and shall also forward to the Construction Manager a
final Contractor's Application for Payment. Upon receipt, the Construction
Manager will forward the notice and Application to the Architect who will
promptly make such inspection. When the Architect, based on the recommendation
of the Construction Manager, finds the Work acceptable under the Contract
Documents and the Contract fully performed, the Construction Manager and
Architect will promptly issue a final Certificate for Payment stating that to
the best of their knowledge, information and belief, and on the basis of their
observations and inspections, the Work has been completed in accordance with
terms and conditions of the Contract Documents and that the entire balance found
to be due the Contractor and noted in said final Certificate is due and payable.
The construction Manager's and Architect's final Certificate for Payment will
constitute a further representation that conditions listed in Section 9.10.2 as
precedent to the Contractor's being entitled to final payment have been
fulfilled.

SECTION 9.10.2 Neither final payment nor any remaining retained percentage shall
become due until the Contractor submits to the Architect through the
Construction Manager (1) an affidavit that payrolls, bills for materials and
equipment, and other indebtedness connected with the work for which the Owner or
the Owner's property might be responsible or encumbered (less amounts withheld
by Owner) have been paid or other wise satisfied, (2) a certificate evidencing
that insurance required by the Contract Documents to remain in force after final
payment is currently in effect and will not be canceled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner, (3) a
written statement that the Contractor knows of no substantial reason that the
insurance will not be renewable to cover the period required by the Contract
Documents, (4) consent of surety, if any, to final payment and (5), if required
by the Owner, other data establishing payment or satisfaction of obligations,
such as receipts, releases and waivers of liens, claims, security interests or
encumbrances arising out of the Contract, to the extent and in such form as may
be designated by the Owner. If a Subcontractor refuses to furnish a release or
waiver required by the Owner, the Contractor may furnish a bond satisfactory to
the Owner to indemnify the Owner against such lien. If such lien remains
unsatisfied after payments are made, the Contractor shall refund to the Owner
all money that the Owner may be compelled to pay in discharging such lien,
including all costs and reasonable attorneys' fees.

SECTION 9.10.3 If, after Substantial Completion of the Work, final completion
thereof is materially delayed through no fault of the Contractor or by issuance
of Change Orders affecting final completion, and the Construction Manager and
Architect so confirm, the Owner shall, upon application by the Contractor and
certification by the Construction Manager and Architect, and without terminating
the Contract, make payment of the balance due for that portion of the Work fully
completed and accepted. If the remaining balance for Work not fully completed or
corrected is less than retainage stipulated in the Contract Documents, and if
bonds have been furnished, the written consent of surety to payment of the
balance due for that portion of the Work fully completed and accepted shall be
submitted by the Contractor to the Architect through the Construction Manager
prior to certification of such payment. Such payment shall be made under terms
and conditions governing final payment, except that it shall not constitute a
waiver of Claims. The making of final payment shall constitute a waiver of
Claims by the Owner as provided in Section 4.4.5.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              35



SECTION 9.10.4 Acceptance of final payment by the Contractor, a Subcontractor or
material supplier shall constitute a waiver of claims by that payee except those
previously made in writing and identified by that payee as unsettled at the time
of final Application for Payment. Such waivers shall be in addition to the
waiver described in Section 4.7.5.

ARTICLE 10 PROTECTION OF PERSONS AND PROPERTY

SECTION 10.1 SAFETY PRECAUTIONS AND PROGRAMS

SECTION 10.1.1 The Contractor shall be responsible for initiating, maintaining
and supervising all safety precautions and programs in connection with the
performance of the Contract. The Contractor shall submit the Contractor's safety
program to the Construction Manager for review and coordination with the safety
programs of other Contractors.

SECTION 10.1.2 In the event the Contractor encounters on the site material
reasonably believed to be asbestos or polychlorinated biphenyl (PCB) which has
not been rendered harmless, the Contractor shall immediately stop Work in the
area affected and report the condition to the Owner, Construction Manager and
Architect in writing. The Work in the affected area shall not thereafter be
resumed except by written agreement of the Owner and Contractor if in fact the
material is asbestos or polychlorinated biphenyl (PCB) and has not been rendered
harmless. The Work in the affected area shall be resumed in the absence of
asbestos or polychlorinated biphenyl (PCB), or when it has been rendered
harmless, by written agreement of the Owner and Contractor, or in accordance
with final determination by the Architect on which arbitration has not been
demanded, or by arbitration under Article 4.

SECTION 10.1.3 The Contractor shall not be required pursuant to Article 7 to
perform without consent any Work relating to asbestos or polychlorinated
biphenyl (PCB).

SECTION 10.1.4 To the fullest extent permitted by law, the Owner shall indemnify
and hold harmless the Contractor, Construction Manager, Architect, their
consultants, and agents and employees of any of them from and against claims,
damages, losses and expenses, including but not limited to attorneys' fees,
arising out of or resulting from performance of the Work in the affected area if
in fact the material is asbestos or polychlorinated biphenyl (PCB) and has not
been rendered harmless, provided that such claim, damage, loss or expense is
attributable to bodily injury, sickness, disease or death, or to injury to or
destruction of tangible property (other than the Work itself) including loss of
use resulting therefrom, but only to the extent caused in whole or in part by
negligent acts or omissions of the Owner, anyone directly or indirectly employed
by the Owner or anyone for whose acts the Owner may be liable, regardless of
whether or not such claim, damage, loss or expense is caused in part by a party
indemnified hereunder. Such obligation shall not be construed to negate, abridge
or reduce other rights or obligations of indemnity which would otherwise exist
as to a party or person described in this Section 10.1.4.

SECTION 10.1.5 If reasonable precautions will be inadequate to prevent
foreseeable bodily injury or death to persons resulting from a material or
substance encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner, Construction Manager and Architect in writing. The
Owner, Contractor, Construction Manager and Architect shall then proceed in the
same manner described in Section 10.1.2.

SECTION 10.1.6 The Owner shall be responsible for obtaining the services of a
licensed laboratory to verify a presence or absence of material or substance
reported by the Contractor and, in the event such material or substance is found
to be Present, to verify that it has been rendered harmless. Unless otherwise
required by the Contract Documents, the Owner shall furnish in writing to the
Contractor, Construction Manager and Architect the names and qualifications of
persons or entities who are to perform tests verifying the presence or absence
of such material or substance or who are to perform the task or removal or safe
containment of such material or substance. The Contractor, the Construction
Manager and the Architect will promptly rely to the Owner in writing starting
whether or not any of them has reasonable objection to the persons or entities
proposed by the Owner. If the Contractor, Construction Manager or Architect has
an objection to a person or entity proposed by the Owner, the Owner shall
propose another to whom the Contractor, the Construction Manager and the
Architect have no reasonable objection.

SECTION 10.2 SAFETY OF PERSONS AND PROPERTY

SECTION 10.2.1 The Contractor shall take reasonable precautions for safety of,
and shall provide reasonable protection to prevent damage, injury or loss to:

     .1   employees on the Work and other persons who may be affected thereby;

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              36



     .2   the Work and materials and equipment to be incorporated therein,
          whether in storage on or off the site, under care, custody or control
          of the Contractor or the Contractor's Subcontractors or
          Sub-subcontractors;

     .3   other property at the site or adjacent thereto, such as trees, shrubs,
          lawns, walks, pavements, roadways, structures and utilities not
          designated for removal, relocation or replacement in the course of
          construction; and

     .4   construction or operations by the Owner or other Contractors.

SECTION 10.2.2 The Contractor shall give notices and comply with applicable
laws, ordinances, rules, regulations and lawful orders of public authorities
bearing on safety of persons or property or their protection from damage, injury
or loss.

SECTION 10.2.3 The Contractor shall erect and maintain, as required by existing
conditions and performances of the Contract, reasonable safeguards for safety
and protection, including posting danger signs and other warning against
hazards, promulgating safety regulations and notifying owners and users of
adjacent sites and utilities.

SECTION 10.2.4 When use for storage of explosives or other hazardous materials
or equipment or unusual methods are necessary for execution of the Work, the
Contractor shall exercise utmost care and carry on such activities under
supervision of properly qualified personnel.

SECTION 10.2.5 The Contractor shall promptly remedy damage and loss (other than
damage or loss insured under property insurance required by the Contract
Documents) to property referred to in Sections 10.2.1.2,10.2.l.3 and 10.2.1.4
caused in whole or in part by the Contractor, a Subcontractor, a
Sub-subcontractor, or anyone directly or indirectly employed by any of them, or
by anyone for whose acts they may be liable and for which the Contractor is
responsible under Sections 10.2.1.2,10.2.1.3 and 10.2.1.4, except damage or loss
attributable to acts or omissions of the Owner, Construction Manager or
Architect or anyone directly or indirectly employed by any of them, or by anyone
for whose acts any of them may be liable, and not attributable to the fault or
negligence of the Contractor. The foregoing obligations of the Contractor are in
addition to the Contractor's obligations under Section 3.18.

SECTION 10.2.6 The Contractor shall designate a responsible member of the
Contractor's organization at the site whose duty shall be the prevention of
accidents. This person shall be the Contractor's superintendent unless otherwise
designated by the Contractor in writing to the Owner, Construction Manager and
Architect.

SECTION 10.2.7 The Contractor shall not load or permit any part of the
construction or site to be loaded so as to endanger its safety.

SECTION 10.3 EMERGENCIES

SECTION 10.3.1 In an emergency affecting safety or persons or property, the
Contractor shall act, at the Contractor's discretion, to prevent threatened
damage, injury or loss. Additional compensation or extension of timer claimed by
the Contractor on account of an emergency shall be determined as provided in
Section 4.7 and Article 7.

ARTICLE 11 INSURANCE AND BONDS

SECTION 11.1 CONTRACTOR'S LIABILITY INSURANCE

SECTION 11.1.1 The Contractor shall purchase from and maintain in a company or
companies lawfully authorized to do business in the jurisdiction in which the
Project is located such insurance as will protect the Contractor from claims set
forth below which may arise out of or result from the Contractor's operations
under the Contract and for which the Contractor may be legally liable, whether
such operations be by the Contractor or by a Subcontractor or by anyone directly
or indirectly employed by any of them, or by anyone for whose acts any of them
may be liable:

     .1   claims under workers compensation, disability benefit and other
          similar employee benefit acts which are applicable to the Work to be
          performed;

     .2   claims for damages because of bodily injury, occupational sickness or
          disease, or death of the Contractor's employees;

     .3   claims for damages because of bodily injury, sickness or disease, or
          death of any person other than the Contractor's employees;

     .4   claims for damages insured by usual personal injury liability coverage
          which are sustained (1) by a person as a result of an offense directly
          or indirectly related to employment of such person by the Contractor,
          or (2) by another person;

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              37



     .5   claims for damages, other than to the Work itself, because of injury
          to or destruction of tangible property, including loss of use
          resulting therefrom;

     .6   claims for damages because of bodily injury, death of a person or
          property damage arising out of ownership, maintenance or use of a
          motor vehicle; and

     .7   claims involving contractual liability insurance applicable to the
          Contractor's obligations under Section 3.18.

SECTION 11.1.2 The insurance required by Section 11.1.1 shall be written for not
less than limits of liability specified in the Contract Documents or required by
law, whichever coverage is greater. Coverages, whether written on an occurrence
or claims-made basis, shall be maintained without interruption from date of
commencement of the Work until date of final payment and termination of any
coverage required to be maintained after final payment.

SECTION 11.1.3 Certificates of insurance acceptable to the Owner shall be
submitted to the Construction Manager for transmittal to the Owner with a copy
to the Architect prior to commencement of the Work. These certificates and the
insurance policies required by this Section 11.1 shall contain a provision that
coverages afforded under the policies will not be canceled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner. If any
of the foregoing insurance coverages are required to remain in force after final
payment and are reasonably available, an additional certificate evidencing
continuation of such coverage shall be submitted with the final Application for
Payment as required by Section 9.10.2. Information concerning reduction of
coverage shall be furnished by the Contractor with reasonable promptness in
accordance with the Contractor's information and belief.

SECTION 11.2 OWNER'S LIABILITY INSURANCE

SECTION 11.2.1 The Owner shall be responsible for purchasing and maintaining the
Owner's usual liability insurance, Optionally, the Owner may purchase and
maintain other insurance for self-protection against claims which may arise from
operations under the Contract. The Contractor shall not be responsible for
purchasing and maintaining this optional Owner's liability insurance unless
specifically required by the Contract Documents.

SECTION 11.3 PROPERTY INSURANCE

SECTION 11.3.1 Unless otherwise provided, the Owner shall purchase and maintain,
in a company or companies lawfully authorized to do business in the jurisdiction
in which the Project is located, property insurance in the amount of the initial
Contract Sum as well as subsequent modifications thereto for the entire Work at
the site on a replacement cost basis without voluntary deductibles. Such
property insurance shall be maintained, unless otherwise provided in the
Contract Documents or otherwise agreed in writing by all persons and entities
who are beneficiaries of such insurance, until final payment has been made as
provided in Section 9.10 or until no person or entity other than the Owner has
an insurable interest in the property required by this Section 11.3 to be
covered, whichever is earlier. This insurance shall include interests of the
Owner, the Contractor, Subcontractors and Sub-subcontractors in the Work.

SECTION 11.3.1.1 Property insurance shall be on an "all-risk" policy form and
shall insure against the perils of fire and extended coverage and physical loss
or damage including, without duplication of coverage, theft, vandalism,
malicious mischief, collapse, falsework, temporary buildings and debris removal
including demolition occasioned by enforcement of any applicable legal
requirements, and shall cover reasonable compensation for Architect's services
and expenses required as a result of such insured loss. Coverage for other
perils shall not be required unless otherwise provided in the Contract
Documents.

SECTION 11.3.1.2 If the Owner does not intend to purchase such property
insurance required by the Contract and with all of the coverages in the amount
described above, the Owner shall so inform the Contractor in writing prior to
commencement of the Work. The Contractor may then effect insurance which will
protect the interests of the Contractor, Subcontractors and Sub-subcontractors
in the Work, and by appropriate Change Order the cost thereof shall be charged
to the Owner. If the Contractor is damaged by the failure or neglect of the
Owner to purchase or maintain insurance as described above, without so notifying
the Contractor, then the Owner shall bear all reasonable costs properly
attributable thereto.

SECTION 11.3.1.3 If the property insurance requires minimum deductibles and such
deductibles are identified in the Contract Documents, the Contractor shall pay
costs not covered because of such deductibles. If the Owner or insurer increase
the required minimum deductibles above the amounts so identified or if the Owner
elects to purchase this

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              38



insurance with voluntary deductible amounts, the Owner shall be responsible for
payment of the additional costs not covered because of such increased or
voluntary deductibles.

SECTION 11.3.1.4 Unless otherwise provided in the Contract Documents, this
property insurance shall cover portions of the Work stored off the site after
written approval of the Owner at the value established in the approval, and also
portions of the Work in transit.

SECTION 11.3.1.5 The insurance required by this Section 11.3 is not intended to
cover machinery, tools or equipment owned or rented by the Contractor which are
utilized in the performance of the Work but not incorporated into the permanent
improvements. The Contractor shall, at the Contractor's own expense, provide
insurance coverage for owned or rented machinery, tools or equipment which shall
be subject to the provisions of Section 11.3.7.

SECTION 11.3.2 Boiler and Machinery Insurance. The Owner shall purchase and
maintain boiler and machinery required by the Contract Documents or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner; this insurance shall include interests of
the Owner, Construction Manager, Contractor, Subcontractors and
Sub-subcontractors in the Work, and the Owner and Contractor shall be named
insureds.

SECTION 11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may
purchase and maintain such insurance as will insure the Owner against loss of
use of the Owner's property due to fire or other hazards, however caused. The
Owner waives all rights of action against the Contractor for loss of use of the
Owner's property including consequential losses due to fire or other hazards
however caused.

SECTION 11.3.4 If the Contractor requests in writing that insurance for risks
other than those described herein or for other special hazards be included in
the property insurance policy, the Owner shall, if possible, include such
insurance, and the cost thereof shall be charged to the Contractor by
appropriate Change Order.

SECTION 11.3.5 If during the Project construction period the Owner insures
properties, real or personal or both, adjoining or adjacent to the site by
property insurance under policies separate from those insuring the Project, or
if after final payment property insurance is to be provided on the completed
Project through a policy or policies other than those insuring the Project
during the construction period, the Owner shall waive all rights in accordance
with the terms of Section 11.3.7 for damages caused by fire or other perils
covered by this separate property insurance. All separate policies shall provide
this waiver of subrogation by endorsement or otherwise.

SECTION 11.3.6 Before an exposure to loss may occur, the Owner shall file with
the Contractor a copy of each policy that includes insurance coverages required
by this Section 11.3. Each policy shall contain all generally applicable
conditions, definitions, exclusions and endorsements related to this Project.
Each policy shall contain a provision that the policy will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Contractor.

SECTION 11.3.7 Waivers of Subrogation. The Owner and Contractor waive all rights
against each other and against the Construction Manager, Architect, Owner's
other Contractors and own forces described in Article 6, if any and the
subcontractors, sub-subcontractors, consultants, agents and employees of any of
them, for damages caused by fire or other perils to the extent covered by
property insurance obtained pursuant to this Section 11.3 or other property
insurance applicable to the Work, except such rights as the Owner and Contractor
may have to the proceeds of such insurance held by the Owner as fiduciary. The
Owner or Contractor, as appropriate, shall require of the Construction Manager,
Construction Manager's consultants, Architect, Architect's consultants, Owner's
separate contractors described in Article 6, if any, and the subcontractors,
sub-subcontractors, agents and employees, of any of them, by appropriate
agreements, written where legally required for validity, similar waivers each in
favor of other parties enumerated herein. The policies shall provide such
waivers of subrogation by endorsement or otherwise. A waiver of subrogation
shall be effective as to a person or entity even though that person or entity
would otherwise have a duty of indemnification, contractual or otherwise, did
not pay the insurance premium directly or indirectly, and whether or not the
person or entity had an insurable interest in the property damaged.

SECTION 11.3.8 A loss insured under Owner's property insurance shall be adjusted
by the Owner as fiduciary and made payable to the Owner as fiduciary for the
insureds, as their interests may appear, subject to requirements of any
applicable mortgagee clause and of Section 11.3.10. The Contractor shall pay
Subcontractors their just shares of

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              39



insurance proceeds received by the Contractor, and by appropriate agreements,
written where legally required for validity, shall require Subcontractors to
make payments to their Sub-subcontractors in similar manner.

SECTION 11.3.9 If required in writing by a party in interest, the Owner as
fiduciary shall, upon occurrence of an insured loss, give bond for proper
performance of the Owner's duties. The cost of required bonds shall be charged
against proceeds received as fiduciary. The Owner shall deposit in a separate
account proceeds so received, which the Owner shall distribute in accordance
with such agreement as the parties in interest may reach, or in accordance with
an arbitration award in which case the procedure shall be as provided in Section
4.9. If after such loss no other special agreement is made, replacement of
damaged property shall be covered by appropriate Change Order.

SECTION 11.3.10 The Owner as fiduciary shall have power to adjust and settle a
loss with insurers unless one of the parties in interest shall object in writing
within five days after occurrence of loss to the Owner's exercise of this power,
if such objection be made, arbitrators shall be chosen as provided in Section
4.9. The Owner as fiduciary shall, in that case, make settlement with insurers
in accordance with directions of such arbitrators. If distribution of insurance
proceeds by arbitration is required, the arbitrators will direct such
distribution.

SECTION 11.3.11 Partial occupancy or use in accordance with Section 9.9 shall
not commence until the insurance company or companies providing property
insurance have consented to such partial occupancy or use by endorsement or
otherwise. The Owner and the Contractor shall take reasonable steps to obtain
consent of the insurance company or companies and shall, without mutual written
consent, take no action with respect to partial occupancy or use that would
cause cancellation, lapse or reduction of insurance.

SECTION 11.4 PERFORMANCE BOND AND PAYMENT BOND

SECTION 11.4.1 The Owner shall have the right to require the Contractor to
furnish bonds covering faithful performance of the Contract and payment of
obligations arising thereunder as stipulated in bidding requirements or
specifically required in the Contract Documents on the date of execution of the
Contract.

SECTION 11.4.2 Upon the request of any person or entity appearing to be a
potential beneficiary of bonds, covering payment of obligations arising under
the Contract, the Contractor shall promptly furnish a copy of the bonds or sha1l
permit a copy to be made.

ARTICLE 12 UNCOVERING AND CORRECTION OF WORK

SECTION 12.1 UNCOVERING OF WORK

SECTION 12.1.1 If a portion of the Work is covered contrary to the Construction
Manager's or Architect's request or to requirements specifically expressed in
the Contract Documents, it must, if required in writing by either, be uncovered
for their observation and be replaced at the Contractor's expense without change
in the Contract Time.

SECTION 12.1.2 If a portion of the Work has been covered which the Construction
Manager or Architect has not specifically requested to observe prior to its
being covered, the Construction Manager or Architect may request to see such
Work and it shall be uncovered by the Contractor. If such Work is in accordance
with the Contract Document, costs of uncovering and replacement shall, by
appropriate Change Order, be charged to the Owner. If such work is not in
accordance with the Contract Documents, the Contractor shall pay such costs
unless the condition was caused by the Owner or one of the other Contractors in
which event the Owner shall be responsible for payment of such costs.

SECTION 12.2 CORRECTION OF WORK

SECTION 12.2.1 The Contractor shall promptly correct Work rejected by the
Construction Manager or Architect or failing to conform to the requirements of
the Contract Documents, whether observed before or after Substantial Completion
and whether or not fabricated, installed or completed. The Contractor shall bear
costs of correcting such rejected Work, including additional testing and
inspections and compensation for the Construction Manager's and Architect's
services and expenses made necessary thereby.

SECTION 12.2.2 If, within one year after the date of Substantial Completion of
the Work or designated portion thereof, or after the date for commencement of
warranties established under Section 9.9.1, or by terms of an applicable special
warranty required by the Contract Documents, any of the Work is found to be not
in accordance with the requirements of the Contract Documents, the Contractor
shall correct it promptly after receipt of written notice from the Owner to do
so unless the Owner has previously given the Contractor a written acceptance of
such condition. This period of one year shall be extended with respect to
portions of Work first performed after Substantial

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              40



Completion by the period of time between Substantial Completion and the actual
performance of the Work. This obligation under this Section 12.2.2 shall survive
acceptance of the Work under the Contract and termination of the Contract. The
Owner shall give such notice promptly after discovery of the condition.

SECTION 12.2.3 The Contractor shall remove from the site portions of the Work
which are not in accordance with the requirements of the Contract Documents and
are neither corrected by the Contractor nor accepted by the Owner.

SECTION 12.2.4 If the Contractor fails to correct nonconforming Work within a
reasonable time, the Owner may correct it in accordance with Section 2.4. If the
Contractor does not proceed with correction of such nonconforming Work within a
reasonable time fixed by written notice from the Architect issued through the
Construction Manager, the Owner may remove it and store the salvable materials
or equipment at the Contractor's expenses. If the Contractor does not pay costs
of such removal and storage within ten days after written notice, the Owner may
upon ten additional days' written notice sell such materials and equipment at
auction or at private sale and shall account for the proceeds thereof, after
deducting costs and damages that should have been borne by the Contractor,
including compensation for the Construction Manager's and Architect's services
and expenses made necessary thereby. If such proceeds of sale do not cover costs
which the Contractor should have borne, the Contract Sum shall be reduced by the
deficiency. If payments then or thereafter due the Contractor are not sufficient
to cover such amount, the Contractor shall pay the difference to the Owner.

SECTION 12.2.5 The Contractor shall bear the cost of correcting destroyed or
damaged construction whether completed or partially completed, of the Owner or
other Contractors caused by the Contractor's correction or removal of Work which
is not in accordance with the requirements of the Contract Documents.

SECTION 12.2.6 Nothing contained in this Section 12.2 shall be construed to
establish a period of limitation with respect to other obligations which the
Contractor might have under the Contract Documents. Establishment of the time
period of one year as described in Section 12.2.2 relates only to the specific
obligation of the Contractor to correct the Work, and has no relationship to the
time within which the obligation to comply with the Contract Documents may be
sought to be enforced, nor to the time within which proceedings may be commenced
to establish the Contractor's liability with respect to the Contractor's
obligations other than specifically to correct the Work.

SECTION 12.3 ACCEPTANCE OF NONCONFORMING WORK

SECTION 12.3.1 If the Owner prefers to accept Work which is not in accordance
with the requirements of the Contract Documents, the Owner may do so instead of
requiring its removal and correction, in which case the Contract Sum will be
reduced as appropriate and equitable. Such adjustment shall be effected whether
or not final payment has been made.

ARTICLE 13 MISCELLANEOUS PROVISIONS

SECTION 13.1 GOVERNING LAW

SECTION 13.1.1 The Contract shall be governed by the law of the place where the
Project is located.

SECTION 13.2 SUCCESSORS AND ASSIGNS

SECTION 13.2.1 The Owner and Contractor respectively bind themselves, their
partners, successors, assigns and legal representatives to the other party
hereto and to partners, successors, assigns and legal representatives of such
other party in respect to covenants, agreements and obligations contained in the
Contract Documents. Neither party to the Contract shall assign the Contract as a
whole without written consent of the other. If either party attempts to make
such an assignment without such consent, that party shall nevertheless remain
legally responsible for all obligations under the Contract.

SECTION 13.3 WRITTEN NOTICE

SECTION 13.3.1 Written notice shall be deemed to have been duly served if
delivered in person to the individual or a member of the firm or entity or to an
officer of the corporation for which it was intended, or if delivered at or sent
by registered or certified mail to the last business address known to the party
giving notice.

SECTION 13.4 RIGHTS AND REMEDIES

SECTION 13.4.1 Duties and obligations imposed by the Contract Documents and
rights and remedies available thereunder shall be in addition to and not a
limitation of duties, obligations, rights and remedies otherwise imposed or
available by law.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

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                                                                              41



SECTION 13.4.2 No action or failure to act by the Owner, Construction Manager,
Architect or Contractor shall constitute a waiver of a right or duty afforded
them under the Contract, nor shall such action or failure to act constitute
approval of or acquiescence in a breach thereunder, except as may be
specifically agreed in writing.

SECTION 13.5 TESTS AND INSPECTIONS

SECTION 13.5.1 Tests, inspections and approvals of portions of the Work required
by the Contract Documents or by laws, ordinances, rules, regulations or orders
of public authorities having jurisdiction shall be made at an appropriate time.
Unless otherwise provided, the Contractor shall make arrangements for such
tests, inspections and approvals with an independent testing laboratory or
entity acceptable to the Owner, or with the appropriate public authority, and
shall bear all related costs of tests, inspections and approvals. The Contractor
shall give the Construction Manager and Architect timely notice of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear costs of tests,
inspections or approvals which do not become requirements until after bids are
received or negotiations concluded.

SECTION 13.5.2 If the Construction Manager, Architect, Owner or public
authorities having jurisdiction determine that portions of the Work require
additional testing, inspection or approval not included under Section 13.5.1,
the Construction Manager and Architect will, upon written authorization from the
Owner, instruct the Contractor to make arrangements for such additional testing,
inspection or approval by an entity acceptable to the Owner, and the Contractor
shall give timely notice to the Construction Manager and Architect of when and
where tests and inspections are to be made so the Construction Manager and
Architect may observe such procedures. The Owner shall bear such costs except as
provided in Section 13.5.3.

SECTION 13.5.3 If such procedures for testing, inspection or approval under
Sections 13.5.1 and 13.5.2 reveal failure of the portions of the Work to comply
with requirements established by the Contract Documents, the Contractor shall
bear all costs made necessary by such failure including those of repeated
procedures and compensation for the Construction Manager's and Architect's
services and expenses.

SECTION 13.5.4 Required certificates of testing, inspection or approval shall,
unless otherwise required by the Contract Documents, be secured by the
Contractor and promptly delivered to the Construction Manager for transmittal to
the Architect.

SECTION 13.5.5 If the Construction Manager or Architect is to observe tests,
inspections or approvals required by the Contract Documents, the Construction
Manager or Architect will do so promptly and, where practicable, at the normal
place of testing.

SECTION 13.5.6 Tests or inspections conducted pursuant to the Contract Documents
shall be made promptly to avoid unreasonable delay in the Work.

SECTION 13.6 INTEREST

SECTION 13.6.1 Payment due and unpaid under the Contract Documents shall bear
interest from the date payment is due at such rate as the parties may agree upon
in writing or, in the absence thereof, at the legal rate prevailing from time to
time at the place where the Project is located.

SECTION 13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD

SECTION 13.7.1 As between the Owner and Contractor:

     .1   Before Substantial Completion. As to acts or failures to act occuring
          prior to the relevant date of Substantial Completion, any applicable
          statute of limitations shall commence to run and any alleged cause of
          action shall be deemed to have accrued in any and all events not later
          than such date of Substantial Completion;

     .2   Between Substantial Completion and Final Certificate for Payment. As
          to acts or failures to act occurring subsequent to the relevant date
          of Substantial Completion and prior to issuance of the final
          Certificate for Payment, and applicable statute of limitations shall
          commence to run and any alleged cause of action shall be deemed to
          have accrued in any and all events not later than the date of issuance
          of the final Certificate for Payment; and

     .3   After Final Certificate for Payment. As to acts or failures to act
          occurring after the relevant date of issuance of the final Certificate
          for Payment, any applicable statute of limitations shall commence to

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              42



          run and any alleged cause of action shall be deemed to have accrued in
          any and all events not later than the date of any act or failure to
          act by the Contractor pursuant to any warranty provided under Section
          3.5, the date of any correction of the Work or failure to correct the
          Work by the Contractor under Section 12.2, or the date of actual
          commission of any other act or failure to perform any duty or
          obligation by the Contractor or Owner, whichever occurs last.

ARTICLE 14 TERMINATION OR SUSPENSION OF THE CONTRACT

SECTION 14.1 TERMINATION BY THE CONTRACTOR

SECTION 14.1.1 The Contract may terminate the Contract if the Work is stopped
for a period of 30 days through no act or fault of the Contractor or a
Subcontractor, Sub-subcontractor or their agents or employees or any other
persons performing portions of the Work under contract with the Contractor, for
any of the following reasons:

     .1   issuance of an order of a court or other public authority having
          jurisdiction;

     .2   an act of government, such as a declaration of national emergency,
          making material unavailable;

     .3   because the Construction Manager or Architect has not issued a
          Certificate for payment and has not notified the Contractor of the
          reason for withholding certification as provided in Section 9.4.2, or
          because the Owner has not made payment on a Certificate for Payment
          within the time stated in the Contract Documents;

     .4   if repeated suspensions, delays or interruptions by the Owner as
          described in Section 14.3 constitute in the aggregate more than 100
          percent of the total number of days scheduled for completion, or 120
          days in any 365-day period, whichever is less; or

     .5   the Owner has failed to furnish to the Contractor promptly, upon the
          Contractor's request, reasonable evidence as required by Section
          2.2.1.

SECTION 14.1.2 If one of the above reasons exists, the Contractor may, upon
seven additional days' written notice to the Owner, Construction Manager and
Architect, terminate the Contract and recover from the Owner payment for Work
executed and for proven loss with respect to materials, equipment, tools, and
construction equipment and machinery, including reasonable overhead, profit and
damages.

SECTION 14.1.3 If the Work is stopped for a period of 60 days through no act or
fault of the Contractor or a Subcontractor or their agents or employees or any
other persons performing portions of the Work under contract with the Contractor
because the Owner has persistently failed to fulfill the Owner's obligations
under the Contract Documents with respect to matters important to the progress
of the Work, the Contractor may, upon seven additional days' written notice to
the Owner, Construction Manager and Architect, terminate the Contract and
recover from the Owner as provided in Section 14.1.2.

SECTION 14.2 TERMINATION BY THE OWNER FOR CAUSE

SECTION 14.2.1 The Owner may terminate the Contract if the Contractor:

     .1   persistently or repeatedly refuses or fails to supply enough properly
          skilled workers or proper materials;

     .2   fails to make payment to Subcontractors for materials or labor in
          accordance with the respective agreements between the Contractor and
          the Subcontractors;

     .3   persistently disregards laws, ordinances, or rules, regulations or
          orders of a public authority having jurisdiction; or

     .4   otherwise is guilty of substantial breach of a provision of the
          Contract Documents.

SECTION 14.2.2 When any of the above reasons exist, the Owner, after
consultation with the Construction Manager, and upon certification by the
Architect that sufficient cause exists to justify such action, may without
prejudice to any other rights or remedies of the Owner and after giving the
Contractor and the Contractor's surety, if any, seven days' written notice,
terminate employment of the Contractor and may, subject to any prior rights of
the surety:

     .1   take possession of the site and of all materials, equipment, tools,
          and construction equipment and machinery thereon owned by the
          Contractor;

     .2   accept assignment of subcontracts pursuant to Section 5.4; and

     .3   finish the Work by whatever reasonable method the Owner may deem
          expedient

SECTION 14.2.3 When the Owner terminates the Contract for one of the reasons
stated in Section 14.2.1, the Contractor shall not be entitled to receive
further payment until the Work is finished.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              43



SECTION 14.2.4 If the unpaid balance of the Contract Sum exceeds costs of
finishing the Work, including compensation for the Construction Manager's and
Architect's services and expenses made necessary thereby, such excess shall be
paid to the Contractor. If such costs exceed the unpaid balance, the Contractor
shall pay the difference to the Owner. The amount to be paid to the Contractor
or Owner, as the case may be, shall, upon application, be certified by the
Architect after consultation with the Construction Manager, and this obligation
for payment shall survive termination of the Contract.

SECTION 14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE

SECTION 14.3.1 The Owner may, without cause, order the Contractor in writing to
suspend, delay or interrupt the Work in whole or in part for such period of time
as the Owner may determine.

SECTION 14.3.2 An adjustment shall be made for increases in the cost of
performance of the Contract, including profit on the increased cost of
performance, caused by suspension, delay or interruption. No adjustment shall be
made to the extent:

     .1   that performance is, was or would have been so suspended, delayed or
          interrupted by another cause for which the Contractor is responsible;
          or

     .2   that an equitable adjustment is made or denied under another provision
          of this Contract.

SECTION 14.3.3 Adjustments made in the cost of performance may have a mutually
agreed fixed or percentage fee.

AIA Document A201/CMa(TM) - 1992. Copyright (C) 1992 by The American Institute
of Architects. All rights reserved. WARNING: This AIA(R) Document is protected
by U.S. Copyright Law and International Treaties. Unauthorized reproduction or
distribution of this AIA(R) Document, or any portion of it, may result in severe
civil and criminal penalties, and will be prosecuted to the maximum extent
possible under the law. This draft was produced by AIA software at 15:21:49 on
12/14/2006 under Order No. 1000245581_1 which expires on 6/27/2007, and is not
for resale.

User Notes:                                                          (482810611)


                                                                              44

EX-10.17

                                                                   Exhibit 10.17

                                                                  Project L06276
                                                                  Contract 5F

                              AIA Document AlOl/CMa

                           STANDARD FORM OF AGREEMENT
                          BETWEEN OWNER AND CONTRACTOR

                 where the basis of payment is a STIPULATED SUM

                    1992 CONSTRUCTION MANAGER-ADVISER EDITION

      THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
     ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.

The 1992 Edition of AIA Document A201/CMa, General Conditions of the Contract
for Construction, Construction Manager-Adviser Edition, is adopted in this
document by reference. Do not use with other general conditions unless this
document is modified.

AGREEMENT

made as of the Nineteenth day of December in the year of Two Thousand Six
(in words, indicate day, month and year)

BETWEEN the Owner:                      Converted Organics of Woodbridge, LLC
(Name and address)                      99 Madison Avenue
                                        Fanwood, NJ 07023

and the Contractor:                     Hatzel and Buehler, Inc.
(Name and address)                      5A South Gold Drive
                                        Hamilton, NJ 08691

For the following Project:              Converted Organics of Woodbridge, LLC
(Include detailed description of        75 Crows Mill Road
Project, location, address and scope)   Keasbey, NJ

The Construction Manager is:            The Construction Partnership, Inc.
(Name and address)                      436 Creamery Way, Suite 100
                                        Exton, PA 19341

The Architect is:                       For the purposes of this Agreement all
(Name and address)                      references to "Architect" shall be
                                        intended to mean "Process Engineer".
                                        Process Engineer is:

                                             Weston Solutions, Inc.
                                             1 Wall Street
                                             Manchester, NH 03101

The Owner and Contractor agree as set forth below.

Copyright 1975, 1980, (C)1992 by The American Institute of Architects, 1735 New
York Avenue, N.W., Washington, D.C. 2OO06-5292. Reproduction of the material
herein or substantial quotation of its provisions without the written permission
of the AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution

(LOGO)   AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION
         MANAGER-ADVISER EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
         ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 -
         WARNING: UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL
         SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   1


                                    ARTICLE 1
                             THE CONTRACT DOCUMENTS

The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and areas fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.

                                    ARTICLE 2
                            THE WORK OF THIS CONTRACT

The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:

Provide Electrical work in accordance with the Contractor's Proposal dated
November 13, 2006 and Contractor's letter, dated November 30, 2006, the Terms
and Conditions of which shall take precedence over any other contract document
including, but not limited to, the specifications listed in Attachment "A" and
drawings listed in Attachment "B". In the event of a conflict between said
proposal and any other contract documents, the said proposal shall be
controlling.

                                    ARTICLE 3
                 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.

(Insert the date of commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)

     DATE OF COMMENCEMENT SHALL BE FIXED WITHIN 45 DAYS OF THE DATE OF THIS
AGREEMENT.

Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner, through the Construction
Manager, in writing not less than five days before commencing the Work to permit
the timely filing of mortgages, mechanic's liens and other security interests.

3.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than

(Insert the calendar date or number of calendar days after the date of
commencement Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)

          425 DAYS FROM THE NOTICE TO PROCEED

, subject to adjustments of this Contract Time as provided in the Contract
Documents.

(Insert provisions, if any, for liquidated damages relating to failure to
complete on time)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   2



                                    ARTICLE 4
                                  CONTRACT SUM

4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Two Million One Hundred Thirty
Four Thousand Dollars ($2,134,000), subject to additions and deductions as
provided in the Contract Documents.

4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:

(State the numbers or other identification of accepted alternates. If decisions
on other alternates are to be made by the Owner subsequent to the execution of
this Agreement, attach a schedule of such other alternates showing the amount
for each and the date until which that amount is valid.)

4.3 Unit prices, if any, are as follows:

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION
MANAGER-ADVISER EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING:
UNLICENSED PHOTOCOPYING VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE
VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   3



                                    ARTICLE 5
                                PROGRESS PAYMENTS

5.1 Based upon Applications for Payment submitted by the Contractor to the
Construction Manager, and upon Project Applications and Certificates for Payment
issued by the Construction Manager and Architect, the Owner shall make progress
payments on account of the Contract Sum to the Contractor as provided below and
elsewhere in the Contract Documents.

5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:

5.3 Provided an Application for Payment is submitted to the Construction Manager
not later than the 25th day of a month, the Owner shall make payment to the
Contractor not later than the 30th day of the following month. If an Application
for Payment is received by the Construction Manager after the application date
fixed above, payment shall be made by the Owner not later than 30 days after the
Construction Manager receives the Application for Payment.

5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Construction Manager or Architect may require.
This schedule, unless objected to by the Construction Manager or Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.

5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.

5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:

5.6.1 Take that portion of the Contract Sum properly allocable to completed Work
as determined by multiplying the percentage completion of each portion of the
Work by the share of the total Contract Sum allocated to that portion of the
work in the Schedule of Values, less retainage of Ten percent (10%) Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions;

5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction (or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing), less retainage of ten
percent (10%);

5.6.3 Subtract the aggregate of previous payments made by the Owner; and

5.6.4 Subtract amounts, if any, for which the Construction Manager or Architect
has withheld or nullified a Certificate for Payment as provided in Paragraph
9.5 of the General Conditions.

5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:

5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to increase
the total payments to One Hundred percent (100%) of the Contract Sum, less such
amounts as the Construction Manager recommends and the Architect determines for
incomplete Work and unsettled claims; and

5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.

5.8 Reduction or limitation of retainage, if any, shall be as follows:

(If it is intended, prior to Substantial Completion of the entire Work, to
reduce or limit the retainage resulting from the percentages inserted in
Subparagraphs 5.6.1 and 5.6.2 above, and this is not explained elsewhere in the
Contract Documents, insert here provisions for such reduction or limitation.)

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT. CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1902 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   4



                                    ARTICLE 6
                                  FINAL PAYMENT

Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Project Certificate for Payment has been issued
by the Construction Manager and Architect; such final payment shall be made by
the Owner not more than 30 days after the issuance of the final Project
Certificate for Payment, or as follows:

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.

7.2 Payments due and unpaid under the Contract shall bear interest from the date
payment is due at the rate stated below, or in the absence thereof, at the legal
rate prevailing from time to time at the place where the Project is located.

(Insert rate of interest agreed upon, if any.)

(Usury laws and requirements under the Federal Truth in Lending Act, similar
stale and local consumer credit laws and other regulations at the Owner's and
Contractor's principal places of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waiters.)

7.3 Temporary facilities and services:

(Here insert temporary facilities and services which are different from or in
addition to those included elsewhere in the Contract Documents.)

7.4 Other Provisions:

(Here list any special provisions affecting the Contract.)

Insurance requirements shall be as set forth in the attached "Contractor's
Statement of Insurance Conditions".

The execution of this Agreement is continent on the Owner securing a letter from
the Bank of New York confirming financing if this project in the amount of a
minimum of $17,500,000 including $700,000 in contingency funds.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   5



                                    ARTICLE 8
                            TERMINATION OR SUSPENSION

8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.

8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.

                                    ARTICLE 9
                        ENUMERATION OF CONTRACT DOCUMENTS

9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:

9.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A101/CMa, 1992 Construction Manager-Adviser
Edition.

9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201/CMa, 1992 Construction Manager-Adviser Edition.

9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated _______________________________, and are as follows:



DOCUMENT   TITLE   PAGES
- --------   -----   -----
             



9.1.4 The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and ace as follows:

(Either list the Specifications here or refer to an exhibit attached to this
Agreement)



SECTION    TITLE   PAGES
- --------   -----   -----
             



                               See Attachment "A"

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS. 1735 NEW YORK
AVENUE, N.W., WASHINGTON. DC 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                                 A101/CMA-1992 6



9.1.5 The Drawings are as follows, and are dated ___________________ unless a
different date is shown below.

(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)



NUMBER     TITLE   DATE
- ------     -----   ----
             



                               See Attachment "B"



9.1.6 The Addenda, if any, are as follows:



NUMBER     DATE    PAGES
- ------     ----    -----
             



Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT. CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, DC 2OO06-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   7



9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:

(List here any additional documents which are intended to form part of the
Contract Documents The General Conditions provide that bidding requirements such
as advertisement or invitation to bid, Instructions to Bidders, sample forms and
the Contractor's bid are not part of the Contract Documents unless enumerated in
this Agreement. They should be listed here only if intended to be part of the
Contract Documents.)

This project is a New Jersey Economic Development Agency project. Contractor is
to meet all requirements of the NJEDA as stated in the meeting attended by
Construction Manager and Contractor on November 2, 2006. These items include but
are not limited to:

Prevailing wage requirements as documented in TCPI Meeting Minutes dated
November 2, 2006 and information package provided at the meeting (attached).

Affirmative action requirements as documented in TCPI meeting minutes dated
November 2, 2006 and information package provided at the meeting (attached).

NJEDA Exhibit "E" attached.

This Agreement is entered into as of the day and year first written above and is
executed in at least four original copies of which one is to be delivered to the
Contractor, one each to the Construction Manager and Architect for use in the
administration of the Contract, and the remainder to the Owner.

OWNER                                   CONTRACTOR


/s/ Edward Gildea                       /s/ Scott Eyester
- -------------------------------------   ----------------------------------------
(Signature)                             (Signature)

EDWARD GILDEA, PRESIDENT                Scott Eyester - Vice President
(Printed name and title)                (Printed name and title)

(AIA LOGO)

CAUTION: You should sign an original AIA document which has this caution printed
in red. An original assures that changes will not be obscured as may occur when
documents are reproduced. See Instruction Sheet for Limited License for
Reproduction of this document.

AIA DOCUMENT A101/CMA - OWNER-CONTRACTOR AGREEMENT, CONSTRUCTION MANAGER-ADVISER
EDITION - AIA(R) - (C)1992 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK
AVENUE, N.W., WASHINGTON, D.C. 20006-5292 - WARNING: UNLICENSED PHOTOCOPYING
VIOLATES U.S. COPYRIGHT LAWS AND WILL SUBJECT THE VIOLATOR TO LEGAL PROSECUTION.


                                                               A101/CMA-1992   8



                                 ATTACHMENT "A"

SPECIFICATION LIST (AS PREPARED BY WESTON SOLUTIONS, INC.)



Title                                                             Revision
- -----                                                             --------
                                                            
16000    Electrical Provisions                                       B
16010    Electrical General                                          B
16111    Conduit                                                     B
16114    Cable Trays                                                 B
16121    Medium Voltage Cable                                        B
16123    Wires and Cables                                            B
16130    Boxes                                                       B
16141    Wiring Devices                                              B
16170    Grounding & Bonding                                         B
16190    Supporting Devices                                          B
16195    Electrical Identification                                   B
16312    Unit Substation                                             B
16340    Medium Voltage Metal-Clad Switch Gear (C/B Switchgear)      B
16440    Disconnect Switches                                         B
16461    Dry Type Transformers                                       B
16470    Panelboards                                                 B
16480    Motor Control                                               B
16480A   Motor Control Center(s)                                     B
16510    Lighting Fixtures and Lamps                                 B




                                 ATTACHMENT "B"

DRAWING LIST (AS PREPARED BY CONVERTED ORGANICS)

    
G-l    Solid Waste Receiving
G-2    Not Included
G-3    Macerator and Y Tank
G-4    Digesters
G-5    Digesters
G-6    Not Included
G-7    Primary Screen and Press Feed Tank
G-8    Rotary Press
G-9    Clarifier and Cooling Tower
G-10   Filtrate and Filtrate Catch Tank
G-11   Evaporator System
G-12   Dryer System
G-13   Not Included
G-14   Pelletizer and Bagger
G-15   Hot Water Recovery System
G-16   Wastewater Treatment
G-17   Process Vapor
G-l8   Process Odor Control System
G-19   Boiler System
G-20   Compressed Air System





(TCPI LOGO)                                             CONTRACTORS STATEMENT OF
The Construction Partnership, Inc.                          INSURANCE CONDITIONS

All contractors performing services for Owner are required to provide the
following insurance with insurance companies licensed in the State in which the
work is being performed prior to the performance of the work:

1.   The Contractor shall purchase insurance as described below in a company or
     companies properly licensed to do business in the State in which the work
     is being performed and acceptable to the Construction Manager. Such
     insurance shall be written for not less than the limits specified below, or
     the minimum limits specified in the prime contract, whichever requirement
     is greater. Coverages shall be kept in force without interruption from the
     date of commencement of the work until final payment and termination of any
     coverage required to be maintained after final payment.

          a.   Workers Compensation

               Statutory coverage and amounts as required by the State in which
               the work is being performed.

               Employers Liability
               $500,000 Each Accident
               $500,000 Aggregate for Injury By Disease
               $500,000 Each Employee for Injury By Disease

          b.   Commercial General Liability including Premises and Operations,
               XCU covering explosion, collapse and underground hazards,
               Independent Contractors Protective, Products and Completed
               Operations, Blanket Contractual Liability, Personal Injury and
               Broad Form Property damage.

               Bodily Injury and Property Damage Combined
               $1,000,000 Any One Occurrence (Coverage A)
               $1,000,000 Any One Person or Organization (Coverage B)
               $2,000,000 Products/Completed Operations Aggregate
               $2,000,000 General Aggregate
               $50,000 Fire Damage
               $5,000 Medical Expense

               The general aggregate limit shall apply on a per project basis.

               General Liability insurance shall be written on an "occurrence"
               basis. General Liability insurance shall name the Construction
               Manager, Owner and Architect as Additional Insureds on a primary
               and noncontributory basis via ISO endorsements CG2037 & CG2033 or
               an endorsement providing equivalent coverage to the Additional
               Insureds. Coverage for Additional Insureds must be as broad as
               coverage provided to the Named Insured. Coverage shall not be cut
               back or limited for Additional Insureds.


                                                                     Page 1 of 2



               Products and Completed Operations coverage shall be extended to
               Additional Insureds and shall be maintained with the same limits
               as above for three years commencing with final acceptance and
               payment by the Construction Manager.

               Contractual Liability insurance shall cover the Contractor's
               obligations under the indemnification agreement included herein.

          c.   Comprehensive Automobile Liability including coverage for owned,
               hired and non-owned vehicles.

               Bodily Injury and Property Damage Combined
               $1,000,000 each accident

          d.   Umbrella Liability

               Bodily Injury and Property Damage Combined
               $1,000,000 Products/Completed Operations Aggregate
               $1,000,000 General Aggregate
               $1,000,000 Any One Occurrence (Coverage A)
               $1,000,000 Any One Person or Organization (Coverage B)

               The general aggregate limit shall apply on a per project basis.

               Umbrella liability insurance shall be written on an "occurrence"
               basis and shall name the Construction Manager, Owner and
               Architect as Additional Insureds on a primary and noncontributory
               basis. Coverage for Additional Insureds must be as broad as
               coverage provided to the Named Insured. Coverage shall not be cut
               back or limited for Additional Insureds.

               Contractor agrees to furnish an Acord certificate of insurance to
               the Construction Manager prior to commencement of work. Such
               certificate shall provide that the required insurance coverages
               will not be cancelled, non-renewed or materially changed unless
               at least thirty (30) days prior to written notice is given to
               Construction Manager.

2.   Subcontractors of any tier shall be required to maintain the same
     insurance, which is required of the Contractor.

3.   Qualification of Insurers: In order to determine financial strength and
     reputation of insurance carriers, all companies providing coverages
     required shall have financial rating not lower than A as listed in A.M.
     Best's Key Rating Guide, current edition. Companies with ratings lower than
     A will be acceptable only upon written consent of Construction Manager.

4.   Owner's or Construction Manager's insurance will not apply to machinery,
     tools and other non-expendable items of equipment owned or rented by
     subcontractor or its subcontractors or to other personal property of
     subcontractors, its subcontractors, or employees. TCPI shall not be liable
     for any loss or damage thereto.

5.   THE CERTIFICATES OF INSURANCE SHALL SPECIFY OWNER NAME, PROJECT TITLE AND
     PROJECT NUMBER. PLEASE HAVE YOUR AGENT FORWARD YOUR INSURANCE CERTIFICATE
     TO: THE CONSTRUCTION PARTNERSHIP, INC., 436 CREAMERY WAY, SUITE 100, EXTON,
     PA 19341.


                                                                     Page 2 of 2

EX-10.18

                                                                   EXHIBIT 10.18

                                 PROMISSORY NOTE

$100,000                                                        OCTOBER 27, 2006
                                                                PORTLAND, OREGON

      FOR VALUE RECEIVED, Converted Organics Inc., a Delaware corporation
("Maker"), promises to pay to the order of Paulson Investment Company, Inc.
("Holder") the principal sum of One Hundred Thousand and no/l00ths Dollars
($100,000.00) (the "Obligation"). Interest on the Obligation shall accrue until
the Obligation is paid in full at the rate of ten percent (10%) per annum. The
Obligation and interest shall be payable in lawful money of the United States,
at Portland, Oregon or such other place as Holder hereof may designate.

      Interest shall be computed on the basis of a 365-day year or 366-day year,
as applicable, and actual days lapsed. Maker shall have the right to prepay at
any time in advance of maturity, without premium or penalty, all or any part of
the principal amount of this Promissory Note or interest thereon. Payments shall
be first applied to outstanding interest and thereafter to the principal.

      This Promissory Note shall be payable as follows:

      1.    If before December 31, 2006, this Promissory Note shall become due
            and payable in full at the time of the closing of the proposed
            public offering of securities of Maker pursuant to that certain
            Registration Statement on Form SB-2 (SEC File No. 333-135174) to be
            underwritten by a syndicate managed by Holder (the "Offering"). At
            the option of Holder, Holder may deduct such payment from the net
            proceeds otherwise payable by Holder to Maker at the closing of the
            Offering.

      2.    If after December 31, 2006, and the Offering has not closed or this
            Promissory Note has not been paid in full, this Promissory Note
            shall become due and payable in full thirty (30) days after any
            written or oral demand for payment by Holder.

      Maker waives diligence, presentment, demand, protest, and notice of any
kind whatsoever. The non-exercise by Holder of any of Holder's rights hereunder
in any instance shall not constitute a waiver thereof in that or any subsequent
instance.



      Maker shall pay upon demand any and all expenses, including reasonable
attorney fees, incurred or paid by Holder without suit or action in attempting
to collect funds due under this Promissory Note. In the event an action is
instituted to enforce or interpret any of the terms of this Promissory Note
including, but not limited to, any action or participation by Maker in, or in
connection with, a case or proceeding under the U.S. Bankruptcy Code or any
successor statute, the prevailing party shall be entitled to recover all
expenses reasonably incurred at, before and after trial, on appeal, and on
review whether or not taxable as costs, including, without limitation,
attorneys' fees, witness fees (expert and otherwise), deposition costs, copying
charges and other expenses.

      This Promissory Note is to be construed in all respects and enforced
according to the laws of the State of Oregon.

      By order of and upon the authorization of the Board of Directors of
Converted Organics Inc.:


                                    "MAKER"

                                    CONVERTED ORGANICS INC.

                                    By:   /s/ Edward Gildea
                                        ----------------------------------------
                                    Its:  President
                                        ----------------------------------------

EX-10.19

                                                                 Exhibit 10.19

                                PROMISSORY NOTE

$100,000                                                      October 30, 2006
                                                              Atlanta, Georgia


     FOR VALUE RECEIVED, Converted Organics Inc., a Delaware corporation
("Maker"), promises to pay to the order of High Capital Funding, LLC ("Holder")
the principal sum of One Hundred Thousand and no/100th Dollars ($100,000) (the
"Obligation"). Interest on the Obligation shall accrue until the Obligation is
paid in full at the rate of ten percent (10%) per annum. The Obligation and
interest shall be payable in lawful money of the United States, at Atlanta,
Georgia or such other place as Holder hereof may designate.

     Interest shall be computed on the basis of a 365-day year or 366-day year,
as applicable, and actual days lapsed. Maker shall have the right to prepay at
any time in advance of maturity, without premium or penalty, all or any part of
the principal amount of this Promissory Note or interest thereon. Payments
shall be first applied to outstanding interest and thereafter to the principal.

     This Promissory Note shall be payable as follows:

     1.  If before December 31, 2006, this Promissory Note shall become due and
         payable in full at the time of the closing of the proposed public
         offering of securities of Maker pursuant to that certain Registration
         Statement on Form SB-2 (SEC File No. 333-135174) to be underwritten by
         a syndicate managed by Paulson Investment Company, Inc. (the
         "Offering").

     2.  If after December 31, 2006, and the Offering has not closed or this
         Promissory Note has not been paid in full, this Promissory Note shall
         become due and payable in full thirty (30) days after any written or
         oral demand for payment by Holder.


     Maker waives diligence, presentment, demand, protest, and notice of any
kind whatsoever. The non-exercise by Holder of any of Holder's rights hereunder
in any instance shall not constitute a waiver thereof in that or any subsequent
instance.

     Maker shall pay upon demand any and all expenses, including reasonable
attorney fees, incurred or paid by Holder without suit or action in attempting
to collect funds due under this Promissory Note. In the event an action is
instituted to enforce or interpret any of the terms of this Promissory Note
including, but not limited to, any action or

participation by Maker in, or in connection with, a case or proceeding under the
U.S. Bankruptcy Code or any successor statute, the prevailing party shall be
entitled to recover all expenses reasonably incurred at, before and after trial,
on appeal, and on review whether or not taxable as costs, including, without
limitation, attorneys' fees, witness fees (expert and otherwise), deposition
costs, copying charges and other expenses.

     This Promissory Note is to be construed in all respects and enforced
according to the laws of the State of Delaware.

     By order of and upon the authorization of the Board of Directors of
Converted Organics Inc.:


                                       "MAKER"

                                       CONVERTED ORGANICS INC.



                                       By: /s/ Edward Gildea
                                          -------------------------------------

                                       Its: President
                                          -------------------------------------

EX-10.20

                                                                   Exhibit 10.20


                                PROMISSORY NOTE

$50,000                                                        DECEMBER 29, 2006
                                                                PORTLAND, OREGON


     FOR VALUE RECEIVED, Converted Organics Inc., a Delaware corporation
("Maker"), promises to pay to the order of Paulson Investment Company, Inc.
("Holder") the principal sum of Fifty Thousand and no/100ths Dollars
($50,000.00) (the "Obligation"). Interest on the Obligation shall accrue until
the Obligation is paid in full at the rate of ten percent (10%) per annum. The
Obligation and interest shall be payable in lawful money of the United States,
at Portland, Oregon or such other place as Holder hereof may designate.

     Interest shall be computed on the basis of a 365-day year or 366-day year,
as applicable, and actual days lapsed. Maker shall have the right to prepay at
any time in advance of maturity, without premium or penalty, all or any part of
the principal amount of this Promissory Note or interest thereon. Payments
shall be first applied to outstanding interest and thereafter to the principal.

     This Promissory Note shall be payable as follows:

     1.  If before January 29, 2007, this Promissory Note shall become due and
         payable in full at the time of the closing of the proposed public
         offering of securities of Maker pursuant to that certain Registration
         Statement on Form SB-2 (SEC File No. 333-135174) to be underwritten by
         a syndicate managed by Holder, (the "Offering").

     2.  If after January 29, 2007, and the Offering has not closed or this
         Promissory Note has not been paid in full, this Promissory Note shall
         become due and payable in full thirty (30) days after any written or
         oral demand for payment by Holder.


    Maker waives diligence, presentment, demand, protest, and notice of any kind
whatsoever. The non-exercise by Holder of any of Holder's rights hereunder in
any instance shall not constitute a waiver thereof in that or any subsequent
instance.

     Maker shall pay upon demand any and all expenses, including reasonable
attorney fees, incurred or paid by Holder without suit or action in attempting
to collect funds due under this Promissory Note. In the event an action is
instituted to enforce or interpret any of the terms of this Promissory Note
including, but not limited to, any action or




participation by Maker in, or in connection with, a case or proceeding under the
U.S. Bankruptcy Code or any successor statute, the prevailing party shall be
entitled to recover all expenses reasonably incurred at, before and after trial,
on appeal, and on review whether or not taxable as costs, including, without
limitation, attorneys' fees, witness fees (expert and otherwise), deposition
costs, copying charges and other expenses.

     This Promissory Note is to be construed in all respects and enforced
according to the laws of the State of Oregon.

     By order of and upon the authorization of the Board of Directors of
Converted Organics Inc.:

                                             "MAKER"

                                             CONVERTED ORGANICS INC.

                                             By: /s/ Edward Gildea
                                                 -------------------


                                             Its:  President & CEO
                                                 -------------------

EX-10.21

                                                                   Exhibit 10.21


                                PROMISSORY NOTE


$50,000.00                                                       January 3, 2007


     FOR VALUE RECEIVED, Converted Organics Inc., a Delaware corporation
("Maker"), promises to pay to the order of High Capital Funding, LLC ("Holder")
the principal sum of Fifty Thousand Dollars ($50,000)(the "Obligation").
Interest on the Obligation shall accrue until the Obligation is paid in full at
the rate of ten (10%) per annum. The Obligation and interest shall be payable in
lawful money of the United States, at Atlanta, Georgia or such other place as
Holder hereof may designate.

     Interest shall be computed on the basis of a 365 day year or 366-day year,
as applicable, and actual days lapsed. Maker shall the right to prepay at any
time in advance of maturity, without premium or penalty, all or any part of
the principal amount of this Promissory Note or interest thereon. Payments
shall be first applied to outstanding interest and thereafter to the principal.

     This Promissory Note shall be payable as follows:

     1.   If before January 31, 2007, this Promissory Note shall become due and
          payable in full at the time of the closing of the proposed public
          offering of securities of Maker pursuant to that certain Registration
          Statement on Form SB-2 (SEC File No. 333-135174) to be underwritten by
          a syndicate managed by Paulson Investment Company, Inc. (the
          "Offering").

     2.   If after January 31, 2007, and the Offering has not closed or this
          Promissory Note has not been paid in full, this Promissory Note shall
          become due and payable in full thirty (30) days after any written or
          oral demand for payment by Holder.


     Maker waives diligence, presentment, demand, protest, and notice of any
kind whatsoever. The non-exercise by Holder of any of Holder's rights hereunder
in any instance shall not constitute a waiver thereof in that or any subsequent
instance.

     Maker shall pay upon demand any and all expenses, including reasonable
attorney fees, incurred or paid by Holder without suit or action in attempting
to collect funds due under this Promissory Note. In the event an action is
instituted to enforce or interpret any of the terms of this Promissory Note
including, but not limited to, any action or participation by Maker in, or in
connection with, a case or proceeding under the U.S. Bankruptcy Code or any
successor statute, the prevailing party shall be entitled to recover all
expenses reasonably incurred at, before and after trial, on appeal, and on
review whether or not taxable as costs, including, without limitation,
attorneys' fees, witness fees (expert and otherwise), deposition costs, copying
charges and other expenses.

     This Promissory Note is to be construed in all respects and enforced
according to the laws of the state of Delaware.

     A facsimile signature on this Promissory Note shall be deemed to be an
original signature for all purposes.

     By order of and upon the authorization of the Board of Directors of
Converted Organics Inc.:



                                          "MAKER"

                                          CONVERTED ORGANICS INC.

                                          BY:  /s/ Edward Gildea
                                               ---------------------

                                          ITS: President
                                               ---------------------

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

     We hereby consent to the use in this Registration Statement on Form SB-2 of our report dated June 2, 2006, except for Note 10, as to which the date is June 15, 2006, relating to the financial statements of Converted Organics Inc., which appears in such Registration Statement, and to the use of our name and the statements with respect to us, as appearing under the heading “Experts” in such Registration Statement.

/s/ CARLIN, CHARRON & ROSEN, LLP

CARLIN, CHARRON & ROSEN, LLP

Glastonbury, Connecticut
January 25, 2007