8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 22, 2008

METASWARM, INC.

(Exact name of registrant as specified in its charter)

Florida	000-52847	65-1081050
(State of Other Jurisdiction of Incorporation)	(Commission File Number)	IRS Employer Identification Number)

530 S.  Lake Ave. #186, Pasadena, CA 91101

(Address of principal executive offices)

(626) 792-0153

 (Registrant's telephone number, including area code)

Copies to:

Richard A. Friedman, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, New York 10006

Phone: (212) 930-9700

Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On January 22, 2008, pursuant to the terms of a securities purchase and security agreement (the “Purchase Agreement”), MetaSwarm, Inc. (the “Company”) issued and sold secured convertible notes in the aggregate principal amount of $1,000,000 (the “Secured Convertible Notes”) and warrants to purchase an aggregate of 5,000,000 shares of the Company’s common stock (the “Warrants”) for a net purchase price of $985,000 (reflecting a loan origination fee of $15,000) in a private placement.  The Company received net proceeds of $856,220 (net of placement agent fees of $85,000 and other closing costs of $58,780) from the private placement.   The Secured Convertible Notes are secured by all assets of the Company (including the Company’s inventions and patent applications which are secured by a patent security agreement), bear interest at a rate of 14% per annum, mature one year from the date of issuance and are convertible into shares of common stock of the Company at a rate of $0.20 per share.    The Warrants are exercisable for a period of ten years at $0.202 per share.

We claim an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, these transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.

The foregoing description of the Purchase Agreement, the Patent Security Agreement, the Secured Convertible Notes and the Warrants does not  purport to be complete and is qualified in its entirety by reference to these agreements which are attached as exhibits to this Current Report and are incorporated into this Item by reference

ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION

See Item 1.01 above, which is incorporated herein by reference.

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES

See Item 1.01 above, which is incorporated herein by reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Business Acquired.

Not Applicable

(b) Pro Forma Financial Information

Not Applicable

(c) Exhibits

4.8	-	Securities Purchase and Security Agreement
4.9	-	Patent Security Agreement
4.10	-	Form of Secured Convertible Note
4.11	-	Form of Warrant

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	METASWARM, INC.
Dated: January 24, 2008	By:	/s/ Marvin Shannon
		Name: Marvin Shannon
		Title: Chief Executive Officer

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EX-4.8

Exhibit 4.8

SECURITIES PURCHASE AND SECURITY AGREEMENT

SECURITIES PURCHASE AND SECURITY AGREEMENT, dated as of January 22, 2008, between MetaSwarm, Inc., a Florida corporation (the “Issuer”), and AIS Funding, LLC, a Delaware limited liability company (the “Subscriber”).

Background

A.            The Issuer has requested that the Subscriber provide loans to the Issuer in the aggregate original maximum principal amount of $1,000,000.00, which will be evidenced by one or more promissory notes in the aggregate amount not to exceed $1,000,000.

B.            The Subscriber has agreed to provide the Loan, subject to the terms and conditions set forth below.

Agreement

The parties hereby agree as follows:

1. DEFINITIONS AND ACCOUNTING TERMS

Section 1.01                                 As used in this Agreement, the following terms have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):

 “Affiliate”shall mean any Person (a) which directly or indirectly Controls, or is Controlled by or is under common Control with the Issuer or a subsidiary, (b) which directly or indirectly beneficially holds or owns 5% or more of any class of voting stock of the Issuer or any subsidiary, or (c) 5% or more of the voting stock of which is directly or indirectly beneficially owned or held by the Issuer or a subsidiary.

“Bankruptcy Code” as used herein shall mean Title 11 of the United States Code entitled “Bankruptcy”.

“Collateral”shall have the meaning assigned to such term in Section 4.

“Control” shall mean the possession, directly or indirectly, of the power to director cause the direction of the management and policies of any Person, whether through the ownership of voting securities, by contract or otherwise.

“Conversion Shares”means those Shares issuable upon conversion of the Note(s).

“Debt”means , without duplication (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations as lessee under capital leases; (e) current liabilities in respect of unfunded vested benefits under plans covered by ERISA; (f) obligations under Letters of Credit; (g) obligations under acceptance facilities; (h) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; and (i) obligations secured by any Liens, whether or not the obligations have been assumed.

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“Distributions” shall mean all payment or distributions to Owners in cash or in property other than reasonable salaries, bonuses and expense reimbursements.

“Environmental Law”means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the protection of human health and the environment.

“ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Event of Default”shall have the meaning assigned to such term in Section 13.01.

“GAAP” shall mean generally accepted accounting principles.

“Hazardous Substances”means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed in, regulated by or identified in any Environmental Law.

“Lien”means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing).

“Loan”shall mean the loan described herein and evidenced by this Agreement, the Note(s) and the remaining Loan Documents.

“Loan Amount”means an amount equal to $1,000,000.00 or such lesser amount equal to the sum of the original principal amount(s) under one or more Note(s) executed and delivered by Issuer to Subscriber.

“Loan Documents” means, collectively,this Agreement, the Note(s), the Patent Assignment, the Warrants, and all other documents executed in connection with this Agreement.

“Obligations” shall have the meaning assigned to such term in Section 5.

“Organizational Documents”means (a) with respect to Issuer or any other corporation, its certificate or articles of incorporation and by-laws; (b) with respect to a partnership, its partnership certificate and partnership agreement; (c) with respect to a limited liability company, its articles or certificate of formation and its operating or management agreement; and (d) with respect to a trust, the declaration of trust; and, with respect to any of them, any other document required to be filed with public authorities to evidence or establish authority to conduct business.

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“OTC”means the over-the-counter pink sheets.

“Owner”means with respect to Issuer, any Person having legal or beneficial title to Shares or other ownership interest in Issuer or a right to acquire such an interest.

“Permitted Liens”shall have the meaning assigned to such term in Section 12.04.

“Permitted Protests” means the right of the Issuer to protest any Lien (other than a Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a federal or state tax lien) or rental payment, provided that (x) a reserve with respect to such liability is established on the books of the Issuer in an amount that is reasonably satisfactory to the Subscriber, (y) any such protest is instituted and diligently prosecuted by the Issuer in good faith, and (z) the Subscriber is satisfied that, while such protest is pending, there will be no impairment of the enforceability, validity or priority of any of the Liens of the Issuer in and to the Collateral.

“Person”means an individual, partnership, corporation, limited liability company, limited liability partnership, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.

“Plan”means any employee plan subject to Title IV of ERISA maintained for employees of Issuer, any subsidiary of Issuer or any other trade or business under common control with Issuer within the meaning of Section 414(c) of the Internal Revenue Code of 1986 or any regulations thereunder.

“Registration Statement”means a registration statement filed by the Issuer with the SEC for a public offering and sale of securities of the Issuer on Form SB-2 or other available form for which Issuer is eligible (other than a registration statement on Form S-4, Form S-8, or successor form to either, or any reg­istration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation).

“SEC” means the Securities and Exchange Commis­sion, or any other federal agency at the time administering the Securities Act.

“Securities Act”means the Securities Act of 1933, as amended since, and all regulationspromulgated thereunder.

“Securities Exchange Act”means the Securities Exchange Act of 1934, as amendedsince, and all regulations promulgated thereunder.

“Shares” means shares of common stock, no par value, of Issuer.

“UCC”shall mean the Florida Uniform Commercial Code as in effect from time to time.

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“Warrant Shares”means those Shares issuable upon exercise of the Warrants.

Section 1.02       All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 7.05, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.

Section 1.03        Unless otherwise defined in this Agreement, capitalized words shall have the meanings set forth in the UCC.

2.            LOAN.

Section 2.01        Subject to the terms and provisions of this Agreement, Subscriber agrees to make a loan to Issuer in the Loan Amount, to be secured by Issuer’s Inventory, Accounts and all other Collateral and the proceeds thereof (the “Loan”).

Section 2.02        The Loan shall be evidenced by and repayable according to this Agreement and one or more Convertible Promissory Note(s), the initial one being of even date, issued by Issuer to Subscriber in the form attached as Exhibit 1 (whether one or two are issued, the “Note(s)”), and made a part hereof.  The Note(s) shall be due and payable, if not paid in full earlier or converted in full earlier, one year following the Closing Date (the “Maturity Date”).  Subscriber agrees to provide Issuer with the loan proceeds under the Loan, in the principal amount of $1,000,000.00 upon the conditions under Article 3 being satisfied (the “Closing” and the date hereof, being the “Closing Date”).  Simultaneous with the issuance of the first Note(s) to Subscriber and payment of loan proceeds by Subscriber to Issuer in the original principal amount of the first Note(s), Issuer will also issue to Subscriber and Subsciber will purchase for an aggregate purchase price of $10.00, the warrants to purchase Shares in the form attached as Exhibit 2-1 (the “Warrants”, which term also includes the Selling Agent Warrants).

Section 2.03.        If any amount due pursuant to this Agreement or under the Note(s) is not paid within ten days after the date it is due and payable, without in any way affecting Subscriber’s right to declare an Event of Default to have occurred, Subscriber may in its sole discretion assess a late charge equal to five percent of such late payment against Issuer, which late charge shall be immediately due and payable and may be paid by treating the same as a loan made to Issuer.

Section 2.04         It is the intention of the parties hereto to comply strictly with applicable usury laws, if any; accordingly, notwithstanding any provisions to the contrary in this Agreement or any other documents or instruments executed in connection herewith, in no event shall this Agreement or such documents or instruments require or permit the payment, taking, reserving, receiving, collecting or charging of any sums constituting interest under applicable laws which exceed the maximum amount permitted by such laws.  If any such excess interest is called for, contracted for, charged, paid, taken, reserved, collected or received in connection with the Obligations or in any communication by Subscriber or any other Person to the Issuer or any other Person, or in the event all or part of the principal of the Obligations or interest thereon shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, collected, reserved, or received on the amount of principal actually outstanding from time to time under this Agreement shall exceed the maximum amount of interest permitted by applicable usury laws, if any, then in any such event it is agreed as follows: (a) the provisions of this paragraph shall govern and control, (b) neither the Issuer nor any other Person now or hereafter liable for the payment of the Obligations shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws, if any, (c) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance hereof or, if the Obligations have been or would be paid in full by such credit, refunded to the Issuer, and (d) the provisions of this Agreement and the other documents or instruments executed in connection herewith, and any communication to the Issuer, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof.  Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, taken, collected, reserved, or received in connection herewith which are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Obligations, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved or received.  The terms of this paragraph shall be deemed to be incorporated in every document and communication relating to the Obligations.

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Section 2.05  Any statement rendered by Subscriber to Issuer of Issuer’s loan account with Subscriber hereunder shall be considered correct and to have been accepted by Issuer and shall be conclusively binding upon Issuer absent manifest error, in respect of all charges, debits and credits of whatsoever nature contained therein under or pursuant to this Agreement, and the closing balance shown therein, unless Issuer notifies Subscriber in writing of any discrepancy within 21 days from the mailing (or emailing) by Subscriber to Issuer of any such statement.

3.            CONDITIONS TO THE SUBSCRIBER’S OBLIGATIONS.

The obligation of Subscriber to consummate at the Closing the transactions contemplated by this Agreement, including delivery of the Loan proceeds to Issuer, is subject to the satisfaction of the following conditions:

Section 3.01                                 Representations and Warranties.   The representations and warranties of the Issuer in this Agreement shall be true, accurate and correct when made and shall be true, accurate and correct as of the Closing Date except that representations and warranties which address matters as of a specified date shall remain true, accurate and correct as  of such date.

Section 3.02                                 No Adverse Change.  There shall not have been any adverse change in the business, properties, condition (financial or otherwise) or operations of the Issuer taken as a whole as of the Closing.

Section 3.03                                 Compliance with Agreement.  The Issuer shall have performed and complied with all of its obligations under this Agreement which are to be performed or complied with by it or them on or prior to the Closing Date.

Section 3.04                                 Proceedings and Instruments Satisfactory.  All proceedings, corporate or other, to be taken by the Issuer in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in all respects to the Subscriber and Subscriber’s Counsel.

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Section 3.05                                 Documentation at Closing.  The Subscriber’s counsel shall have received on behalf of Subscriber at or prior to the Closing all of the following, each in form and substance reasonably satisfactory to the Subscriber and its counsel, Tarlow, Breed, Hart & Rodgers, P.C. (“Subscriber’s Counsel”).

(a)            A certificate from the Secretary of the Issuer certifying (i) the duly adopted resolutions of the Board of Directors of the Issuer unanimously authorizing and approving the execution and delivery by the Issuer of this Agreement, the remaining Loan Documents and the consummation of the transactions contemplated hereby and thereby; (ii) as to the Issuer’s certificate of incorporation, as amended to date; (iii) as to the Issuer’s By-laws, as amended to date; and (iv) as to the incumbency of the Chief Executive Officer and President of the Issuer executing the Loan Documents on behalf of the Issuer.

(b)            A certificate of the Chief Executive Officer and President of the Issuer certifying that (i) the representations and warranties of the Issuer set forth in this Agreement are true and correct on the Closing Date and (ii) all conditions required to be performed by the Issuer at or prior to the Closing have been so performed.

(c)            Any and all consents or waivers necessary on the part of the Issuer to execute and deliver this Agreement, the Note, the Warrants and the remaining Loan Documents, and to consummate the transactions contemplated hereby and thereby, which consents and waivers shall be in full force and effect as of the Closing.

(d)            A Certificate of the Secretary of the State of Florida as to the legal existence and corporate good standing of the Issuer.

(e)            A certificate of the foreign qualification good standing of the Issuer from the Secretary of State of California; provided that Issuer shall not be deemed in violation of this clause (e) unless such certificate has not been received by Subscriber that day seven days after Subscriber disburses to Issuer any portion of the Loan.

(f)            A copy of the certificate of incorporation of the Issuer, as amended to date, certified by the Secretary of State of Florida.

(g)            The Note(s).

(h)            The Warrants, duly executed by the Issuer and issued to the Subscriber.

(i)            The warrants in the form of attached Exhibit 3.05(i) (the “Selling Agent  Warrants”), duly executed by the Issuer and for issuance to First Montauk Securities Corp. (the “Selling Agent”).

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(j)            The Patent Security Agreement, duly executed by the Issuer.

(k)            A certificate of insurance on Accord Form 25 complying with the terms of Article 11 of this Agreement.

(l)            An escrow letter agreement in the form of attached Exhibit 3.05(l), duly executed by the Issuer.

(m)            A disbursement authorization letter in the form of attached Exhibit 3.05(m), duly executed by the Issuer, providing in part for payment from the Loan proceeds, before disbursement to Issuer, of all costs and expenses reasonably incurred by Issuer in connection with the consummation of the Loan and other transactions contemplated by this Agreement.

Section 3.06                                 UCC-1 Financing Statement.  The Subscriber shall have filed with the Florida Secretary of State a UCC-1 Financing Statement naming Issuer as debtor and Subscriber as secured party thereunder.

Section 3.07                                 Filing of Patent Security Agreement.  The Subscriber shall have filed with the United States Patent Office, the Patent Security Agreement.

4.            SECURITY INTEREST.

Issuer, as a debtor under the UCC, for valuable consideration, receipt whereof is hereby acknowledged, hereby grants to Subscriber, as secured party under the UCC, a continuing security interest in and to,all assets of the Issuer, wherever located and whether now owned or hereafter acquired, including, without limitation, the following:

(a)            all inventory, including all goods, merchandise, raw materials, goods and work in process, finished goods, and other tangible personal property now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in Issuer’s business (all hereinafter called the “Inventory”);

(b)            all Accounts, contracts, contract rights, notes, bills, drafts, acceptances, General Intangibles (including without limitation registered and unregistered trademarks, service marks and tradenames, together with the goodwill therein; copyrights; customer lists; all other  goodwill; computer programs; computer records; computer software; computer data; trade secrets; inventions; patents and patent applications; ledger sheets; files; records; data processing records relating to any Accounts and all tax refunds of every kind and nature to which Issuer is now or hereafter may become entitled to, no matter how arising including, without limitation, the intellectual property listed in the attached Schedule 4(b)), Instruments, Documents, Chattel Paper (whether tangible or electronic), Deposit Accounts, Letter of Credit Rights (whether or not the Letter of Credit is evidenced by a writing), Securities, Security Entitlements, Security Accounts, Investment Property, Supporting Obligations, choses in action, Commercial Tort Claims, and all other debts, obligations and liabilities in whatever form, owing to Issuer from any Person, whether now existing or hereafter arising, now or hereafter received by or belonging or owing to Issuer, for goods sold by it or for services rendered by it, or however otherwise same may have been established or created, all guarantees and securities therefor, all right, title and interest of Issuer in the merchandise or services which gave rise thereto, including the rights of reclamation and stoppage in transit, all rights to replevy goods, and all rights of an unpaid seller of merchandise or services (all  hereinafter called the “Receivables”);

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(c)            all machinery, Equipment, Fixtures and other Goods whether now owned or hereafter acquired by the Issuer and wherever located, all replacements and substitutions therefor or accessions thereto and all proceeds thereof (all hereinafter called the “Equipment”); and

(d)            all proceeds and products of all of the foregoing in any form, including, without limitation, all proceeds of credit, fire or other insurance, and also including, without limitation, rents and profits resulting from the temporary use of any of the foregoing (which, with Inventory, Receivables and Equipment are all hereinafter called “Collateral”).

Issuer further collaterallyassigns to Subscriber all of the foregoing Collateral except for trademarks, service marks and trade names.

This foregoing security interest shall be instantiated in the Patent Security Assignment of Schedule 4, which may be recorded with any state, federal, or foreign authorities in lieu of recording this entire agreement, at the option of Subscriber.

5.            OBLIGATIONS SECURED.

The security interest granted hereby is to secure payment and performance of the Loan, debts, liabilities and obligations of Issuer to Subscriber hereunder, under the Note(s), and under the remaining Loan Documents, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, under this Agreement, the Note(s) or the remaining Loan Documents, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, fees, charges, expenses and overdrafts, and also including, without limitation, all obligations and liabilities which Lender may incur or become liable for, on account of, or as a result of, any of the Loan or any of the Loan Documents (all hereinafter called “Obligations”).

6. ISSUER’S PLACES OF BUSINESS, INVENTORY LOCATIONS.

Section 6.01                                 Issuer warrants that Issuer has no places of business other than that shown at the end of this Agreement, and on attached Schedule 6.01.

Section 6.02                                 Issuer’s principal executive office and the office where Issuer keeps its records concerning its accounts, contract rights and other property, is that shown at the end of this Agreement.  All Inventory presently owned by Issuer is stored at the locations set forth on Schedule 6.01.

Section 6.03                                 Issuer will promptly notify Subscriber in writing of any change in the location of any place of business or the location of any Inventory or the establishment of any new place of business or location of Inventory or office where its records are kept which would be shown in this Agreement if it were executed after such change.

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7.            ISSUER’SADDITIONALREPRESENTATIONSANDWARRANTIES.

Issuer represents and warrants that:

Section 7.01                                 Organization and Standing.  Issuer is duly organized, validly existing and in good standing as a corporationunder the laws of the State of Floridaand shallremain in good standing in that state, and is duly qualified and in good standing in every other state in which it is doing business, and shall hereafter remain duly qualified and in good standing in every other state in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of the Issuer.

Section 7.02                                 Issuer Name; Federal Identification Number.  Issuer’s exact legal name is as set forth in this Agreement and Issuer will not undertake or commit to undertake any act which will result in a change of Issuer’s legal name, without giving Subscriber at least 30 days’ prior written notice of the same.  The federal identification number of Issuer is as set forth on Schedule 6.01.

Section 7.03                                 Corporate Action.  The execution, delivery and performance of this Agreement, the Note(s), the Warrants, and any other document executed by Issuerin connection herewith, are within the Issuer’s powers, have been duly authorized, are not in contravention of law or the terms of the Issuer’s Organizational Documents, or of any indenture, agreement or undertaking to which the Issuer is a party or by which it or any of its properties may be bound.  Without limitation to the foregoing, Issuer has all necessary corporate power and has taken all corporate action required to make this Agreement, the Note(s), the Warrants, and any other agreements and instruments executed in connection herewith the valid and enforceable obligations of the Issuer.  Sufficient shares of authorized but unissued common stock of the Issuer have been reserved by appropriate corporate action in connection with the prospective conversion of the Note and exercise of the Warrants.  The issuance and sale of the Note(s) and Warrants, and the issuance of the Shares, upon the conversion of the Note(s) and exercise of the Warrants, are not subject to preemptive or other preferential rights, or similar statutory or contractual rights, either arising pursuant to any agreement or instrument to which the Issuer is a party or which are otherwise binding upon the Issuer.

Section 7.04                                 Governmental Approvals.  All authorizations, consents, approvals, licenses, exemptions from or filings, or registrations with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, necessary for, or in connection with, the offer, issuance, sale, execution or delivery of the Note(s) or the Warrants, or for the performance by Issuer of its obligations under this Agreement, the Note(s) or the Warrants, or the Shares issuable upon conversion of the Note(s) or exercise of the Warrants, shall have been made prior to, and shall be effective as of, the date hereof.  The Issuer is in compliance in all respects with the terms and provisions of its charter documents, as amended to date, by-laws, as amended, and with the terms and provisions of each mortgage, indenture, lease, contract and other instrument to which the Issuer is a party, and of all judgments, decrees, governmental orders, statutes, rules or regulations by which it is bound or to which its properties or assets are subject.  Neither the execution or delivery of this Agreement, the Note(s), the Warrants or the issuance of the Shares upon conversion of the Note(s) or exercise of the Warrants, nor the consummation of any transaction contemplated hereby, has constituted or resulted in or will constitute or result in a default or violation of any term or provision in any of the foregoing documents or instruments.

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Section 7.05                                 Books and Records.  All Organizational Documents and all amendments thereto of Issuer have been duly filed (to the extent required)and are in proper order.  All ownership interests of Issuer outstanding was and is properly issued and all books and records of Issuer, including but not limited to its minute books, Organizational Documents and books of account, are accurate and up to date and will be so maintained.

Section 7.06                                 Financial Statements.  The (a) balance sheet of the Issuer as at June 30, 2007, and the related statements of income and retained earnings of the Issuer for the 6-month period then ended, and (b) financial statements for the year ended December 31, 2006, and the accompanying footnotes, together with the opinion thereon, of the Borrower’s independent certified public accountants (collectively, the “Financial Statements”), copies of which have been furnished to or made available to the Subscriber, are in all material respects complete and correct and fairly present the financial condition of the Issuer as at such dates and the results of the operations of the Issuer for the periods covered by such statements, all in accordance with GAAP consistently applied (subject for those Financial Statements for the 6-month interim period ended June 30, 2007 to year-end adjustments in the case of the interim financial statements), and since June 30, 2007, there has been no material adverse change in the condition (financial or otherwise), business, or operations of the Issuer.  There are no liabilities of the Issuer, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since June 30, 2007.  No information, exhibit, or report furnished by the Issuer to the Subscriber in connection with the negotiation of this Agreement or the remaining Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading.

Section 7.07                                 Title to Assets.  Issuer owns all of the assets reflected in the most recent of Issuer’s financial statements provided to Subscriber, except assets sold or otherwise disposed of in the ordinary course of business since the date thereof, and such assets together with any assets acquired since such date, including without limitation the Collateral, are free and clear of any Lien, except (a) the security interests and other encumbrances (if any) listed on attached Schedule 7.07(a), (b) those leases set forth on attached Schedule 7.07(b), (c) those liens permitted pursuant to Section 12.04 of this Agreement, (d) liens and security interests in favor of Subscriber, or (e) Permitted Liens.

Section 7.08                                 Taxes.Except as set forth on Schedule 7.08, Issuer has made or filed all tax returns, reports and declarations relating to any material tax liability required by any jurisdiction to which it is subject (any tax liability which may result in a lien on any Collateral being hereby deemed material); has paid all taxes shown or determined to be due thereon except those being contested in good faith and which Issuer has, prior to the date of such contest, identified in writing to Subscriber as being contested; and has made adequate provision for the payment of all taxes so contested, so that no lien will encumber any Collateral.

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Section 7.09                                 Compliance with Other Instruments; No Violations.  Issuer (a) is not subject to any restrictions in its Organization Documents or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction which could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with its Organization Documents, all contractual requirements by which it or any of its properties may be bound and all applicable laws, rules and regulations (including without limitation those relating to environmental protection) other than laws, rules or regulations the validity or applicability of which it is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect its financial condition, business or prospects or the value of any Collateral.

Section 7.10                                 Litigation.Except as set forth in Schedule 7.10, there is no action, suit, proceeding or investigation pending or, to Issuer’s knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on its financial condition, business or prospects or the value of any Collateral.

 Section 7.11                                 ERISA.Issuer is in compliance with ERISA; no Reportable Event has occurred and is continuing with respect to any Plan; and it has no unfunded vested liability under any Plan.

Section 7.12.                                 Anti-Terrorism.

(a)            Neither Issuer nor, to the knowledge of Issuer, any of its Affiliates or Owners who are Issuer employees or contractors, is in violation of any laws relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(b)            Neither Issuer nor, to the knowledge of Issuer, any of its Affiliates or Owners who are Issuer employees or contractors, or other agent of Issuer acting or benefitting in any capacity in connection with the transactions contemplated hereunder, is any of the following: (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a Person with which Subscriber is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (e) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list.

(c)            Neither Issuer nor, to the knowledge of Issuer, any agent of any of its Affiliates or, to the extent employees or contractors of Issuer, Owners acting in any capacity in connection with the transactions contemplated hereunder (a) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 7.13, (b) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order, or (c) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

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Section 7.13.                                 Compliance with Laws.  Issuer has complied and will comply with all applicable federal or state securities laws (including but not limited to the Securities Act, the Securities Exchange Act)  in connection with the issuance and sale of the Warrants and the Warrant Shares.  Neither the Issuer nor anyone acting on its behalf has offered or will offer to sell the Shares issuable upon conversion of the Note(s), exercise of the Warrants, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person or entity so as to bring the issuance and sale of such securities under the registration provisions of the Securities Act.

Section 7.14.  Capitalization.  Issuer has a total authorized capitalization consisting of (a) 100,000,000 shares of preferred stock, no par value, none of which are issued or outstanding, and (b) 300,000,000 shares of its common stock, no par value, 102,381,508 Shares of which are issued and outstanding, of which the officers and directors of Issuer beneficially own 61,212,000 Shares as more particularly set forth in (i) the Form 10-SB filed by Issuer with the Securities and Exchange Commission on or about October 10, 2007 (“Form 10-SB”), (ii) as supplemented by a subsequent issuance of 150,000 Shares to the Issuer’s Treasurer, and (iii) a subsequent issuance of 9,000,000 Shares upon conversion of previously outstanding 24,000 shares of the Issuer’s Series A Preferred Stock.  Issuer also has issued convertible securities as described in Item 4 of Part II of the Form 10-SB as supplemented by the following subsequent issuances:  (i) On October 17, 2007, the Issuer issued a convertible note in the principle amount of $62,500 which is convertible into an aggregate of 500,000 Shares and in connection with such offering the Issuer issued warrants to purchase an aggregate of 500,000 Shares at an exercise price of $0.18 per Share; (ii) On November 16, 2007, the Issuer issued a convertible note in the principle amount of $25,000 which is convertible into 250,000 Shares and in connection with such offering the Issuer issued warrants to purchase an aggregate of 250,000 Shares at an exercise price of $0.15 per Share; (iii) On December 1, 2007, the Issuer issued a convertible note in the principle amount of $90,000 which is convertible into an aggregate of 1,000,000 Shares and in connection with such offering the Issuer issued warrants to purchase an aggregate of 1,000,000 Shares at an exercise price of $0.15 per Share; (iv) On January 3, 2008, the Issuer issued a convertible note in the principle amount of $20,000 which is convertible into an aggregate of 200,000 Shares and in connection with such offering the Issuer issued warrants to purchase an aggregate of 100,000 Shares; and (v) pursuant to the Investment Contract by and between the Issuer and Beijing InfoSure Technology Ltd., the Issuer is obligated to issue 200,000 Shares to the shareholders of Beijing InfoSure (the “Beijing InfoSure Shares”).  Except as set forth in this Section 7.14, there are no options, warrants or rights to purchase Shares  or other Issuer securities authorized, issued or outstanding, nor is the Issuer obligated in any other manner to issue Shares or other Issuer securities, except to Subscriber under the Loan Documents and to the Selling Agent in the form of the Selling Agent Warrant.  All of the outstanding Shares of the Issuer have been and will be duly authorized, validly issued, fully paid and nonassessable.  All Shares issuable upon exercise of outstanding options have been duly authorized and, when issued and paid for in accordance with the terms of such options or warrants, will be validly issued and fully paid and nonassessable.  The Shares issuable upon conversion of the Note and Warrants, when respectively issued, delivered and paid for in accordance with the terms hereof, will be duly authorized, validly issued and fully paid and nonassessable.  There are no restrictions imposed by the Issuer or any other person or entity in an agreement to which the Issuer is a party or of which the Issuer has knowledge on the transfer of Shares or other Issuer securities convertible into Shares other than those imposed by relevant state and federal securities laws.   No holder of any security of the Issuer is entitled to preemptive or similar statutory or contractual rights, either arising pursuant to any agreement or instrument to which the Issuer is a party or that are otherwise binding upon the Issuer.  The offer and sale of all shares of capital stock or other securities of the Issuer issued before the date hereof complied with or were exempt from registration or qualification under all federal and state securities laws.

Section 7.15.                                 Disclosure.  This Agreement, including the Schedules hereto, contains no untrue statement of a material fact and does not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

Section 7.16                                 Registration Rights.  Except as provided in Article 14 and as set forth on Schedule 7.16, no Person has the right to demand or other rights to cause the Issuer to file any registration statement under the Securities Act relating to any securities of the Issuer, presently outstanding or that may be subsequently issued, or any right to participate in any such registration statement.

Section 7.17                                 No Brokers or Finders.  No Person has or will have, as a result of the transactions contemplated by this Agreement based on actions taken by the Issuer or to the Issuer’s knowledge anyone acting on its behalf, any right, interest or valid claim against or upon the Subsciber or the Issuer for any commission, fee or other compensation as a finder or broker, other than fees due the Selling Agent by Issuer; and the Issuer agrees to indemnify and hold the Subscriber harmless against any such commissions, fees or other compensation.  The only fees due from Issuer to the Selling Agent in connection with the transactions described in the Loan Documents are a cash fee of $85,000 and the Selling Agent Warrant for 500,000 Shares.

8. SALESOFINVENTORY

So long as Issuer is not in default hereunder, Issuer shall have the right, in the regular course of business, to process and sell Issuer’s Inventory.  A sale in the ordinary course of business shall not include a transfer in total or partial satisfaction of a debt.

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9.            FINANCING STATEMENTS.

Issuer hereby irrevocably authorizes Subscriber at any time and from time to time to file in any UCC jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Issuer or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Issuer is an organization, the type of organization and any organization identification number issued to Issuer, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted Collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Issuer  agrees to furnish any such information to Subscriber promptly upon request.  Issuer also ratifies its authorization for Subscriber to have filed in any UCC jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.  Issuer further hereby irrevocably authorizes Subscriber at any time and from time to time to file and record in the United States Patent and Trademark Office and an any other appropriate federal, foreign or international agency this Agreement, the Patent Security Agreement of Schedule 4, or a summary thereof, to be recorded against the Issuer’s patent applications or patents. Upon full repayment of Issuer’s Obligations, Subscriber shall provide to Issuer for recordation a release and termination of Subscriber’s assignment in security, re-assigning to Issuer said patents and patent applications.

10.            ISSUER’S REPORTS.

Section 10.01                                 Issuer will furnish Subscribera copy of its periodic reports within five days of when filed with the SEC pursuant to Section 13 of the Securities Exchange Act; provided that if the Issuer fails to timely file any such periodic reports with he SEC, then Issuer, in addition to such failure being an Event of Default hereunder, shall provide Subscriber with such financial statements during the continuation of such failure as Subscriber may request from time to time, such financial statements to be prepared in accordance with GAAP, certified by the chief financial officer of the Issuer (subject to year end adjustment).

Section 10.02                                   In addition to the foregoing, the Issuer promptly shall provide Subscriber with such other and additional information concerning the Issuer, the Collateral, the operation of the Issuer’s business, and the Issuer’s financial condition, including financial reports and statements, as Subscriber may from time to time reasonably request from the Issuer.  All financial information provided Subscriber by the Issuer shall be prepared in accordance with GAAP or generally accepted auditing principles (as applicable) applied consistently in the preparation thereof and with prior periods to fairly reflect the financial conditions of the Issuer at the close of, and its results of operations for, the periods in question.

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11.            GENERALAGREEMENTSOFBORROWER.

Section 11.01                                  Issuer agrees to keep all the Collateral insured with coverage and in amounts not less than that usually carried by one engaged in a like business and in any event not less than that required by Subscriber with loss payable to Subscriber and Issuer, as their interests may appear, hereby appointing Subscriber as attorney for Issuer in obtaining, adjusting, settling for claims in excess of $10,000.00following the occurrence and during the continuance uncured of an Event of Defaultand canceling such insurance and endorsing any draftsin excess of such amount following the occurrence and during the continuance uncured of an Event of Default.  As further assurance for the payment and performance of the Obligations, Issuer hereby assigns to Subscriber all such sums to which Subscriber has the foregoing rights,which may become payable under any policy of insurance on the Collateral and Issuer hereby directs each insurance company issuing any such policy to make payment of such sums directly to Subscriber.

Section 11.02                                   Subscriber or its agents have the right at reasonable times after reasonable notice, to inspect the Collateral and all records pertaining thereto at intervals to be determined by Subscriber and without hindrance or delay.

Section 11.03                                   Issuer will at all times keep accurate and complete records of Issuer’s Inventory, Accounts and other Collateral, and Subscriber, or any of its agents, shall have the right to call at Issuer’s place or places of business at reasonable times after reasonable notice at intervals to be determined by Subscriber, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence which relate to Issuer’s Accounts, and other Collateral or other transactions, between the parties thereto and the general financial condition of Issuer and Subscriber may remove any of such records temporarily for the purpose of having copies made thereof.  Issuer shall pay to Subscriber all reasonable audit fees, plus all travel and other expenses incurred in connection with any such audit.

Section 11.04                                  Issuer will maintain a standard and modern system of accounting which enables Issuer to produce financial statements in accordance with GAAP and maintain records pertaining to the Collateral that contain information as from time to time may be requested by Subscriber.

Section 11.05                                  Issuer will maintain its existence in good standing and comply with all laws and regulations of the United States or of any state or states thereof or of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business , except for those the application of which to Issuer is being contested in good faith.

Section 11.06                                  Issuer will pay all real and personal property taxes, assessments and charges and all franchises, income, unemployment, old age benefits, withholding, sales and other taxes assessed against it, or payable by it at such times and in such manner as to prevent any penalty from accruing or any lien or charge from attaching to its property , except for those being contested in good faith.

Section 11.07                                  If any of Issuer’s Accounts arise out of contracts with the United States or any department, agency, or instrumentality thereof, Issuer will immediately notify Subscriber thereof in writing and execute any instruments and take any steps required by Subscriber in order that all monies due and to become due under such contracts shall be assigned to Subscriber and notice thereof given to the Government under the Federal Assignment of Claims Act.

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Section 11.08                                  If any of Issuer’s Accounts should be evidenced by promissory notes, trade acceptances, or other instruments for the payment of money, Issuer will immediately deliver same to Subscriber, appropriately endorsed to Subscriber’s order and, regardless of the form of such endorsement, Issuer hereby waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto.

Section 11.09                                   If any goods are at any time in the possession of a bailee, Issuer shall promptly notify Subscriber thereof and, if requested by Subscriber, shall promptly obtain an acknowledgment from the bailee, in form and substance satisfactory to Subscriber, that the bailee holds such Collateral for the benefit of Subscriber and shall act upon the instructions of Subscriber, without the further consent of Issuer.  Subscriber agrees with Issuer that Subscriber shall not give any such instructions unless an Event of Default has occurred and is continuingor would occur after taking into account any action by Issuer with respect to the bailee.

Section 11.10                                   If Issuer is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Issuer, Issuer shall promptly notify Subscriber thereof and, at the request and option of Subscriber, Issuer shall, pursuant to an agreement in form and substance satisfactory to Subscriber, either (a) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Subscriber of the proceeds of any drawing under the letter of credit, or (b) arrange for Subscriber to become the transferee beneficiary of the letter of credit, with Subscriber agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be applied  in the same manner as any other payment on an Account.

Section 11.11                                   If Issuer shall at any time hold or acquire a commercial tort claim, Issuer shall immediately notify Subscriber in a writing signed by Issuer of the brief details thereof and grant to Subscriber in such writing a security interest therein, and in the proceeds  thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Subscriber.

Section 11.12                                   Issuer will promptly pay when due all taxes and assessments upon the Collateral or for its use or operation or upon this Agreement, or upon any note or notes evidencing the Obligations, and will, at the request of Subscriber, promptly furnish Subscriber the receipted bills therefor.  At its option, Subscriber may discharge taxes, Liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral.  Issuer agrees to reimburse Subscriber on demand for any payments made, or any expenses incurred by Subscriber pursuant to the foregoing authorization, and upon failure of the Issuer so to reimburse Subscriber, any such sums paid or advanced by Subscriber shall be deemed secured by the Collateral and constitute part of the Obligations.  Issuer shall not abandon any patent application without consent of Subscriber, in writing, and Issuer shall continue to prosecute its patent applications in good faith, paying all legal fees and government fees as they become due.

Section 11.13                                  Issuer will immediately notify Subscriber upon receipt of notification of any potential or known release or threat of release of Hazardous Substance from any site operated by Issuer or of the incurrence of any expense or loss in connection therewith or with the Issuer’s obtaining knowledge of any investigation, action or the incurrence of any expense or loss by any governmental authority in connection with the assessment, containment or removal of any Hazardous Substance for which expense or loss the Issuer may be liable.

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Section 11.14                                   Except for Subscriber’s proven gross negligence or willful misconduct, Issuer will indemnify and save Subscriber harmless from all loss, costs, damage, liability or expenses (including, without limitation, court costs and reasonable attorneys’ fees) that Subscriber may sustain or incur by reason of defending or protecting this security interest or the priority thereof or enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations and/or the Collateral.  This indemnity shall survive the repayment of the Obligations and the termination of Subscriber’s agreement to make the Loan available to Issuer and the termination of this Agreement.

Section 11.15                                   At the option of Subscriber, Issuer will furnish to Subscriber, from time to time, within five days after the accrual in accordance with applicable law of Issuer’s obligation to make deposits for F.I.C.A. and withholding taxes and/or sales taxes, proof satisfactory to Subscriber that such deposits have been made as required.

Section 11.16                                   Should Issuer fail to make any of such deposits or furnish such proof then Subscriber may, in its sole and absolute discretion, (a) make any of such deposits or any part thereof, (b) pay such taxes, or any part thereof, or (c) set up such reserves as Subscriber, in itsjudgment, shall deem necessary to satisfy the liability for such taxes.  Each amount so deposited or paid shall constitute an advance under the terms hereof, repayable on demand with interest, as provided herein, and secured by all Collateral and any other property at any time pledged by Issuer with Subscriber.  Nothing herein shall be deemed to obligate Subscriber to make any such deposit or payment or set up such reserve and the making of one or more of such deposits or payments or the setting up of such reserve shall not constitute (i) an agreement on Subscriber’s part to take any further or similar action, or (ii) a waiver of any default by Issuer under the terms hereof.

Section 11.17                                   All advances by Subscriber to Issuer under this Agreement constitute one Loan, and all indebtedness of Issuer to Subscriber under this and under any other Loan Documentconstitute one general Obligation.  Any and all advances to Issuer hereunder or otherwise shall be made upon the security of all of the Collateral held and to be held by Subscriber.  It is distinctly understood and agreed that all of the rights of Subscriber contained in this Agreement shall likewise apply, insofar as applicable, to any modification of or supplement to this Agreement and to any other Loan Document.  Any default of this Agreement by Issuer shall constitute, likewise, a default by Issuer of each other Loan Document, and any default by Issuer of any remaining Loan Documentshall constitute a default of this Agreement.  The entire Obligation of Issuer to Subscriber shall become due and payable when payments become due and payable hereunder upon termination of this Agreement.

Section 11.18                                   Issuer will, at its expense, upon request of Subscriber promptly and duly execute and deliver such documents and assurances and take such actions as may be necessary or desirable or as Subscriber may request in order to correct any defect, error or omission which may at any time be discovered or to more effectively carry out the intent and purpose of this Agreement and to establish, perfect and protect Subscriber’s security interest, rights and remedies created or intended to be created hereunder.  Without limiting the generality of the above, Issuer will join with Subscriber in executing notices appropriate under applicable Federal or state law in form satisfactory to Subscriber and filing the same in all public offices and jurisdictions wherever and whenever requested by Subscriber.

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Section 11.19                                   Issuer shall promptly notify Subscriber in writing of any litigation, proceeding, or counterclaim against, or of any investigation of, Issuer if:  (a) the outcome of such litigation, proceeding, counterclaim, or investigation may materially and adversely affect the finances or operations of Subscriber or title to, or the value of, any Collateral; or (b) such litigation, proceeding, counterclaim, or investigation questions the validity of this Agreement or any action taken, or to be taken, pursuant to this Agreement, Issuer shall furnish to Subscriber such information regarding any such litigation, proceeding, counterclaim, or investigation as Subscriber shall request.

Section 11.20                                  In connection with the Subscriber’s exercise of the Subscriber’s rights after the occurrence ofand during the continuance ofan Event of Default, the Subscriber may enter upon any premises or place of business which Issuer presently has or may hereafter have and where any Collateral may be located for the purpose of accessing such Collateral.  The Subscriber shall not be required to remove any of the Collateral from any such premises upon the Subscriber’s taking possession thereof, and may render any Collateral unusable to the Issuer.  In no event shall the Subscriber be liable to the Issuer for any rental for any access, use or occupancy by the Subscriber of any such premises pursuant to this Agreement.

Section 11.21                                  Any and all instruments, documents, policies and certificates of insurance, securities, goods, accounts, choses in action, general intangibles, chattel papers, cash, property and the proceeds thereof (whether or not the same are Collateral or proceeds thereof hereunder) owned by Issuer or in which Issuer has an interest, which now or hereafter are at any time in possession or control of Subscriber or in transit by mail or carrier to or from Subscriber or in the possession of any third party acting in Subscriber’s behalf, without regard to whether Subscriber received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise or whether Subscriber had conditionally released the same, shall constitute additional security for the Obligations and may be applied at any time following the occurrence of and during the continuance ofan Event of Default, to any Obligations.

Section 11.22                                  Issuer shall pay to Subscriber on demand any and all reasonable counsel fees and other expenses incurred by Subscriber in connection with the preparation, interpretation, enforcement, administration or amendment of this Agreement, or of any documents relating thereto, and any and all expenses, all attorneys’ fees and expenses, and all other expenses of like or unlike nature which may be expended by Subscriber to obtain or enforce payment of any Account either as against the account debtor, Issuer, or any guarantor or surety of Issuer or in the prosecution or defense of any action or concerning any matter growing out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Subscriber’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any reasonablecounsel fees or expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses incurred or paid by Subscriber in connection with the administration, supervision, protection or realization on any security held by Subscriber for the debt secured hereby, whether such security was granted by Issuer or by any other Person primarily or secondarily liable (with or without recourse) with respect to such debt, and all reasonable costs and expenses incurred by Subscriber in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Subscriber in connection with the debt secured hereby, all of which amounts shall be considered advances to protect Subscriber’s security, and shall be secured hereby.  Issuer shall also pay Subscriber a $15,000 Loan facility fee, payable from the proceeds of the first Note(s).

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Section 11.23                                  Issuer does hereby make, constitute and appoint any officer or agent of Subscriber as Issuer’s true and lawful attorney−in−fact, with power to endorse the name of Issuer or any of Issuer’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment (including payments payable under any policy of insurance on the Collateral) or Collateral that may come into possession of Subscriber in full or part payment of any amounts owing to Subscriber; to sign and endorse the name of Issuer or any of Issuer’s officers or agents upon any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with Accounts, and any instrument or documents relating thereto or to Issuer’s rights therein; to give written notice to such office and officials of the United States Post Office to effect such change or changes of address so that all mail addressed to Issuer may be delivered directly to Subscriber; granting upon Issuer’s said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as Issuer might or could do, and hereby ratifying all that said attorney shall lawfully do or cause to be done by virtue hereof.  Neither Subscriber nor the attorney shall be liable for any acts or omissions nor for any error of judgment or mistake, except for their gross negligence or willful misconduct.  This power of attorney shall be irrevocable for the term of this Agreement and all transactions hereunder and thereafter as long as Issuer may be indebted to Subscriber. Subscriber agrees not to exercise the foregoing power of attorney prior to the occurrence of an Event of Default which is continuing.

Section 11.24                               Issuercovenants and agrees that during the term of this Agreement, neither Issuer nor any of its employees or agents or Affiliates shall, directly or indirectly, by operation of law or otherwise, knowingly cause or permit (a) any of the funds or properties of Issuer or any of its Affiliates that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any Person subject to sanctions or trade restrictions under United States law (“Embargoed Person”or “Embargoed Persons”) that is identified  on (i) the “List of Specially Designated Nationals and Blocked Persons” (the “SDN List”) maintained by OFAC and/or on any other similar list (“Other List”) maintained by OFAC pursuant to any authorizing statutes including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation promulgated thereunder, with the result that the investment of such funds in Issuer (whether directly or indirectly) is prohibited by law, or the Loan made by Subscriber would be in violation of law, or (ii) the Executive Order, any related enabling legislation or any other similar Executive Orders, or (b) any Embargoed Person to have any direct or indirect interest, or any nature whatsoever in Issuer or any of its Owners or Affiliates, with the result that the investment in Issuer (whether directly or indirectly) is prohibited by law or any of the transactions contemplated hereunder is in violation of law.

Section 11.25                                  Issuer covenants and agrees during the term of this Agreement, to comply with all applicable laws, rules, regulations and orders of any governmental authority (including but not limited to compliance with the Securities Act and the Securities Exchange Act) noncompliance with which could materially adversely affect its business or condition, financial or otherwise, except non-compliance being contested in good faith through appropriate proceedings so long as the Issuer shall have set up and funded sufficient reserves, if any, required under generally accepted accounting principles with respect to such items.  Issuer further covenants and agrees that during the term of this Agreement, Issuer shall comply in all respects with all Securities and Exchange Commission requirements currently applicable to Issuer and other OTC reporting and other requirements currently applicable to Issuer and/or its Shares.

12.            ISSUER’S NEGATIVE COVENANTS.  Issuer will not at any time:

Section 12.01                                 Issue evidence of Debt or suffer to exist Debt in addition to the Obligations, except (a) Debt or liabilities of Issuer other than for money borrowed, incurred or arising in the ordinary course of business, or (b) Debt related to Permitted Liens;

Section 12.02                                  After there has occurred an Event of Default which has not been cured, Issuer shall not make any distributions or dividends to its Owners whatsoever at any time after there has occurred an Event of Default which has not been cured;

Section 12.03                                  Sell, assign, exchange, license or otherwise dispose of or encumber any of the Collateral, other than Collateralconsisting ofscrap, waste, defective goods and the like; obsolete goods; finished goods sold in the ordinary course of business or any interest therein to any Person; andEquipment which is no longer required or deemed necessary for the conduct of Issuer’s business, so long as Issuer receives therefor a sum substantially equal to such Equipment’s fair value;

Section 12.04                                  Create, permit to be created or suffer to exist any Lien upon any of the Collateral or any other property of Issuer, now owned or hereafter acquired, except: (a) landlords’, carriers’, warehousemen’s, mechanics’ and other similar liens arising by operation of law in the ordinary course of Issuer’s business; (b) arising out of pledge or deposits under worker’s compensation, unemployment insurance, old age pension, social security, retirement benefits or other similar legislation; (c) purchase money Liens arising in the ordinary course of business (so long as the Debt secured thereby does not exceed the lesser of the cost or fair market value of the property subject thereto, and such Lien extends to no other property); (d) Liens for unpaid taxes that are either (i) not yet due and payable, or (ii) the subject of Permitted Protests; (e) Liens which are the subject of Permitted Protests; (f) those Liens and encumbrances set forth on attached Schedule 12.04; (g) in favor of Subscriber; and (h) other Liens and encumbrances approved by Subscriber in writing and subject to subordination and intercreditor agreements as approved by Subscriber (collectively, “Permitted Liens”);

Section 12.05                                  Pay or make any distribution on account of (except as permitted under Section 12.02) any class of Issuer’s ownership interest in cash or in property (other than additional ownership interest), or redeem, purchase or otherwise acquire, directly or indirectly, any of the ownership interests;

Section 12.06                                  Make any loans or advances to any Person, including without limitation Issuer’s directors, officers and employees, except advances to officers or employees with respect to expenses incurred by them in the ordinary course of their duties which are properly reimbursable by Issuer and are consistent with past practice;

Section 12.07                                  Assume, guaranty, endorse or otherwise become directly or contingently liable in respect of (including without limitation by way of agreement, contingent or otherwise, to purchase, provide funds to or otherwise invest in a debtor or otherwise to assure a creditor against loss), any Debt (except guarantees by endorsement of instruments for deposit or collection in the ordinary course of business and guarantees in favor of Subscriber) of any other Person.

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Section 12.08                                  (a) Use any Loan proceeds to purchase or carry any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or (b) invest in or purchase any stock or securities of any Person except readily marketable direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof;

Section 12.09                                  Enter into any lease or other transaction with any Owner, officer of  Issuer or Affiliate on terms any less favorable than those which might be obtained at the time from Persons who are not such an Owner, officer of Issuer or Affiliate;

Section 12.10                                   Sell, transfer or otherwise dispose of any stock or other ownership interest of any subsidiary of Issuer; or

Section 12.11                                  (a) Except as set forth on Schedule 12.11, merge or consolidate with or into any Person, (b) acquire all or substantially all of the assets of any Person, (c) enter into any joint venture or partnership with any Person; (d) convey, lease or sell all or any material portion of its property or assets or business to any other Person, except for the sale of Inventory in the ordinary course of its business; or (e) convey, lease or sell any of its assets to any Person for less than the fair market value thereof.

Section 12.12                                  Authorize or issue, or obligate itself to issue, any shares of capital stock or any equity security or preferred stock that is senior to, or pari passu with, the rights of the Note holder in and to the Collateral upon a liquidation or dissolution of the Issuer, including any other security convertible into or exercisable for any such security of the Issuer.

13.            RIGHT TO PARTICIPATE IN SUBSEQUENT FINANCINGS.

(a)            The Issuer covenants and agrees that it shall not until the later of (I) the first anniversary following the Closing Date, and (II) the date that the Note is either paid in full or converted into Shares, issue or sell any (A) shares of capital stock of the Issuer (including but not limited to Shares), (B) securities convertible into or carrying any rights to purchase capital stock of the Issuer (including but not limited to Shares), or (C) options, warrants or other rights to subscribe for, purchase or otherwise acquire any capital stock of the Issuer (including but not limited to Shares), or (D) debt financing, unless the Issuer first submits a written offer to the Subscriber to permit it to purchase its “Proportionate Share” of such securities (as defined below) on terms and conditions, including price, not less favorable to the Subscriber than those offered to such other prospective purchaser (the “Buyer”).  Such notice shall be delivered to the address of Subscriber as set forth on the Issuer’s securities record book and shall identify the Buyer (to the extent known), describe the securities proposed to be issued by the Issuer, specify price and payment terms and any other material terms related thereto and shall include any offer letter, term sheet and related correspondence between the Issuer or its representatives and the Buyer.  Subscriber shall have the right to elect to purchase a number of such securities (or participate in such debt financing), as the case may be, based on the ratio which the Shares owned by the Subscriber or obtainable by the Subscriber upon conversion of any rights to acquire Shares and exercise of Warrants bears to all the issued and outstanding Shares owned by all stockholders or obtainable by all holders of Issuer securities (including the Subscriber) upon conversion of any rights to acquire Shares (the “Proportionate Share”).  The Issuer’s offer to the Subscriber shall remain open for a period of fourteen days following receipt of the written notice to the Subscriber.  In the event Subscriber elects to acquire its Proportionate Share of the securities offered by the Issuer pursuant to this Section 13, the closing of such purchase shall take place no later than the thirtieth day from the date of the Subscriber’s acceptance notice, unless otherwise any agreed to in writing by the Subscriber and the Issuer.  Notwithstanding the foregoing, the Issuer or the Subscriber electing to acquire its Proportionate Share may abandon such sale or purchase without liability in the event the pending sale described in the notice from the Issuer referred to above is abandoned for any reason.

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(b)            Any securities offered to the Subscriber pursuant to this section which Subscriber has not elected to purchase within the time fixed herein may, within ninety days after the date for making such election, be sold by the Issuer at not less than the same price and upon terms not materially less favorable to the Issuer than were offered to the Subscriber provided, however, that if such third party sale or sales are not consummated within such 90-day period, the Issuer shall not sell such securities as shall not have been so purchased without again complying with the provisions of this Section 13.  Notwithstanding the above, the Issuer may from the date hereof, without offering or having offered such securities to the Subscriber, issue or grant (i) stock options to employees or contractors approved by Issuer’s Board of Directors; (ii) any Shares or securities convertible into Shares issued for or in connection with any joint venture, strategic partnering, merger, or stock or asset acquisition approved by Issuer’s Board of Directors; (iii) any Shares issuable upon conversion of the Notes or upon exercise of the Warrants; and (iv) any Shares issuable upon conversion of the securities identified in the Form 10-SB; (v) any exercise of rights which when issued, were the subject of an offering with respect to which the Issuer complied with the requirements of this Section 13, or such requirements were waived by the Subscriber in accordance with Section 13(d).

(c)            Issuer shall not issue any securities without the consent of a majority of its Board of Directors or approval of a higher percentage of its Board of Directors if required by the terms of its certificate of incorporation or any other agreement to which it is a party or by which it is bound.

(d)            Notwithstanding the foregoing, the Subscriber may in writing waive the provisions of Section 13(a) and (b), provided however, that such waiver shall not be permitted with respect to any offering of securities in which more than 50% of the securities are sold to the Subscriber or its Affiliates.

14.            COVENANTS RELATING TO REGISTRATION OF SHARES.

Section 14.1  Registration Obligation.

(a) The Issuer represents and warrants that it will file a Registration Statement promptly following the clearing of all comments on the Issuer’s Form 10-SB filed with the SEC on October 4, 2007, and that it will use its best efforts to have such Registration Statement become effective promptly after the date of filing, and in any event to become effective not later than 150 days following the Closing Date.  Such Registration Statement will include to register under the Securities Act all Conversion Shares and all Warrant Shares provided that the amount of Conversion Shares and Warrant Shares shall be limited to not less than 100% of the maximum amount of common stock which may be included in a single registration statement without exceeding registration limitations imposed by the SEC pursuant to Rule 415 of the Securities Act.  In the event that less than all of the initial registrable securities are included in the Registration Statement as a result of the limitation described in Section 14.1(a), then the Issuer will file within fourteen days of such limits being triggered, an additional registration statement each registering the amount permitted under Rule 415 until all of the Conversion Shares and Warrant Shares have been registered, such registration statements to be effective within forty-five days of the filing thereof.

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(b) The Issuer’s obligation to register all Conversion Shares and all Warrant Shares shall, notwithstanding any other provision of this Agreement, be deemed satisfied  when, and only when, (i) a Registration Statement or Registration Statements covering all Conversion Shares and all Warrant Shares shall have become effective, or (ii) such time as all of the Conversion Shares and Warrant Shares are no longer, by reason of Rule 144(k) under the Securities Act, required to be registered for the sale thereof by such holders (provided that if clause (ii) applies, Issuer shall provide Subscriber with an opinion letter as to same in form and from counsel each satisfactory to Subscriber and Issuer’s transfer agent and Issuer’s obligation to so register such Conversion Shares and Warrant Shares shall not be deemed satisfied until such satisfactory opinion is provided); except as expressly provided in this Section 14(b).  In the event that a Registration Statement or Registration Statements to register all the Conversion Shares and all Warrant Shares has (or have) not become effective within 150 days following the Closing Date (for whatever reason), it will be deemed an Event of Default under this Agreement, and Subscriber will be entitled to, without limitation, the benefit of the provisions of Section 14(c), in addition to any other remedies as provided in this Agreement, any of the remaining Loan Documents, or otherwise by law.

(c) In the event that a Registration Statement or Registration Statements to register all Conversion Shares and all Warrant Shares has not become effective by that date 150 days following the Closing Date unless clause (ii) of Section 14.1(b) applies including satisfaction of the opinion letter condition described therein, then whether or not Issuer used its best efforts to meet such deadline, the Subscriber shall be entitled to liquidated damages on demand, payable in cash by wire transfer according to wiring instructions given by Subscriber to Issuer, in the amount equal to 1% of the Loan Amount, for each thirty days, pro rated daily, that such Registration Statement(s) are not effective by such 150-day deadline or until clause (ii) of Section 14.1(b) applies including satisfaction of the opinion letter condition described therein. Notwithstanding the remaining provisions of this Section 14.1(c), liquidated damages under the provisions of this paragraph shall not be imposed for a period beyond a maximum of six 30-day periods.

Section 14.2 Registration Procedures.  If and whenever the Issuer is required by the provisions of Section 14.1 to effect the registration of Conversion Shares and/or Warrant Shares under the Securities Act, the Issuer will, at its expense, as expeditiously as possible:

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(a) In accordance with the Securities Act and the rules and regulations of the SEC, prepare and file with the SEC a Registration Statement with respect to the Conversion Shares and Warrant Shares and use its best efforts to cause such Reg­istration Statement to become and remain effective until the Conversion Shares and Warrant Shares covered by such Registration Statement have been sold, but for no longer than twelve months subsequent to the effective date of such registration, and prepare and file with the SEC such amend­ments to such Registration Statement and supplements to the prospectus contained therein as may be necessary to keep such Registration Statement effective and such Registration Statement and prospectus accurate and complete until the Conversion Shares and Warrant Shares covered by such Registration Statement has been sold, but for no longer than twelve months subsequent to the effective date of such registration;

(b) If the offering is to be underwritten in whole or in part, enter into a written underwriting agreement in form and substance reasonably satisfactory to the managing under­writer, if any, of the public offering and the Subscriber;

(c) Furnish to the Subscriber and to the underwriters such reasonable number of copies of the Registration Statement, preliminary prospectus, final prospectus and such other documents as such underwriters and the Subscriber may reasonably request in order to facilitate the public offering of such securities;

(d) Use its best efforts to register or qualify the Conversion Shares and the Warrant Shares covered by such Registration Statement under such state securities or blue sky laws of such jurisdictions (i) as shall be reasonably appropriate for the distribution of the Conversion Shares and Warrant Shares covered by such Registration Statement or (ii) as the Subscriber and underwriters may rea­sonably request within ten  days following the origi­nal fil­ing of such Registration Statement, except that the Issuer shall not for any purpose be required to execute a general consent to service of process, to subject itself to taxation, or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified;

(e) Notify the Subscriber promptly after it shall receive notice thereof, of the date and time when such Registration Statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such Registration Statement has been filed;

(f) Notify the Subscriber promptly of any request by the SEC or any state securities commission or agency for the amending or supple­menting of such Registration Statement or prospectus or for additional information;

(g) Prepare and file with the SEC, promptly upon the request of the Subscriber or any other participating holder of Shares for which registration is sought by such Registration Statements, any amendments or supplements to such Registration Statement or prospectus which, in the opinion of counsel representing the Issuer in such Registration, is required under the Securities Act or the rules and regulations thereunder in connection with the dis­tribution of the Shares being registered thereby, by such participating holders of Shares, including the Subscriber, but for no longer than twelve months subsequent to the effective date of such registration;

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(h) Prepare and promptly file with the SEC, and promptly notify such participating holders of Shares for which registration is sought by such Registration Statements, including the Subscriber, of the filing of, such amendments or supplements to such Registration State­ment or prospectus as may be necessary to correct any state­ments or omissions if, at the time when a prospectus relat­ing to such Shares is required to be delivered under the Securities Act, any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not mis­leading;

(i) In case any of such participating holders of Shares, including the Subscriber, or any underwriter for any such holders of Shares is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations of the SEC, prepare promptly upon request such amendments or supplements to such Registration Statement and such prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations;

(j) Advise such participating holders of Shares, including the Subscriber, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC or any state securities commission or agency suspending the effectiveness of such Registration Statement or the initia­tion or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

(k) At the request of the Subscriber (i) furnish to the indemnitors, if such registration includes an underwritten public offering, at the closing provided for in the underwriting agreement, copies of any opinion, dated such date, of the counsel representing the Issuer for the purposes of such registration, (which opinion need only be addressed to the underwriters), if any, covering such matters with respect to the registration statement, the prospectus and each amendment or supplement thereto, proceedings under state and Federal securities laws, other mat­ters relating to the Issuer, the securities being registered and the offer and sale of such securities as are cus­tomarily the subject of opinions of issuer’s counsel provid­ed to underwriters in underwritten public offerings and (ii) use its best efforts to furnish to the Subscriber a letter dated each such effective date and such closing date, from the independent certified public accountants of the Issuer, addressed to the underwriters, if any, and to the Subscriber, stating that they are indepen­dent certified public accountants within the meaning of the Securities Act and dealing with such matters as the underwriters may request, or, if the offering is not underwrit­ten, that in the opinion of such accountants the financial statements and other financial data of the Issuer included in the Registration Statement or the prospectus or any amendment or supplement thereto comply in all material respects with the applicable accounting requirements of the Securities Act, and additionally covering such other finan­cial matters, including information as to the period ending not more than five business days prior to the date of such letter with respect to the Registration Statement and prospectus, as the Subscriber may reasonably request;

(l)            Maintain its OTC listing for the Shares and continue to maintain the qualification of the Shares being registered on the OTC system.

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Section 14.3                                 Expenses.

(a) With respect to each registration effected pursu­ant to Section 14.1, all fees, costs and expenses of and incidental to such registration and the public offer­ing in connection therewith shall be borne by the Issuer, as set forth in paragraph 14.3(b); provided, however, (i) that holders of Shares being registered thereby, including the Subscriber, and other holders of the Shares participating in any such registration shall bear their pro rata share of the underwriting discounts and selling commissions, and (ii) any such fee, cost or expense which does not constitute a fee, cost or expense customary in such a registra­tion and which is attribut­able solely to one holder of such Shares or other holder of Shares participating in any such registration shall be borne by that holder.

(b) The fees, costs and expenses of registration to be borne as provided in paragraph 14.3(a) above, shall include, without limitation, all registration, filing and OTC fees, fees of any other governmental authority, printing expenses, fees and disbursements of counsel and accountants for the Issuer, fees and disbursements of counsel for the underwriter or underwriters of such securities (if the Issuer and/or selling security holders are otherwise required to bear such fees and disbursements), all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified, reasonable fees and disbursements of counsel for the Subscriber and the premiums and other costs of policies of insurance insuring the Issuer against liability arising out of such public offering.

Section 14.4                                 Indemnification and Contribution.

(a) The Issuer will indemnify and hold harmless the Subscriber if any Conversion Shares or Warrant Shares are included in a Registration Statement pursuant to the provisions of this Agreement, and any underwriter (as defined in the Securities Act) for the Subscriber, and any Person who controls the Subscriber or such underwriter within the meaning of the Securities Act, and each of their successors, from and against, and will reimburse the Subscriber and each such underwriter and controlling Person with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which the Subscriber or any such underwriter or controlling Person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or allegedly untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or arise out of any violation by the Issuer of any rule or regulation under the Securities Act applicable to the Issuer and relating to action or inaction required of the Issuer in connection with such registration; provided, however, that the Issuer will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in reliance upon and in conformity with information furnished by the Subscriber, such underwriter or controlling Person in writing specifically for use in the preparation thereof; and provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations; and provided further, that if any claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission contained in any preliminary prospectus which did not appear in the final prospectus and if the Subscriber delivered a copy of the preliminary prospectus to the person alleging damage and failed to deliver a copy of the final prospectus to such persons, the Issuer shall not be liable with respect to the claims of such person.

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(b) Promptly after receipt by the Subscriber of actual knowledge or notice of the commencement of any action involving the subject matter of the indemnity provisions under Section 14.4(a), the Subscriber will, if a claim thereof is to be made against the Issuer pursuant to the provisions of paragraph 14.4(a), notify the Issuer of the commencement thereof; but the omission so to notify the Issuer will not relieve it from any liability which it may have to the Subscriber otherwise than under this Section 14.4 and shall not relieve the Issuer from liability under this Section 14.4 unless the Issuer is prejudiced by such omission. In case such action is brought against the Subscriber and the Subscriber notifies the Issuer of the commencement thereof, the Issuer shall have the right to participate in, and, to the extent that it may wish, to assume the defense there­of, with counsel reasonably satisfactory to the Subscriber, and after notice from the Issuer to the Subscriber of its election so to assume the defense thereof, the Issuer will not be liable to the Subscriber pursuant to the provisions of such para­graph 14.4(a) for any legal or other expense subsequent­ly incurred by the Subscriber in connection with the defense thereof other than reasonable costs of investiga­tion.  Notwithstanding the foregoing, the Subscriber shall have the right to retain its or her own counsel, with the fees and expenses to be paid by the Issuer, if representation of the Subscriber by the counsel retained by the Issuer would be inappropriate due to actual or potential differing interests, as reasonably determined by either party, between the Subscriber and any other party represented by such counsel in such proceeding.  The Issuer shall not be liable to the Subscriber for any settlement of any action or claim without the consent of the Issuer, provided that the Issuer may not unreasonably withhold its consent to any such settle­ment.  The Issuer will not consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Subscriber of a release from all liability in respect to such claim or litigation.

(c)       In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Shares exercising rights under this Agreement, or any controlling Person of any such holder of Shares, makes a claim for indemnification pursuant to this Section 14.4 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 14.4 provides for the indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder of Shares or any such controlling Person in circumstances for which indemnification was provided under this Section 14.4; then, and in each case, the Issuer and each such holder of Shares will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder of Shares is responsible for the portion represented by the percentage that the public offering price of its Shares offered by the Registration Statement bears to the public price of all securities offered by such Registration Statement, and the Issuer is responsible for the remaining portion; provided, however, that, in any such case, (A) no Person or entity guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of the Securities Act) will be entitled to contribution from any Person or entity was not guilty of such fraudulent misrepresentation and (B) no holder of Shares will be required to contribute any amount in excess of the proceeds of such holder of Shares offered by it pursuant to such Registration Statement.

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(d) In the event of any conflict between the provision of this Section 14.4 and the provisions of any indemnity agreement entered into by any holder of Shares in conjunction with any such Registration Statement, the provisions of such indemnity agreement shall govern and control.

Section 14.5                                 Reporting Requirements Under Securities Exchange Act of 1934.  The Issuer shall maintain the registration of its Shares under Section 12 of the Securities Exchange Act and shall keep effective such registration and shall timely file such information, documents and reports as the SEC may require or prescribe under Section 13 of the Securities Exchange Act.  The Issuer  shall use its best efforts to (whether or not it shall then be required to do so) timely file such information, documents and reports as the SEC may require or prescribe under Section 13 or 15(d) (whichever is applicable) of the Securities Ex­change Act. Immediately upon becoming subject to the reporting requirements of either Section 13 or 15(d) of the Securities Exchange Act, the Issuer shall forthwith upon request furnish the Subscriber or any other holder of Shares being so registered (i) a written statement by the Issuer that it has complied with such reporting requirements, (ii) a copy of the most recent annual or quarterly report of the Issuer, and (iii) such other reports and documents filed by the Issuer with the SEC as the Subscriber or such holder of Shares may reasonably request in availing it­self of an exemption for the sale of Shares, Conversion Shares or Warrant Shares without registration under the Securities Act.  The Issuer acknowledges and agrees that the purposes of the requirements contained in this Section 14.5 are (a) to enable any of Subscriber or such other holder of such Shares to comply with the current public information requirement contained in Paragraph (c) of Rule 144 under the Securities Act should the Subscriber or such other holder of Shares ever wish to dispose of any of the securities of the Issuer acquired by it without registration under the Securities Act in reliance upon Rule 144 (or any other similar or successor exemptive provi­sion), and (b) to qualify the Issuer for the use of Registration Statements on Form S-3.  In addition, the Issuer shall take such other measures and file such other information, documents and reports, as shall hereafter be required by the SEC as a condition to the availability of Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect) and the use of Form S-3.  The Issuer also covenants to use its best efforts, to the extent that it is reasonably within its power to do so, to qualify for the use of Form SB-2 or Form S-3.  From and after the effective date of the first Registration Statement filed by the Issuer which is first effective after the date hereof, the Issuer agrees to use its best efforts to facilitate and expedite transfers of Shares pursu­ant to Rule 144 under the Securities Act (or any similar or suc­cessor exemptive provision hereafter in effect), which efforts shall include timely notice to its transfer agent to expedite such transfers of Shares.

Section 14.6                                 Stockholder Information.  The Issuer may require Subscriber and each other holder of Shares as to which any registration is to be effected pursuant to this Agreement to furnish the Issuer in a timely manner such information with respect to Subscriber or such other holder of such Shares and the distribution of such Shares as the Issuer may from time to time rea­sonably request in writing and as shall be required by law or by the SEC in connection therewith.

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Section 14.7                                 Lock-Up Agreements.

(a) Restrictions on Public Sale by the Company.  The Issuer agrees not to effect any public sale or other distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such equity securities, during the period (not to exceed ninety days) as requested by the managing underwriter, following the effective date of any underwritten public offering of Conversion Shares or Warrant Shares, except in connection with any such underwritten offering of any remaining portion of Conversion Shares or Warrant Shares not covered by the prior offering and except for equity securities issued pursuant to employee stock option or employee stock purchase plans or in conjunction with any merger or consolidation with, or acquisition of the stock or assets of, any other entity.

(b) Restrictions on Public Sale by Subsequent Holders.  Except in the public offering registered under the Securities Act, the Issuer shall not issue or sell any equity security unless each recipient thereof agrees in writing with the Issuer not to offer to sell or sell such equity security during a period specified by the Issuer and the underwriter thereof (not to exceed ninety days), except in conjunction with such underwritten offering.

Section 14.8                                 Other Registration Rights.  The Issuer shall not grant to any third party any registration rights which would interfere with or delay the exercise by the Subscriber of its registrations rights hereunder, so long as any of the registration rights under this Agreement remains in effect, unless such rights are (i) subordinate to the rights of the Subscriber or (ii) approved in writing by the Subscriber in its sole discretion, which approval may require that such rights be granted only pursuant to an amendment or restatement of this Agreement.

15.            SUBSCRIBER’S REPRESENTATIONS AND WARRANTIES.

The Subscriber represents and warrants to the Issuer that:

(a)            The Subscriber has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered by the Subscriber and is the legal, valid and binding obligation of the Subscriber enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium, arrangement, fraudulent transfer or other similar law affecting creditors’ rights generally, and subject to principles of equity, including without limitation, concepts of materiality, reasonableness, good faith and fair dealing, election of remedies, estoppel and other similar doctrines affecting the enforceability of agreements generally, regardless of whether considered in a proceeding in equity or at law.

(b)            The Subscriber has been advised that the Note and Warrants have not been registered under the Securities Act or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available.

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(c)            The Subscriber is purchasing the Note and Warrants to be acquired by theSubscriber hereunder for its own account and not with a view to, or for resale inconnection with, the distribution thereof in violation of the Securities Act.

(d)            The Subscriber has such knowledge and experience in financial and business matters that the Subscriber is capable of evaluating the merits and risks of the investment in the Note and Warrants, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time.

(e)            The Subscriber is an accredited investor as that term is defined inRegulation D under the Securities Act.

(f)            The Subscriber had and continues to have an opportunity (i) to question, and to receive information from the Issuer concerning the Issuer and the Subscriber’s purchase of the Note and Warrants each from the Issuer, and (ii) to obtain any and all additional information necessary to verify the accuracy of any information which the Subscriber deems relevant to make an informed investment decision as to the purchase of the Note and Warrants, provided in both cases that the Issuer possesses such information or can acquire it without unreasonable effort or expense.

16.            DEFAULT.

Section 16.01                                                                 Nothing contained in this section, or elsewhere in this Agreement, shall affect the demand nature of such of the Obligations as are by their terms, demand obligations, including, without limitation, the Loan under this Agreement.  The occurrence of an Event of Default shall not be a prerequisite for the Subscriber’s requiring payment of such Obligations upon the Maturity Date.

Upon the occurrence of any one or more of the following events (“EventsofDefault”), any and all Obligations of Issuer to Subscriber shall become immediately due and payable, at the option of Lender and without notice or demand.  The occurrence of any such Event of Default shall also constitute, without notice or demand, a default under all other Loan Documents, whether such agreements now exist or hereafter arise, namely:

(a)            The failure by Issuer to pay within five days of when due any amount due under this Agreement.

(b)            The failure by Issuer to pay within five days of when due any amount due under the Note.

(c)            The failure of Issuer to pay within five days of when due any other Obligations.

(c)            The failure by Issuer to promptly, punctually and faithfully perform, or observe any term, covenant or agreement on its part to be performed or observed pursuant to any of the provisions of this Agreementwhich failure continues for 14 days after written notice by Subscriber to Issuer(except for failure to perform or observe any of the provisions of Section 13 or Section 14.1, for which there shall be a default for failure to perform with no grace period).

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(d)            Any representation or warranty heretofore, now or hereafter made by Issuer to Subscriber, in any documents, instrument, agreement, or paper was not true or accurate in any material respect when given.

(e)            The occurrence of any event such that any Debt exceeding $50,000of Issuer from any lender other than Subscriber could be accelerated, notwithstanding that such acceleration has not taken place.

(f)            The occurrence of any event which would cause a lien creditor, as that term is defined in Section 9−102 of the UCC, to take priority over advances made by Subscriber, which event is not satisfied within fifteen days.

(g)            A filing against or relating to Issuer of (i) a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or (ii) a state tax lien in favor of any state of the United States of America or any political subdivision of any such state.

(h)            The occurrence of any event of default under any of the remaining Loan Documents, whether such agreement now exists or hereafter arises (notwithstanding that Subscriber may not have exercised its rights upon default under any such other agreement).

(i)            Any act by, against, or relating to Issuer, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other Person, pursuant to court action or otherwise, over all, or any part of Issuer’s property.

(j)            The granting of any trust mortgage or execution of an assignment for the benefit of the creditors of Issuer, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for Issuer, the failure by Issuer to generally pay the debts of Issuer as they mature; adjudication of bankruptcy or insolvency relative to Issuer; the entry of an order for relief or similar order with respect to Issuer in any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or petition by or, if not dismissed within thirty days, against Issuer initiating any matter in which Issuer is or may be granted any relief from the debts of Issuer pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the calling or sufferance of a meeting of creditors of Issuer; the meeting by Issuer of a formal or informal creditor’s committee; the offering by or entering into by Issuer of any composition, extension or any other arrangement seeking relief or extension for the debts of Issuer, or the initiation of any other judicial or non−judicial proceeding or agreement by, against or including Issuer which seeks or intends to accomplish a reorganization or arrangement with creditors.

(k)            The entry of any judgment against Issuer, which judgment is not satisfied or appealed from (with execution or similar process stayed) within 20 days of its entry.

(l)            The occurrence of any event or circumstance with respect to Issuer such that Subscriber shall believe in good faith that the prospect of payment of all or any part of the Obligations or the performance by Issuer under this Agreement is impaired or there shall occur any material adverse change in the business or financial condition of Issuer.

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(m)            The entry of any court order which enjoins, restrains or in any way prevents Issuer from conducting all or any substantialpart of its business affairs in the ordinary course of business.

(n)            The service of any process upon Subscriber seeking to attach by trustee process any assets of Issuer in the Subscriber’s possession.

(o)            The occurrence of any uninsured loss, theft, damage or destruction to any material asset(s) of Issuer.

(p)            Any act by or against, or relating to Issuer or its assets pursuant to which any creditor of Issuer seeks to reclaim or repossess or reclaims or repossesses all or a material portion of Issuer’s assets.

(q)            The termination of existence, dissolution, or liquidation of Issuer or the ceasing to carry on actively any substantial part of Issuer’s current business.

(r)            This Agreement shall, at any time after its execution and delivery and for any reason, cease (i) to create a valid and perfected first priority security interest in and to the property purported to be subject to this Agreement; or (ii) to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by Issuer or any guarantor of Issuer denies it has any further liability or obligation hereunder.

(s)            Any of the following events occur or exist with respect to Issuer or any ERISA affiliate: (i) any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code) involving any Plan; (ii) any “reportable event” (as defined in Section 4043 of ERISA and the regulations issued under such Section) shall occur with respect to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (iv) any event or circumstance exists which might constitute grounds entitling the Pension Benefit Guaranty Corporation (PBGC) to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan, or the institution by the PBGC of any such proceedings; or (v) partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and in each case above, such event or condition, together with all other events or conditions, if any, could in the opinion of Subscriber subject Issuer to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.

(t)            The occurrence of any of the foregoing Events of Default with respect to any guarantor, endorser, or surety to Subscriber of the Obligations, as if such guarantor, endorser or surety, were the “Issuer” described therein.

(u)            Any guarantor or Person signing a guaranty or support agreement in favor of Subscriber shall repudiate, purport to revoke or fail to perform his obligations under such guaranty or support agreement in favor of Subscriber.

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(v)            Issuer will take or participate in any action which would be prohibited under the provisions of any subordination agreement or make any payment with respect to indebtedness that has been subordinated pursuant to any subordination agreement.

17. RIGHTS AND REMEDIES UPON DEFAULT; EXPENSES; POWER OF ATTORNEY.

Upon the occurrence and continuanceof an Event of Default or, if the Note is not then paid in full or converted in full, on the Maturity Date, the Subscriber shall have the following rights and remedies.

Section 17.01                               Subscriber may declare any obligation Subscriber may have hereunder to be cancelled, declare all Obligations of Issuer to be due and payable and proceed to enforce payment of the Obligations and to exercise any and all of the rights and remedies afforded to Subscriber by the UCC or under the terms of this Agreement or otherwise.  Upon the occurrence of, and during the continuance of, an Event of Default, the Issuer, as additional compensation to the Subscriber for its increased credit risk, promises to pay interest on all Obligations (including, without limitation, principal, whether or not past due, past due interest and any other amounts past due under this Agreement) at a per annum rate of 3 ½% greater than the Interest Rate, as defined in the Note.

Section 17.02                               Upon the filing of any complaint, application, or petition by or against the Issuer initiating any matter in which the Issuer is or may be granted any relief from the debts of the Issuer pursuant to the Bankruptcy Code, Subscriber’s obligation hereunder shall be canceled immediately, automatically, and without notice, and all Obligations of the Issuer then outstanding shall become immediately due and payable without presentation, demand, or notice of any kind to the Issuer.

Section 17.03                               Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Subscriber deems advisable, having due regard to compliance with any statute or regulation which might affect, limit or apply to the Subscriber’s disposition of the Collateral.  The Subscriber may conduct any such sale or other disposition of the Collateral upon the Issuer’s premises.  Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Subscriber shall provide the Issuer with such notice as may be practicable under the circumstances), the Subscriber shall give the Issuer at least the greater of the minimum notice required by law or seven days prior written notice of the date, time and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made.  The Subscriber may purchase the Collateral, or any portion of it at any such sale.

If the Subscriber sells any of the Collateral on credit, the Issuer will be credited only with payments actually made by the purchaser of such Collateral and received by the Subscriber.   If the purchaser fails to pay for the Collateral, the Subscriber may re-sell the Collateral and the Issuer shall be credited with the proceeds of the sale.

Section 17.04                               The Subscriber may require the Issuer to assemble the Collateral and make it available to the Subscriber at the Issuer’s sole risk and expense at a place or places which are reasonably convenient to both the Subscriber and the Issuer.

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Section 17.05                               In connection with Subscriber’s exercise of Subscriber’s rights under this Agreement, Subscriber may enter upon, occupy and use any premises owned or occupied by Issuer, and may exclude Issuer from such premises or portion thereof as may have been so entered upon, occupied, or used by Subscriber.  Subscriber shall not be required to remove any of the Collateral from any such premises upon Subscriber’s taking possession thereof, and may render any Collateral unusable to Issuer.  In no event shall Subscriber be liable to Issuer for use or occupancy by Subscriber of any premises pursuant to this Agreement.

Section 17.06                               Issuer shall, following the occurrence of an Event of Default which is continuing, deliver to Subscriber, daily, a schedule in form and content satisfactory to Subscriber describing the invoices issued by Issuer since the last schedule submitted to Subscriber.  The schedules to be provided under this subsection are solely for the convenience of Subscriber in administering this Agreement and maintaining records of the Collateral.  Issuer’s failure to provide Subscriber with any such schedule shall not affect the security interest of Subscriber in such Accounts.

Section 17.07                               From and after the occurrence of an Event of Default which is continuing, Issuer will immediately, upon receipt of all checks, drafts, cash and other remittances in payment of any Inventory sold or in payment or on account of Issuer’s accounts, contracts, contract rights, notes, bills, drafts, acceptances, general intangibles, choses in action and all other forms of obligations, deliver the same to Subscriber accompanied by a remittance report in form specified by Subscriber.  Said proceeds shall be delivered to Subscriber in the same form received except for the endorsement of Issuer where necessary to permit collection of items, which endorsement Issuer agrees to make.  Subscriber will credit (conditional upon final collection) all such payments against the principal or interest of the Loan secured hereby; provided, however, for the purpose of computing interest, any items requiring clearance or payment shall not be considered to have been credited against the Loan secured hereby until threebusiness days after receipt by Subscriber of any such items.  The order and method of such application shall be in the sole discretion of Subscriber and any portion of such funds which Subscriber elects not to so apply shall be paid over from time to time by Subscriber to Issuer.   Subscriber will at all times have the right to require Issuer to enter into a lockbox arrangement with Subscriber for the collection of such remittances and payments.

Section 17.08                               Subscriber may at any time, after the occurrence of an Event of Default which is continuing, notify account debtors that Collateral has been assigned to Subscriber and that payments shall be made directly to or as directed by Subscriber.  Upon request of Subscriber at any timeafter an Event of Default which is continuing, Issuer will so notify such account debtors and will indicate on all billings to such account debtors that their Accounts must be paid directly to or as directed by Subscriber. After an Event of Default which is continuing, Subscriber shall have full power to collect, compromise, endorse, sell or otherwise deal with the Collateral or proceeds thereof in its own name or in the name of Issuer.

Section 17.09                               Borrower hereby appoints Lender as its attorney-in-fact, with full authority in the place and stead of Borrower and in the name of Borrower, Lender, or otherwise, from time to time in Lender’s discretion, to take any actions and to execute any instruments which Lender may deem necessary or desirable to obtain, adjust, make claims under, and otherwise deal with insurance required pursuant hereto and to receive, endorse, and collect any drafts or other instruments delivered in connection therewith.  This power of attorney shall be irrevocable for the term of this Agreement and all transactions hereunder and thereafter as long as Borrower may be indebted to Lender.  Lender agrees not to exercise the foregoing power of attorney until the occurrence of an Event of Default which is continuing.

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18.              STANDARDS FOR EXERCISING REMEDIES.

To the extent that applicable law imposes duties on Subscriber to exercise remedies in a commercially reasonable manner, Issuer acknowledges and agrees that it is not commercially unreasonable for Subscriber (a) to fail to incur expenses reasonably deemed significant by Subscriber to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as Issuer, for expressions of interest in acquiring  all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of the Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties specifically to disclaim any warranties of title or the like, (k) to purchase insurance or credit enhancements to insure Subscriber against risks of loss, collection or disposition of Collateral or to provide to Subscriber a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Subscriber, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Subscriber in the collection or disposition of any of the Collateral. Issuer acknowledges that the purpose of this section is to provide non-exhaustive indications of what actions or omissions by Subscriber would not be commercially unreasonable in Subscriber’s exercise of remedies against the Collateral and that other actions or omissions by Subscriber shall not be deemed commercially unreasonable solely on account of not being indicated in this section.  Without limitation upon the foregoing, nothing contained in this section shall be construed to grant any rights to Issuer or to impose any duties on Subscriber that would not have been granted or imposed by this Agreement or by applicable law in the absence of this section.

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19.              WAIVER OF JURY TRIAL.

ISSUER AND SUBSCRIBER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.  Issuer hereby certifies that neither Subscriber nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Subscriber would not, in the event of any such suit, action or proceeding, seek to enforce this waiver of right to trial by jury.  Issuer acknowledges that it has read the provisions of this Agreement and in particular, this section; has consulted legal counsel; understands the right it is granting in this Agreement and is waiving in this section in particular; and makes the above waiver knowingly, voluntarily and intentionally.

20.              CONSENT TO JURISDICTION.

Issuer and Subscriber agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in any court of the Commonwealth of Massachusetts sitting in the County of Middlesex, the County of Suffolk or in the District Court of the United States for the District of Massachusetts, and Issuer waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and confer personal jurisdiction if served by registered or certified mail to Issuer, or as otherwise provided by the laws of the Commonwealth of Massachusetts or the United States of America.

21.              TERMINATION

This Agreement may be terminated at any time by either party giving written notice of termination to the other party; provided, however, that unless and until any Loan made by the Subscriber to the Issuer hereunder and all other Obligations or commitments of the Subscriber under which an Obligation could arise, outstanding as of the time of giving or receipt as the case may be, of such notice by the Subscriber have been paid in full, such termination shall in no way affect the security interest or other rights and powers herein granted to the Subscriber, and until such payment in full the security interest of the Subscriber in all Inventory, Accounts and other Collateral of the Issuer, whether existing as of the time of such termination or thereafter arising, and all rights and powers herein granted to the Subscriber in respect thereof shall remain in full force and effect.  Until all of the Obligations of Issuer to Subscriber have been fully paid and satisfied and all commitments of the Subscriber under which an Obligation could arise have expired, Issuer shall fully comply with the terms and conditions of this Agreement as herein provided.  Prior to such payment in full of all of the Obligations of Issuer to Subscriber, this Agreement shall be a continuing agreement in every respect.

22.              MISCELLANEOUS.

Section 22.01                               No delay or omission on the part of Subscriber in exercising any rights shall operate as a waiver of such right or any other right. Waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion.  All Subscriber’s rights and remedies, whether evidenced hereby or by any other agreement, instrument or paper, shall be cumulative and may be exercised singularly or concurrently.

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Section 22.02                               This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto; provided, however, that Issuer may not assign this Agreement or any rights or duties hereunder without Subscriber’s prior written consent and any prohibited assignment shall be absolutely void.  No consent to an assignment by Subscriber shall release Issuer from its Obligations.  Subscriber may assign this Agreement and its rights and duties hereunder and no consent or approval by Issuer is required in connection with any such assignment.  Subscriber reserves the right to sell, assign, transfer or negotiate in all or any part of, or any interest in Subscriber’s rights and benefits hereunder.  In connection with any assignment, Subscriber may disclose all documents and information which Subscriber now or hereafter may have relating to Issuer or Issuer’s business.  To the extent that Subscriber assigns its rights and obligations hereunder to another party, Subscriber thereafter shall be released from such assigned obligations to Issuer and such assignment shall effect a novation between Issuer and such other party.

Section 22.03                               Issuer agrees that any and all Loans made by Subscriber to Issuer or for its account under this Agreement shall be conclusively deemed to have been authorized by Issuer and to have been made pursuant to duly authorized requests therefor on its behalf.

Section 22.04                               Paragraph and section headings used in this Agreement are for convenience only, and shall not effect the construction of this Agreement.  If one or more provisions of this Agreement (or the application thereof) shall be invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not, invalidate or render illegal or unenforceable such provision (or its application) in any other jurisdiction or any other provision of this Agreement (or its application).  This Agreement is the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto.

Section 22.05                               Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other loan document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail

(postage prepaid, return receipt requested ), overnight courier, or facsimile to Issuer or to Subscriber, as the case may be, at its address set forth below:

If to Subscriber:	AIS Funding, LLC
	4 Robert Bonazzoli Avenue
	Hudson, MA  01749
	Attn:Arthur Maxwell, Manager
	Telephone:   (978) 562-7500
	Facsimile:   (978) 562-0811
If to Issuer:	MetaSwarm, Inc.
	301 N. Lake Avenue, Suite 810
	Pasadena, CA 91101
	Attn:Marvin Shannon, President
	Telephone:  (626) 792-0153
	Facsimile: (626) 792-3258

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.  All notices or demand sent in accordance with this section shall be deemed received on the earlier of the date of actual receipt or three days after the deposit thereof in the mail.

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Section 22.06  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Subscriber or Issuer, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

Section 22.07Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

Section 22.08  This Agreement, together with the remaining Loan Documents and other documents and instruments executed concurrently herewith, represent the entire and final understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by evidence of any prior, contemporaneous or subsequent other agreement, oral or written, before the date hereof.

Section 22.09  This Agreement can only be amended by a writing signed by both Subscriber and Issuer.

Section 22.10  The laws of Massachusetts shall govern the construction of this Agreement and the rights and duties of the parties hereto, but without reference to choice of law principles.  This Agreement shall take effect as a sealed instrument.

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Section 22.11     Subscriber and Issueragree to issue a joint press release in form mutually satisfactory.  In addition, Issuer agrees that Subscriber is entitled, at Subscriber’s election, to an acknowledgement line designating that Issuer is an “AIS Funding, LLC-funded company” but in such precise form as selected by Subscriber but subject to Issuer approval, in all Issuer press releases during any time period that the Note remains outstanding.

	METASWARM, INC.
Witnessed by:	By:	/s/ Marvin Shannon
/s/ Celia Rivera		Marvin Shannon
		Chairman and Chief Executive Officer
		Address: 301 N. Lake Avenue, Suite 810
		Pasadena, CA 91101

AIS FUNDING, LLC
By:	/s/ Arthur Maxwell
	Arthur Maxwell
	Manager
	Address:4 Robert Bonazzoli AvenueHudson, Massachusetts  01749

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EX-4.9

Exhibit 4.9

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT (“Agreement”) is made this ___ day of January, 2008, by and between MetaSwarm, Inc., a Florida corporation (the “Grantor”), and AIS Funding, LLC, a Delaware limited liability company (the “Grantee”).

            WHEREAS, Grantor is the owner of the inventions and the patent applications defining same as listed on the attached Schedule A (collectively the “Applications”);

            WHEREAS, Grantee has extended a loan to Grantor pursuant to the terms and conditions of that certain Securities Purchase and Security Agreement dated the date hereof, between Grantor and Grantee (the “Security Agreement”), and the Convertible Promissory Note issued thereunder dated the date hereof (the “Note”) made by Grantor in favor of Grantee;

            WHEREAS, under the Security Agreement, Grantor has granted to Grantee a security interest in certain of its assets (including the Applications) to secure the performance of the obligations of Grantor under the Note and the Security Agreement; and

            WHEREAS, Grantor and Grantee by this instrument seek to confirm and make a record of the grant of a security interest in and assignment of the Applications;

            NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Grantor does hereby acknowledge that it has granted to Grantee a security interest in all of Grantor’s right, title and interest in, to, and under the Applications, and has assigned those Applications to Grantee as follows:

1.            Grantor sells, assigns and transfers to Grantee, its successors, assigns and legal representatives, all hereinafter referred to as the Assignee, Grantor’s entire right, title and interest for the United States and all foreign countries, in and to any and all inventions and designs which are disclosed in patent applications listed on the Invention Schedule attached as Attachment 1hereto, and all non-provisional, divisional, continuing, substitute, renewal, reissue and all other applications for Letters Patent, utility models, industrial designs or similar intellectual property rights which have been or shall be filed in the United States, internationally, and in Japan and any other foreign country on any of said inventions; and in and to all original and reissued patents which have been or shall be issued in the United States, Japan or any other jurisdiction on said inventions, including the right to apply for patent rights in Japan and each other foreign country and all rights to priority;

2.            Grantor, when requested, without charge, at Grantor’s expense, agrees to carry out in good faith the intent and purpose of this assignment, by executing all non-provisional, divisional, continuing, substitute, renewal, reissue, and all other patent, utility model and industrial design applications on any and all said inventions, by executing all rightful oaths, assignments, powers of attorney and other papers, by communicating to said Grantee all facts known to Grantor relating to said inventions and the history thereof, and generally by doing everything reasonably possible which said Grantee shall consider desirable for aiding in securing and maintaining proper protection for said inventions and for vesting title to said inventions and all applications for patents and all patents on said inventions, in said Grantee;

3.            Grantor appoints Grantee its attorney-in-fact to execute, in its name and on its behalf, any and all documents required to effectuate this Assignment, specifically including, but not limited to, those documents specified above and any necessary corrective assignments.

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               Grantor also acknowledges and confirms that the rights and remedies of Grantee and Grantor with respect to the security interests in the Applications granted hereby are more fully set forth in the Note and the Security Agreement, the terms and provisions of which are incorporated herein by reference.

This instrument is executed under seal.

	METASWARM, INC.
Witnessed by:	By:	/s/ Marvin Shannon
/s/ Celia Rivera		Marvin Shannon
		Chairman and Chief Executive Officer
		Address:  301 N. Lake Avenue, Suite 810 Pasadena, CA 91101

STATE OF  ILLINOISCOMMONWEALTHH OF

CALIFORNIA

COUNTY OF

LOS ANGELES

:

On dEthis

January

18

,

2008

, before me, the undersigned notary public,

Personallyappeared

Marvin Shannon

, proved to me through satisfactory evidence of

identification, which were

Proved by US passport

, to be the person who signed the preceding

or attached document in my presence and swore or affirmed to me that the contents of the document are

truthful and accurate to the best of (his) (her) knowledge and belief and acknowledged to me that

(he) (she) signed it voluntarily for its stated purpose.

SEAL

/s/ Pi Ning Cheung

Notary Public

My commission expires:

May 7, 2010

AIS FUNDING, LLC
By:	/s/ Arthur Maxwell
	Arthur Maxwell
	Manager
	Address: 4 Robert Bonazzoli AvenueHudson, Massachusetts  01749

2

EX-4.10

Exhibit 4.10

THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH SALES OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE MAKER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

CONVERTIBLE PROMISSORY NOTE

$_______       January  __, 2008

FOR VALUE RECEIVED, the undersigned, MetaSwarm, Inc., a Florida corporation  (“Maker”), hereby promises to pay to the order of AIS Funding, LLC (“Holder”), the principal sum advanced under this Convertible Promissory Note (this “Note”), together with all accrued interest on such outstanding advanced and unpaid balance, in accordance with the terms and provisions of this Note.

1.Interest.  Interest shall accrue on the outstanding principal balance of this Note from January __, 2008 (the “Issuance Date”) on the unpaid principal amount at a rate equal to 14% per annum, to accrue and be paid when the unpaid principal is due under this Note.  Following an Event of Default (as defined in Section 10) interest shall accrue on the unpaid principal amount at a rate equal to the annual sum of (i) the interest rate absent such Event of Default, plus (ii) 3 ½% per annum, until paid in full.  Interest shall be computed on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid.

2.           Payment. The unpaid principal amount of this Note, together with all accrued but unpaid interest thereon, shall, if not paid sooner, be due and payable in full on that date one year after the Issuance Date (the “Maturity Date”) or such earlier date, at the election of the Holder, following the occurrence of an Event of Default (as defined in Section 10), in each event provided that the Holder has not converted this Note prior thereto in the manner provided in Section 4.

3.         Securities Purchase and Security Agreement.  This Note is issued pursuant, and is subject, to that certain Securities Purchase and Security Agreement of even date herewith (the “Purchase Agreement”) by and between Holder and Maker, which provides, among other things, for acceleration hereof.  This Note is the “Note(s)” referred to in the Purchase Agreement, provided that if the original principal amount of this Note is $1,000,000 then this will be the sole Note(s) and if the original principal amount of this Note is less than $1,000,000, then upon satisfaction of the conditions to Closing as set forth in the Purchase Agreement, there will be a second Note which, together with this Note, are the “Note(s)” referred to in the Purchase Agreement.  Capitalized terms used in this Note but not defined herein shall have the meaning assigned in the Purchase Agreement.

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4.           Conversion by Holder.

(a)           Investment by the Holder. Subject to and in compliance with the provisions of this Section 4, the outstanding principal amount of this Note and accrued and unpaid interest under this Note may, at the option of the Holder, be converted into fully-paid and non-assessable shares (calculated as to each conversion to the nearest smaller whole share) of common stock, no par value, of the Maker, of the same type and class as are publicly-traded OTC as of the Issuance Date (the “Common Stock”). The number of shares of Common Stock into which the Holder shall be entitled upon conversion under this Section 4 shall be calculated in accordance with the provisions of Section 4(b).  This Note is also subject to mandatory and automatic conversion under the provisions set forth in Section 5.

(b)           Conversion Shares.  The number of shares of Common Stock to be issued to the Holder upon conversion of this Note under this Section 4 (the “Conversion Shares”), shall be equal to a fraction, the numerator of which is the Outstanding Conversion Indebtedness, divided by the Applicable Conversion Price.  The term “Outstanding Conversion Indebtedness” means that amount of or portion of unpaid principal balance of this Note and accrued and unpaid interest on the Note which Holder elects to convert, provided if less than the then entire amount of unpaid principle balance and accrued and unpaid interest, then in even multiples of $10,000 and not less than $50,000.  The term “Applicable Conversion Price” means the lesser of (i) $0.20 per share of Common Stock, and (ii) the closing per share of Common Stock OTC bid price on the business day preceding the Issuance Date, subject to paragraphs (I) and (II) below.

(I)           Extraordinary Common Stock Event.  Upon the happening of an Extraordinary Common Stock Event, the Applicable Conversion Price shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted under this paragraph (I) by multiplying the then effective Applicable Conversion Price by a fraction, (x) the numerator of which shall be the aggregate number of shares of Common Stock outstanding immediately prior to such Extraordinary Common Stock Event and (y) the denominator of which shall be the aggregate number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the product so obtained shall thereafter be the Applicable Conversion Price. The Applicable Conversion Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events.  “Extraordinary Common Stock Event” shall mean (x) the issue of additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (y) the subdivision of outstanding shares of Common Stock into a greater number of shares of the Common Stock, or (z) the combination of outstanding shares of the Common Stock into a smaller number of shares of the Common Stock.

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(II)           Dilutive Issuance or Sale of Common Stock or Convertible Securities.  If the Maker shall, while there is any unpaid principal balance of this Note, issue or sell shares of its Common Stock without consideration or at a price per share less than the Applicable Conversion Price in effect immediately prior to such issuance or sale, but excluding shares of Common Stock deemed to have been issued by the Issuer (i) upon conversion, exercise, or exchange of any warrants or convertible securities which are outstanding on the day immediately preceding the Closing and disclosed under Section 7.14 of the Purchase Agreement and Schedule 7.14 thereto, provided that the terms of such warrants or convertible securities are not amended, modified or changed on or after the Closing; or (ii) the Beijing InfoSure Shares, provided that the terms of the Beijing InfoSure Shares are not amended, modified or changed on or after the Closing;  then in each such case such Applicable Conversion Price upon each such issuance or sale, except as hereinafter provided, shall be lowered so as to be equal to the lowest Net Consideration per Share received for each additional Share upon such issuance.  For purposes of this paragraph (I) above and this paragraph (II), the issuance of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase rights with respect to such convertible or exchangeable securities (collectively, “Common Stock Equivalents”), shall be deemed an issuance of Common Stock if the Net Consideration per Share (as hereinafter determined) which may be received by the Maker for such Common Stock shall be less than the Applicable Conversion Price in effect at the time of such issuance.  Any obligation, agreement or undertaking to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises.  No adjustment of the Applicable Conversion Price shall be made under paragraph (I) above or this paragraph (II) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the issuance of any such Common Stock Equivalents as above provided.

(A)  Adjustments for Cancellation or Expiration of Common Stock Equivalents.  Should the Net Consideration per Share of any such Common Stock Equivalents be decreased from time to time, then, upon the effectiveness of each such change, the Applicable Conversion Price will be that which would have been obtained (1) had the adjustments made upon the issuance of such Common Stock Equivalents been made upon the basis of the actual Net Consideration per Share of such securities, and (2) had adjustments made to the Applicable Conversion Price since the date of issuance of such Common Stock Equivalents been made to such Applicable Conversion Price as adjusted pursuant to (1) above.  Any adjustment of the Applicable Conversion Price with respect to this subparagraph (A) which relates to Common Stock Equivalents shall be disregarded if, as, and when all of such Common Stock Equivalents expire or are cancelled without being exercised, so that the Applicable Conversion Price effective immediately upon such cancellation or expiration shall be equal to the Applicable Conversion Price in effect at the time of the issuance of the expired or cancelled Common Stock Equivalents, with such additional adjustments as would have been made to the Applicable Conversion Price had the expired or cancelled Common Stock Equivalents not been issued.    

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                (B)  Net Consideration per Share.  For purposes of the remainingprovisions of this paragraph (II), the “Net Consideration per Share”which may be received by the Maker shall be determined as follows:

(1)  The “Net Consideration per Share” shall mean the amount equal to the total amount of consideration, if any, received by the Maker for the issuance of such Common Stock Equivalents, plus the minimum amount of consideration, if any, payable to the Maker upon exercise, or conversion or exchange thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted.

(2)  The “Net Consideration per Share” which may be received by the Maker shall be determined in each instance as of the date of issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate adjustments which may be applicable with respect to such Common Stock Equivalents.

(c)           Dividends. In the event the Maker shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution (other than a distribution in liquidation or other distribution provided for herein) payable in securities of the Maker other than shares of Common Stock or in assets (other than, the extent permitted by the remaining Loan Documents, ordinary cash dividends paid out of retained earnings), then and in each such event, provision shall be made so that the Holder shall receive upon conversion of this Note, in addition to the number of shares of Common Stock receivable thereupon, the number of securities or such other assets of the Maker which they would have received had the Note been converted into Common Stock on the record date of such event and had they thereafter, during the period from the date of such event to and including the effective date of the conversion, retained such securities or such other assets receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under paragraph (I) or paragraph (II)  of Section 4(b) with respect to the rights of the Holder.

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(d)           Capital Reorganization or Reclassification. If the Common Stock issuable upon the conversion of the Note shall be changed into the same or different number of shares of any series or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for in paragraph (I) of Section 4(a)), then and in each such event the Holder shall have the right thereafter to convert each such Conversion Share into the kind and amount of shares of stock and other securities and property receivable by such holders upon such reorganization, reclassification or other change, equal to the number or shares of Common Stock into which such Note might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

(e)           Certificate as to Adjustments. In each case of an adjustment or readjustment of the Applicable Conversion Price, the Maker will furnish the Holder with a certificate showing such adjustment or readjustment, and stating in reasonable detail the facts upon which such adjustment or readjustment is based.

(f)           Cash in Lieu of Fractional Shares.  No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of the Note. Instead of any fractional shares which would otherwise be issuable upon conversion of the Note, the Maker shall pay to the Holder a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the fair market value per share of the Common Stock, as applicable (as determined in good faith by the Board of Directors) at the close of business on the effective date of conversion. The determination as to whether or not to make any cash payment in lieu of the issuance of fractional shares shall be based upon the total aggregate value of outstanding principal of the Note being converted at any one time by the Holder.

(g)           Issue Tax.  The issuance of certificates for Conversion Shares upon conversion of the Note shall be made without charge to the Holder for any issuance tax in respect thereof, provided that the Maker shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder of this Note being converted.

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(h)           Closing of Books.  The Maker will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion of any outstanding principal or interest amount on this Note in any manner which interferes with the timely conversion of the Note, except as may otherwise be required to comply with applicable securities laws.

(i)           Mechanics and Effect of Conversion.  If the Holder provides notice of its election to convert which notice shall specify the amount of Outstanding Conversion Indebtedness being so converted, the conversion shall be automatic whereupon in exchange for the Holder receiving the stock certificate(s) issued to it as result of such conversion for the number of shares of Common Stock to which such Holder is entitled upon such conversion, together with any securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described in Section 4(f), the Holder shall surrender this Note, duly endorsed, at the principal offices of the Maker or any transfer agent of the Maker.   Upon any conversion of this Note, the Maker will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the principal amount and accrued and unpaid interest being converted including without limitation the obligation to pay such portion of the principal amount and accrued interest.

(j)           Damages.  The Maker recognizes and agrees that the Holder will not have an adequate remedy if the Maker fails to comply with the provisions of this Section 4 and that damages may not be readily ascertainable, and the Maker expressly agrees that, in the event of such failure, it shall not oppose an application by the Holder requiring specific performance of any and all provisions hereof or enjoining the Maker from continuing to commit any such breach or other breach of this Section 4.

5.           Mandatory Conversion.  Subject to and in compliance with the provisions of this Section 5 and also subject to the provisions of Sections 4(b)(I), 4(b)(II), 4(c), 4(d), 4(e), 4(f), 4(g), 4(h) and 4(j), and all, but not less than all, the outstanding principal amount and accrued and unpaid interest under this Note shall be converted into fully-paid and non-assessable shares (calculated as to each conversion to the nearest smaller whole share) of common stock, no par value, of the Maker, of the same type and class as are publicly-traded OTC as of the Issuance Date (the “Common Stock”). The number of shares of Common Stock into which the Holder shall be entitled upon conversion under this Section 5 shall be calculated in accordance with the provisions of Section 5(b).

(a)           Conditions of Mandatory Conversion.  Upon all of the following conditions having been satisfied, Maker will send notice to the Holder that a mandatory conversion of the Note is occurring:

(I)   all Conversion Shares are registered under a Registration Statement that has become effective or all Conversion Shares may be sold without restriction or limitation under Rule 144 of the Securities Act; and

(II)   the closing OTC bid price per share of Common Stock for ten consecutive trading days exceeds the product of (A) three, multiplied by (B) the then Applicable Conversion Price for each of such ten trading days; and

(III)   the daily OTC volume for the Common Stock for such 10-consecutive trading day period described in clause (II) exceeds 750,000 Shares.

Provided, that the Maker’s notice to Holder under this Section 5(a) shall include (i) an opinion to the Maker’s transfer agent and the Holder which is satisfactory to the Maker’s transfer agent (such satisfaction being confirmed in writing), as to both the counsel issuing such opinion and as to form, that the condition under above clause (I) has been satisfied such that the Conversion Shares are freely-tradeable without restriction and that the certificate to be issued to the then Holder upon mandatory conversion will not contain any restrictive legend (“Securities Law Opinion”), and (ii) supporting evidence that the conditions under above clauses (II) and (III) have been satisfied.  In addition, for the mandatory conversion to be effective, the Holder must accept the Securities Law Opinion, such acceptance not to be unreasonably withheld.

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(b)           Conversion Shares.  The number of Conversion Shares to be issued to the Holder upon conversion of this Note under this Section 5 (the “Conversion Shares”), shall be determined in the same manner as under Section 4(b), except that the term  “Outstanding Conversion Indebtedness” for purposes of this Section 5(b) means all then remaining unpaid principal and accrued and unpaid interest on the Note.

(c)           Mechanics and Effect of Conversion.  If the Maker provides notice of the mandatory conversion under Section 5(a) and the remaining conditions of Section 5(a) to the effectiveness of the mandatory conversion are satisfied, the conversion shall be automatic whereupon in exchange for the Holder receiving the stock certificate(s) issued to it as result of such conversion for the number of shares of Common Stock to which such Holder is entitled upon such conversion, together with any securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described in Section 4(f), the Holder shall surrender this Note, duly endorsed, at the principal offices of the Maker or any transfer agent of the Maker.   Upon completion of any mandatory conversion of this Note, the Maker will be forever released from all of its obligations and liabilities under this Note with regard to the principal amount and accrued and unpaid interest including without limitation the obligation to pay such portion of the principal amount and accrued interest.

6.           No Rights as Shareholder.  No provision of this Note shall be construed as conferring upon the Holder hereof the right to vote, consent, receive dividends or receive notice other than as herein expressly provided in respect of meeting of stockholders for the election of directors of the Maker or any other matter whatsoever as a stockholder of the Maker. No provision hereof, in the absence of affirmative action by the Holder hereof to acquire shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder as a stockholder of the Maker, whether such liability is asserted by the Maker or by creditors of the Maker.

7.           Redemption.  Maker shall have the right to redeem by prepayment of this Note in whole or in part but not in increments of less than $50,000 from time to time but subject to the terms and conditions of this Section 7.

(a)           Conditions of Redemption.  The Maker may send a notice to Holder that Maker elects to redeem the Note, such redemption to be effective not less than 20 days after Holder receives such notice (the “Redemption Notice”) on such date designated in such notice, and provided that (i) Maker does not receive from Holder during such 20-day period a notice that Holder is electing to convert the Note under Section 4, and (ii) all shares of Common Stock to be issued to Holder upon such redemption are registered under a Registration Statement that has become effective or all such shares of Common Stock to be issued upon such redemption may be sold without restriction or limitation under Rule 144 of the Securities Act.  The Redemption Notice must also include (A) an opinion to the Maker’s transfer agent and the Holder which is satisfactory to the Maker’s transfer agent (such satisfaction being confirmed in writing), as to both the counsel issuing such opinion and as to form, that the condition under above clause (ii) of this paragraph has been satisfied such that the shares of Common Stock to be issued upon such redemption will, upon such issuance, be freely-tradeable without restriction and that the certificate to be issued to the then Holder upon such redemption will not contain any restrictive legend (“Securities Law Opinion”); and (B) the principal amount (the “Redemption Principal”) and the amount of all accrued and unpaid interest on the Note), which is being redeemed.  In addition, for the redemption to be effective, the Holder must accept the Securities Law Opinion, such acceptance not to be unreasonably withheld.

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(b)           Redemption Price.  The redemption price to be paid by Maker to Holder at the closing of any redemption under this Section 7 shall be the sum of (A) the product obtained by multiplying the Redemption Principal by 1.1, plus (B) all accrued and unpaid interest on the Note as of the date of payment of the redemption price (inclusive, for the avoidance of doubt, of interest on the Redemption Principal).

(c)Mechanics and Effect of Partial Redemption.  If the Maker provides a Redemption Notice to Holder and the Redemption Principal specified therein is less than the entire then outstanding principal on this Note, upon satisfaction of the remaining conditions set forth in Section 7(a) including but not limited to the Holder not having issued a timely election to convert the Note under Section 4, the redemption shall be automatic whereupon in exchange for the Holder receiving a wire transfer or check payable to the Holder for the redemption price described in Section 7(b), the Maker will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the principal amount (the Redemption Principal) and accrued and unpaid interest being redeemed including without limitation the obligation to pay such portion of the principal amount and accrued interest.  If the Redemption Notice is for the entire then outstanding principal on this Note, then in exchange for the Holder receiving a wire transfer or check payable to the Holder for the redemption price described in Section 7(b), the Holder will forthwith deliver the Note to Maker, marked “satisfied” or “paid in full.”

8.           Representations, Warranties and Covenants.  The representations, warranties and covenants of the Maker set forth in the Purchase Agreement are incorporated herein to the same extent as it recited herein in their entirety.

9.          Security.  This Note is secured, among other things, pursuant to the Purchase Agreement, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

10.         Events of Default.  The occurrence of any one of the following shall constitute an “Event of Default” hereunder:

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(a)Maker’s failure to make any required payment of principal and/or interest, or any other payment called for under this Note, and the continuance of such failure to pay for a period of five days after the date on which such payment was due under this Note; or

(b)Maker’s failure to perform any obligation of Maker under Section 4, Section 5 or, as applicable, Section 7; or

(c)Maker’s failure to perform any other obligation (other than  one that can be satisfied with the payment of money and other than any obligation of Maker referred to in clause (b) above) required under this Note; or

(d)The occurrence of an Event of Default, as such term is defined in Section 16.01 of the Purchase Agreement.

11.         Remedies.

(a)           Upon the occurrence and continuation of an Event of Default under this Note, the entire unpaid balance of this Note shall, at the option of the Holder, become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein to the contract notwithstanding, and the Holder may exercise and shall have any and all remedies accorded him by law. Such acceleration of maturity, once claimed hereunder by Holder, may at Holder’s option be rescinded by written acknowledgment to that effect, but the tender and acceptance of partial payment of partial performance alone shall not in any way affect or rescind such acceleration of maturity.

(b)         In case any one or more Events of Default shall occur, the Holder may proceed to protect and enforce his right or remedies either by suit in equity of by action at law, or both, for the specific performance of any covenant, agreement or other provision contained herein, or proceed to enforce the payment of this Note or any other legal, equitable or statutory right or remedy. No right or remedy herein conferred upon the Holder is intended to be exclusive of any other right or remedy contained herein and every such right or remedy contained herein or now or hereafter existing at law or in equity or by statute, or otherwise, may be exercised separately or in any combination. No course of dealing between the Maker and the Holder or any failure or delay on the Holder’s part in exercising any rights or remedies hereunder shall operate as a waiver of any rights or remedies of the Holder and no single or partial exercise of any rights or remedies hereunder shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder.  Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

12.         Governing Law.  The provisions of his Note shall be governed and construed according to the laws of the Commonwealth of Massachusetts, without giving effect to its conflicts of law provisions.  This Note shall be deemed under seal.

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13.         Notices.  Any notice or demand required or permitted by or in connection with this Note shall be given in writing to Maker and Holder in the manner provided in the Purchase Agreement, if to Maker as provided to Issuer under the Purchase Agreement and if to Holder as provided to Subscriber under the Purchase Agreement.

14.         Costs of Collection.  Borrower hereby agrees to pay all costs of collection, including attorneys' fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

15.         Modification; Assignment.  This Note may be modified or amended only in writing signed by the Holder and the Maker. This Note may not be assigned, transferred, encumbered or pledged by the Holder and any such assignment, transfer, encumbrance or pledge will be void.

16.         Severability.  In the event that any one or more of the provisions of this Note shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality of uneforceability shall not affect any other provision of this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

17.          Limitation of Applicable Law.  In the event the operation of any provision of this Note results in an effective rate of interest which exceeds the limit of usury laws or any other law applicable to the loan evidenced hereby, all sums in excess of those lawfully collectible as interest for the period in questions shall, without further agreement or notice by any party to this Note, be applied to the unpaid principal balance of this Note immediately upon receipt of such monies by Holder, with the same force and effect as though Maker had specifically designated such extra sums to be so applied to the unpaid balance and Holder had agrees to accepts such extra payment(s) as a prepayment.

18.         Captions.  The captions herein are for convenience and reference only and in no way define or limit the scope of content of this Note or in any way affect its provisions.

19.Debtor-Creditor Relationship.  Holder shall in no event be construed for any purpose to be a partner, joint venturer or associate of the Maker, it being the sole intention of the parties to establish a relationship of debtor and creditor.

[Remainder of page left blank.]

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                     IN WITNESS WHEREOF, Maker has executed this Convertible Promissory Note on January       , 2008.

	MAKER
	MetaSwarm, Inc.
WITNESS	A Florida corporation
/s/	/s/
Print Name:	Name: Marvin Shannon
	Title: Chairman and Chief Executive Officer

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EX-4.11

Exhibit 4.11

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

METASWARM, INC.

COMMON STOCK PURCHASE WARRANT

Warrant Shares: 2,500,000         Initial Exercise Date: January 22, 2008

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, AIS Funding, LLC, a Delaware limited liability company (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the 10 year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from MetaSwarm, Inc., a Florida corporation (the “Company”), up to 2,500,000 shares (the “Warrant Shares”) of Common Stock.  The number of Warrant Shares is subject to adjustment under Section 3.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  This Warrant is issued pursuant to the terms of the Purchase Agreement and the Holder is entitled to the benefits of Sections 13 and 14 thereof to the same extent as if such Sections 13 and 14 were recited in their entirety in this Warrant.

Section 1. Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase and Security Agreement (the “Purchase Agreement”), dated January 22, 2008, among the Company and the Holder.

“Common Stock” means, and includes, (a) the Company’s common stock, no par value, as authorized on the date of the Purchase Agreement, (b) any other capital stock of any class or classes (however designated) of the Company, authorized on or after such date, the holders of which shall have the rights, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference, and the holders of which shall ordinarily, in the absence of contingencies, be entitled to vote for the election of a majority of directors of the Company (even though the right so to vote has been suspended by the happening of such a contingency), and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

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“Common Stock Equivalents” means any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase rights with respect to such convertible or exchangeable securities.

“Net Consideration per Share” which may be received by the Company shall be determined as follows:

(1)  The “Net Consideration per Share” shall mean the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such Common Stock or Common Stock Equivalents, plus the minimum amount of consideration, if any, payable to the Company upon exercise, or conversion or exchange thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted.

(2)  The “Net Consideration per Share” which may be received by the Company shall be determined in each instance as of the date of issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate adjustments.

“Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, on the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 3 or otherwise, and such term includes, without limitation, Alternate Consideration.

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Section 2. Exercise.

a)Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received  payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3 Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within 1 Business Day of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

b)Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $.202, subject to adjustment hereunder (the “Exercise Price”).

c)Cashless Exercise.  If at any time after the holding period under Rule 144 of the Securities Act has been satisfied starting from the date of issuance of this Warrant, there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where

X = the number of Warrant Shares to be issued to the Holder upon such cashless exercise;

Y = the number of Warrant Shares with respect to which this Warrant is being exercised;

A = the VWAP on the Trading Day immediately preceding the date of such election; and

B = the Exercise Price of this Warrant.

“VWAP” means volume weighted average price OTC for the Common Stock.

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Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d)Holder’s Restrictions.  The Company shall not effect any exercise of this Warrant, and a  Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Debentures or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by a Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB or Form 10-SB, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Beneficial Ownership Limitation provisions of this Section 2(d) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this Section 2(d) shall continue to apply.  Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be further waived by such Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

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e)Mechanics of Exercise.

i.Authorization of Warrant Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

ii.Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid. If the Company fails for any reason to deliver to the Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such certificates are delivered.

iii.Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

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iv.Rescission Rights.  If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

v.Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

vi.No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vii.Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

viii.Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

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Section 3. Certain Adjustments.

a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company or Common Stock Equivalents, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

b)Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock but excluding shares of Common Stock deemed to have been issued by the Issuer (i) upon conversion, exercise, or exchange of any warrants or convertible securities which are outstanding on the day immediately preceding the Closing and disclosed in Section 7.14 of the Purchase Agreement including Schedule 7.14 thereto,  provided that the terms of any such warrants or convertible securities disclosed under said Section 7.14 are not amended, modified or changed on or after the Closing; or (iv) upon issuance of the Beijing InfoSure Shares, provided that the terms of the Beijing InfoSure Shares are not amended, modified or changed on or after the Closing; at Net Consideration per Share less than the then Exercise Price (such lower Net Consideration per Share, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at Net Consideration per Share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.

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c)Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock or Common Stock Equivalents at Net Consideration per Share less than the VWAP at the record date mentioned below (it being understood that if such Net Consideration per Share with respect to such issuance is less than the then applicable Exercise Price, then such issuance shall be subject to Section 3(b)), then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

d)Pro Rata Distributions.  If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any Common Stock Equivalent or other security other than the Common Stock (which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

e)Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of capital stock or Common Stock (each being, Other Securities), as applicable, of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3(e) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula using an expected volatility equal to the 100 day historical price volatility obtained from the HVT function on Bloomberg L.P. as of the trading day immediately prior to the public announcement of the Fundamental Transaction. 

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f)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

g)Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

h)Notice to Holder.

i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues any Common Stock or Common Stock Equivalents  for no Net Consideration per Share, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

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Section 4. Transfer of Warrant.

a)Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c)Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer, that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company, and (iii) the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) promulgated under the Securities Act.

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Section 5. Miscellaneous.

a)No Rights as Shareholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(ii).

b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d)Authorized Shares.

The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

f)Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

g)Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h)Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

i)Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j)Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

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k)Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

l)Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

m)Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n)Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

METASWARM INC.
By:	/s/
	Name
	Title

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NOTICE OF EXERCISE

TO:           METASWARM INC.

The Undersigned is the Holder of Warrant No. ______ (the “Warrant”) issued by MetaSwarm, Inc., a Florida corporation (the “Company”).  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

(1)       The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

[  ] in lawful money of the United States; or

[ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

(4)       Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity:  _________________________________________________

Name of Authorized Signatory:  ___________________________________________________________________

Title of Authorized Signatory:  ____________________________________________________________________

Date: _______________________________________________________________________________________

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ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:                                         _____________________________

Holder’s Address:                                           _____________________________

_____________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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