SUBSCRIPTION AGREEMENT

EX-10.5 2 p69933exv10w5.htm EX-10.5 exv10w5

Exhibit 10.5

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 30, 2004, by and among Goldspring, Inc., a Florida corporation (the “Company”), and the subscribers identified on the signature pages hereto (each a “Subscriber” and collectively “Subscribers”).

WHEREAS, the Company and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 3(a)(9) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”).

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Subscribers, as provided herein, and the Subscribers, in the aggregate, shall purchase up to Twelve Million Dollars ($12,000,000) (the “Purchase Price”) of principal amount of promissory notes of the Company (“Note” or “Notes”) in the form attached hereto as Exhibit A convertible into shares of the Company’s common stock, $0.000666 par value (the “Common Stock”) at a fixed per share conversion price equal to $0.20, or for the first twenty (20) trading days after the Closing Date (as defined in Section 13(b) hereof) at a per share conversion price equal to seventy percent (70%) of the average of the five (5) lowest closing prices of the Common Stock as reported by Bloomberg LP for the Principal Market (as defined in Section 9.1(b) hereof) for the twenty (20) trading days preceding but not including the Closing Date. The Subscribers will also receive share purchase warrants (the “Warrants”) in the form attached hereto as Exhibit B, to purchase shares of Common Stock (the “Warrant Shares”). The Notes, shares of Common Stock issuable upon conversion of the Notes (the "Shares”), the Warrants and the Warrant Shares are collectively referred to herein as the “Securities”;

WHEREAS, the aggregate consideration to be paid for the Notes and the Warrants contemplated hereby shall be held in escrow pursuant to the terms of an Escrow Agreement to be executed by the parties substantially in the form attached hereto as Exhibit C (the “Escrow Agreement”).

WHEREAS, the Subscribers and the Company had previously entered into a Subscription Agreement dated as of March 22, 2004 (“First Subscription Agreement”) relating to the sale by the Company to the Subscribers of common stock (“First Common Stock”) and Class A and Green Shoe Common Stock Purchase Warrants (collectively “First Warrants”) in the amounts set forth on the signature pages hereto, and the Company has defaulted in certain of its obligations to the Subscribers under the terms of the First Subscription Agreement and First Warrants; and

WHEREAS, the Subscribers are desirous of releasing the Company from damages that have accrued under the First Subscription Agreement and First Warrants.

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

1. Closing. Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Closing Date, each Subscriber who signs this Agreement shall purchase and the Company shall sell to each such Subscriber a Note in the principal and the amount of Warrants determined pursuant to Section 3 below. The aggregate principal amount of the Notes to be purchased by the Subscribers on the Closing Date shall not exceed the Purchase Price. The principal amount of the Note to be purchased by each Subscriber shall be equal to the purchase price paid by each Subscriber for the First Common Stock and First Warrants (“First Purchase Price”) designated on the signature page hereto and

(Subscription Agreement)

an additional amount equal to two percent (2%) of such amount for each thirty (30) days or part thereof commencing from April 6, 2004 through April 21, 2004 and from June 20, 2004 through the Closing Date, which represent the liquidated damages described in Section 11.4 of the First Subscription Agreement (“First Liquidated Damages”). The aggregate principal amount of the Note to be received by each Subscriber is set forth on the signature page hereto. This Agreement and the Transaction Documents (as defined in Section 5(c) shall be binding upon the Company and only those Subscribers who execute this Agreement and comply with their obligations hereunder.

2. Payments of Purchase Price. The Subscribers will pay the Purchase Price for the Note and Warrants by surrender to the Company of the First Common Stock and First Warrants, which will be deposited with the Escrow Agent identified in the Escrow Agreement and held pursuant to the Escrow Agreement which surrender shall be the entire payment required to be made by the Subscribers. The Subscribers acknowledge and agree that provided a Closing under this Agreement occurs then the Subscriber and their affiliates shall release Company (a) from any other obligation to pay additional First Liquidated Damages pursuant to Section 11.4 of the First Subscription Agreement and Section 9 of each of the First Warrants; and (b) from any claims they may have against Company in connection with the transactions contemplated by the First Subscription Agreement, as set forth in Section 13. Each of the Subscribers and the Company, by execution of this Agreement, hereby irrevocably releases the other party from any claim or potential claim such party may have presently or in the future arising from the First Subscription Agreement, First Warrants or any state of facts extant prior to the Closing Date to the extent described in Section 13 hereof.

3. Warrants. On the Closing Date, the Company will issue and deliver Class B Warrants to the Subscribers. Fifty (50) Class B Warrants will be issued for each one hundred (100) Shares, which would be issued on the Closing Date assuming the complete conversion of the Notes issued on the Closing Date at an assumed Conversion Price of $.20. The per Warrant Share exercise price to acquire a Warrant Share upon exercise of a Class B Warrant shall be $0.20. The Class B Warrants shall be exercisable until four (4) years after the Issue Date of the Class B Warrants.

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

(a) Information on Company. The Subscriber has been furnished with or has had access at the EDGAR Website of the Commission to the Company’s Form 10-KSB for the year ended December 31, 2004 as filed with the Commission, together with all subsequently filed Forms 10-QSB, 8-K, and filings made with the Commission available at the EDGAR website (hereinafter referred to collectively as the “Reports”). In addition, the Subscriber has received in writing from the Company such other information concerning its operations, financial condition and other matters as the Subscriber has requested in writing (such other information is collectively, the “Other Written Information”), and considered all factors the Subscriber deems material in deciding on the advisability of investing in the Securities.

(b) Information on Subscriber. The Subscriber is, and will be at the time of the conversion of the Notes and exercise of the Warrants, an “accredited investor”, as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which

(Subscription Agreement)

represents a speculative investment. The Subscriber has the authority and is duly and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The information set forth on the signature page hereto regarding the Subscriber is accurate.

(c) Purchase of Notes and Warrants. On the Closing Date, the Subscriber will purchase the Notes and Warrants as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof.

(d) Compliance with Securities Act. The Subscriber understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Subscriber contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration. In any event, and subject to compliance with applicable securities laws and Section 4(l) hereof, the Subscriber may enter into lawful hedging transactions.

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

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

(f) Warrants Legend. The Warrants shall bear the following or similar legend:

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

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

(Subscription Agreement)

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

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

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

(j) Restricted Securities. Subscriber understands that the Securities have not been registered under the 1933 Act and such Subscriber will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the 1933 Act. Notwithstanding anything to the contrary contained in this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under Regulation D and such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. Affiliate includes each Subsidiary of the Company. For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

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

(l) Restrictions on Short Sales. Subscriber represents, warrants and covenants that neither Subscriber nor any person or entity, directly or indirectly controlling, controlled by or under direct or indirect common control with such Subscriber (“Affiliate”) which (x) has knowledge of the transactions contemplated hereby, (y) has or shares discretion relating to such Subscriber’s investments or trading or information concerning such Subscriber’s investments, including in respect of the Securities,

(Subscription Agreement)

or (z) is subject to such Subscriber’s review or input concerning such Affiliate’s investments or trading, has or will, directly or indirectly, during the period beginning on the date on which Subscriber was first contacted regarding the transactions contemplated by this Agreement and ending on December 31, 2004, engage in (i) any “short sales” (as such term is defined in Rule 3b-3 promulgated under the 1934 Act) of the Shares and/or the Warrant Shares, including, without limitation, the maintaining of any short position with respect to, establishing or maintaining a “put equivalent position” (within the meaning of Rule 16a-1(h) under the 1934 Act) with respect to, entering into any swap, derivative transaction or other arrangement (whether any such transaction is to be settled by delivery of Shares, other securities, cash or other consideration) that transfers to another, in whole or in part, any economic consequences or ownership, or otherwise dispose of, any of the Securities by such Subscriber or (ii) any hedging transaction which establishes a net short position with respect to the Securities (clauses (i) and (ii) together, a “Short Sale”); except for (A) Short Sales by such Subscriber or an Affiliate of such Subscriber which was, prior to the date on which such Subscriber was first contacted regarding the transactions contemplated by this Agreement, a market maker for the Shares, provided that such Short Sales are in the ordinary course of business of such Subscriber or Affiliate of such Subscriber and are in compliance with the 1933 Act, the rules and regulations of the 1933 Act and such other securities laws as may be applicable, (B) Short Sales by such Subscriber or an Affiliate of such Subscriber which by virtue of the procedures of such Subscriber or an Affiliate of such Subscriber are made without knowledge of the transactions contemplated by this Agreement or (C) Short Sales by such Subscriber or an Affiliate of such Subscriber to the extent that such Subscriber or Affiliate of such Subscriber is acting in the capacity of a broker-dealer executing unsolicited third-party transactions.

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

(n) Survival. The foregoing representations and warranties shall survive the Closing Date for a period of two (2) years.

5. Company Representations and Warranties. Except as set forth in the Disclosure Schedule (attached hereto as Attachment 1) and the Reports, the Company represents and warrants to and agrees with each Subscriber that:

(a) Due Incorporation. The Company and each of its Subsidiaries identified on Schedule 5(a) hereto (individually a “Subsidiary” and collectively “Subsidiaries”) is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdictions of their incorporation and have the requisite corporate power to own their properties and to carry on their business as now being conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by them makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company taken as a whole.

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

(Subscription Agreement)

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

(d) Additional Issuances. There are no outstanding agreements or preemptive or similar rights affecting the Company’s common stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or other equity interest in any of the Subsidiaries of the Company except as described on Schedule 5(d).

(e) Consents. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates, the OTC Bulletin Board (“Bulletin Board”) nor the Company’s shareholders is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities.

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

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

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

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

(Subscription Agreement)

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

(g) The Securities. The Securities upon issuance:

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

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

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

(iv) will not subject the holders thereof to personal liability by reason of being such holders.

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

(i) Reporting Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding twelve months.

(j) No Market Manipulation. The Company has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock of the Company to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold.

(k) Information Concerning Company. The Reports contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein. Since the date of the financial statements included in the Reports, and except as modified in the Other Written Information or in the Schedules hereto, there has been no Material Adverse Effect relating to the Company’s business, financial condition or affairs not disclosed in the Reports. The Reports do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made.

(Subscription Agreement)

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

(m) Defaults. The Company and its Subsidiaries are not in violation of their articles of incorporation or bylaws. The Company and its Subsidiaries are (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect on the Company, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to the Company’s knowledge not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect on the Company or its Subsidiaries.

(n) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Bulletin Board. Nor will the Company or any of its Affiliates or Subsidiaries take any action or steps that would cause the offer or issuance of the Securities to be integrated with other offerings. The Company will not conduct any offering other than the transactions contemplated hereby that will be integrated with the offer or issuance of the Securities.

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

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

(q) No Undisclosed Liabilities. The Company and its Subsidiaries have no liabilities or obligations which are material, individually or in the aggregate, which are not disclosed in the Reports and Other Written Information, other than those incurred in the ordinary course of the Company’s businesses since December 31, 2003 and which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, other than as set forth in Schedule 5(q).

(r) No Undisclosed Events or Circumstances. Since December 31, 2003, no event or circumstance has occurred or exists with respect to the Company or its Subsidiaries, businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports.

(Subscription Agreement)

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

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

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

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

(w) DTC Status. The Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program.

(x) Investment Company. The Company is not an Affiliate of an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(y) Survival. The foregoing representations and warranties shall survive the Closing Date for a period of two (2) years.

6. Regulation D Offering. The offer and issuance of the Securities to the Subscribers is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) and 3(a)(9) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date, the Company will provide an opinion reasonably acceptable to Subscriber from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by Subscribers. A form of the legal opinion is annexed hereto as Exhibit D. The Company will provide, at the Company’s expense, such other legal opinions in the future as are reasonably necessary for the issuance and resale of the Common Stock issuable upon conversion of the Notes and exercise of the Warrants pursuant to an effective registration statement.

7.1. Conversion of Note.

(Subscription Agreement)

(a) Upon the conversion of a Note or part thereof, the Company shall, at its own cost and expense, take all necessary action, including obtaining and delivering, an opinion of counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of Subscriber (or its nominee) or such other persons as designated by Subscriber and in such denominations to be specified at conversion representing the number of shares of common stock issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or will be given to the transfer agent of the Company’s Common Stock and that assuming the procedures under Section 11.7 are complied with by the Subscriber, unless waived by the Subscriber, the Shares will be free-trading, and freely transferable, and will not contain a legend restricting the resale or transferability of the Shares provided the Shares are being sold pursuant to an effective registration statement covering the Shares or are otherwise exempt from registration.

(b) Subscriber will give notice of its decision to exercise its right to convert the Note or part thereof by telecopying an executed and completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the Company via confirmed telecopier transmission or otherwise pursuant to Section 13(a) of this Agreement. The Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied. Each date on which a Notice of Conversion is telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion Date. The Company will itself or cause the Company’s transfer agent to transmit the Company’s Common Stock certificates representing the Shares issuable upon conversion of the Note to the Subscriber via express courier for receipt by such Subscriber within three (3) business days after receipt by the Company of the Notice of Conversion (such third day being the “Delivery Date”). In the event the Shares are electronically transferable, then delivery of the Shares must be made by electronic transfer provided request for such electronic transfer has been made by the Subscriber. A Note representing the balance of the Note not so converted will be provided by the Company to the Subscriber if requested by Subscriber, provided the Subscriber delivers an original Note to the Company.

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

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

(Subscription Agreement)

any payments in excess of such maximum shall be credited against amounts owed by the Company to the Subscriber and thus refunded to the Company.

7.2. Mandatory Redemption at Subscriber’s Election. In the event the Company is prohibited from issuing Shares, or fails to timely deliver Shares on a Delivery Date, or upon the occurrence of any other Event of Default (as defined in the Note or in this Agreement) or for any reason other than pursuant to the limitations set forth in Section 7.3 hereof, then at the Subscriber’s election, the Company must pay to the Subscriber ten (10) business days after request by the Subscriber, at the Subscriber’s election, a sum of money determined by (i) multiplying up to the outstanding principal amount of the Note designated by the Subscriber by 120%, or (ii) multiplying the number of Shares otherwise deliverable upon conversion of an amount of Note principal and/or interest designated by the Subscriber (with the date of giving of such designation being a “Deemed Conversion Date”) at the then Conversion Price that would be in effect on the Deemed Conversion Date by the highest closing price of the Common Stock on the principal market for the period commencing on the Deemed Conversion Date until the day prior to the receipt of the Mandatory Redemption Payment, whichever is greater, together with accrued but unpaid interest thereon (“Mandatory Redemption Payment”). The Mandatory Redemption Payment must be received by the Subscriber on the same date as the Company Shares otherwise deliverable or within ten (10) business days after request, whichever is sooner (“Mandatory Redemption Payment Date”). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. Liquidated damages calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued for the twenty day period prior to the actual receipt of the Mandatory Redemption Payment by the Subscriber shall be credited against the Mandatory Redemption Payment.

7.3. Maximum Conversion. The Subscriber shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of common stock beneficially owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Subscriber and its Affiliates of more than 4.99% of the outstanding shares of common stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall not be limited to aggregate conversions of only 4.99% and aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber shall have the authority and obligation to determine whether the restriction contained in this Section 7.3 will limit any conversion hereunder and to the extent that the Subscriber determines that the limitation contained in this Section applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Subscriber. The Subscriber may void the conversion limitation described in this Section 7.3 upon and effective after 61 days prior written notice to the Company. The Subscriber may allocate which of the equity of the Company deemed beneficially owned by the Subscriber shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%.

7.4. Injunction — Posting of Bond. In the event a Subscriber shall elect to convert a Note or part thereof or exercise the Warrant in whole or in part, the Company may not refuse conversion or exercise based on any claim that such Subscriber or any one associated or affiliated with such Subscriber has been engaged in any violation of law, or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of said Note or exercise of all or part of said Warrant shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of such Subscriber in the amount of 130% of the amount of the Note, or aggregate purchase

(Subscription Agreement)

price of the Warrant Shares which are sought to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Subscriber to the extent Subscriber obtains judgment.

7.5. Buy-In. In addition to any other rights available to the Subscriber, if the Company fails to deliver to the Subscriber such shares issuable upon conversion of a Note by the Delivery Date and if seven (7) business days after the Delivery Date the Subscriber purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Subscriber of the Common Stock which the Subscriber was entitled to receive upon such conversion (a “Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if the Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of note principal and/or interest, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.

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

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

8. Broker/Legal Fees.

(a) Broker’s Fee. The Company on the one hand, and each Subscriber (for itself only) on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby and arising out of such party’s actions. The Company represents that there are no parties entitled to receive fees, commissions, or similar payments in connection with the transactions described in this Subscription Agreement (the “Offering”).

(b) Legal Fees. The Company, upon closing, shall pay to Grushko & Mittman, P.C., a fee of $25,000 (“Legal Fees”) as reimbursement for services rendered to the Subscribers in connection with the Offering and acting as Escrow Agent for the Offering. The Company will deposit the Legal Fees with the Escrow Agent prior to Closing. The Legal Fees will be payable by the Company out of funds held pursuant to the Escrow Agreement.

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

(a) Stop Orders. The Company will advise the Subscribers, promptly after it receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the

(Subscription Agreement)

Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.

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

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

(d) Reporting Requirements. From the date of this Agreement and until the sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitation, the Company will (A) cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all material respects with its reporting and filing obligations under the 1934 Act, (C) comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act, as applicable, and (D) comply with all requirements related to any registration statement filed pursuant to this Agreement. The Company will use its best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until three (3) years after the Closing Date. Until the earlier of the resale of the Common Stock and the Warrant Shares by each Subscriber or two (2) years after the Warrants have been exercised, the Company will use its best efforts to continue the listing or quotation of the Common Stock on a Principal Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market. The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to each Subscriber promptly after such filing.

(e) Reserved.

(f) Reservation. Prior to the Closing Date, the Company undertakes to reserve, pro rata, on behalf of each holder of a Note or Warrant, from its authorized but unissued common stock, a number of common shares equal to 150% of the amount of Common Stock necessary to allow each holder of a Note to be able to convert all such outstanding Notes and interest and reserve the amount of Warrant Shares issuable upon exercise of the Warrants. Failure to have sufficient shares reserved pursuant to this Section 9.1(f) for three (3) consecutive business days or ten (10) days in the aggregate shall be a material default of the Company’s obligations under this Agreement.

(Subscription Agreement)

(g) Taxes. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefore.

(h) Insurance. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company will keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in the Company’s line of business, in amounts sufficient to prevent the Company from becoming a co-insurer and not in any event less than one hundred percent (100%) of the insurable value of the property insured; and the Company will maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated and to the extent available on commercially reasonable terms.

(i) Books and Records. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis.

(j) Governmental Authorities. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its properties or assets.

(k) Intellectual Property. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business.

(l) Properties. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement (as defined in Section 11.1(iv) hereof) or pursuant to Rule 144, without regard to volume limitations, the Company will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time

(Subscription Agreement)

make all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a Material Adverse Effect.

(m) Confidentiality/Public Announcement. From the date of this Agreement and until the sooner of (i) three (3) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, the Company agrees that except in connection with a Form 8-K or the Registration Statement, it will not disclose publicly or privately the identity of the Subscribers unless expressly agreed to in writing by a Subscriber or only to the extent required by law and then only upon five days prior notice to Subscriber. In any event and subject to the foregoing, the Company undertakes to file a Form 8-K or make a public announcement describing the Offering not later than the first business day after the Closing Date. In the Form 8-K or public announcement, the Company will specifically disclose the amount of common stock outstanding immediately after the Closing. A form of the proposed Form 8-K or public announcement to be employed in connection with the Offering is annexed hereto as Exhibit E.

(n) Further Registration Statements. Except for a registration statement filed on behalf of the Subscribers pursuant to Section 11 of this Agreement, the Company will not file any registration statements or amend any already filed registration statement, including but not limited to Form S-8, with the Commission or with state regulatory authorities without the consent of the Subscriber until the sooner of (i) the Registration Statement shall have been current and available for use in connection with the public resale of the Shares and Warrant Shares for 180 days, (ii) until all the Shares have been resold or transferred by the Subscribers pursuant to the Registration Statement or Rule 144, without regard to volume limitations, or (iii) the date the Note has been fully paid (“Exclusion Period”). The Exclusion Period shall be tolled during the pendency of an Event of Default.

(o) Blackout. The Company undertakes and covenants that until the end of the Exclusion Period the Company will not enter into any acquisition, merger, exchange or sale or other transaction that could have the effect of delaying the effectiveness of any pending registration statement or causing an already effective registration statement to no longer be effective or current for a period of fifteen (15) or more days.

(p) Non-Public Information. The Company covenants and agrees that neither it nor any other person acting on its behalf will provide any Subscriber or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Subscriber shall have agreed in writing to receive such information. The Company understands and confirms that each Subscriber shall be relying on the foregoing representations in effecting transactions in securities of the Company.

9.2. Covenants of the Subsidiaries. The Company makes the same covenants contained in Section 9.1(g) through 9.1(l) on behalf of each of its Subsidiaries as if such covenants were made by the Subsidiaries.

10. Covenants of the Company and Subscriber Regarding Indemnification.

(a) The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable

(Subscription Agreement)

legal fees) of any nature, incurred by or imposed upon the Subscriber or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or breach of any warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Subscriber relating hereto.

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

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

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

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

(i) On one occasion, for a period commencing seventy-five (75) days after the Closing Date, but not later than two (2) years after the Closing Date (“Request Date”), upon a written request therefore from any record holder or holders of more than 50% of the Shares issued and issuable upon conversion of the Notes and Warrant Shares actually issued upon exercise of the Warrants, the Company shall prepare and file with the Commission a registration statement under the 1933 Act registering the Shares, Warrant Shares issuable upon exercise of the Warrants (collectively “Registrable Securities”) which are the subject of such request for unrestricted public resale by the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include (A) Securities which are registered for resale in an effective registration statement, (B) included for registration in a pending registration statement, or (C) which have been issued without further transfer restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such request, the Company shall promptly give written notice to all other record holders of the Registrable Securities that such registration statement is to be filed and shall include in such registration statement Registrable Securities for which it has received written requests within ten (10) days after the Company gives such written notice. Such other requesting record holders shall be deemed to have exercised their demand registration right under this Section 11.1(i).

(ii) If the Company at any time proposes to register any of its securities under the 1933 Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public, provided the Registrable Securities are not otherwise registered for resale by the Subscribers or Holder pursuant to an effective registration statement,

(Subscription Agreement)

each such time it will give at least fifteen (15) days’ prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the Company within ten (10) days after the giving of any such notice by the Company, to register any of the Registrable Securities not previously registered, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by the holder of such Registrable Securities (the “Seller” or “Sellers”). In the event that any registration pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten public offering of common stock of the Company, the number of shares of Registrable Securities to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein; provided, however, that the Company shall notify the Seller in writing of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 11.1(ii) without thereby incurring any liability to the Seller.

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

(iv) The Company shall file with the Commission a Form SB-2 registration statement, or an amendment to a pending registration statement (the “Registration Statement”) (or such other form that it is eligible to use) in order to register the Registrable Securities for resale and distribution under the 1933 Act not later than thirty (30) days after the Closing Date (the “Filing Date”), and cause to be declared effective not later than February 14, 2005 (the “Effective Date”). The Company will register not less than a number of shares of common stock in the Registration Statement that is equal to 150% of the Shares issuable upon conversion of the Notes and all of the Warrant Shares issuable pursuant to this Agreement upon exercise of the Warrants. The Registrable Securities shall be reserved and set aside exclusively for the benefit of each Subscriber and Warrant holder, pro rata, and not issued, employed or reserved for anyone other than each such Subscriber and Warrant holder. The Registration Statement will immediately be amended or additional registration statements will be immediately filed by the Company as necessary to register additional shares of Common Stock to allow the public resale of all Common Stock included in and issuable by virtue of the Registrable Securities. Without the written consent of the Subscriber, no securities of the Company other than the Registrable Securities will be included in the Registration Statement. It shall be deemed a Non-Registration Event if at any time after the date the Registration Statement is declared effective by the Commission (“Actual Effective Date”) the Company has registered for unrestricted resale on behalf of the Subscriber fewer than 125% of the amount of Common Shares issuable upon full conversion of all sums due under the Notes and 100% of the Warrant Shares issuable upon exercise of the Warrants.

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

(Subscription Agreement)

(a) subject to the timelines provided in this Agreement, prepare and file with the Commission a registration statement required by Section 11, with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), and promptly provide to the holders of the Registrable Securities copies of all filings and Commission letters of comment and notify Subscribers (by telecopier and by e-mail addresses provided by Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to ***@***) on or before 6 pm EST on the same business day that the Company receives notice that (i) the Commission has no comments or no further comments on the Registration Statement, and (ii) the registration statement has been declared effective, (failure to timely provide notice as required by this Section 11.2(a) shall be a material breach of the Company’s obligation and an Event of Default as defined in the Notes and a Non-Registration Event as defined in Section 10.4 of this Agreement);

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

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

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

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

(f) immediately notify the Sellers when a prospectus relating thereto is required to be delivered under the 1933 Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and

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

11.3. Provision of Documents. In connection with each registration described in this Section 11, each Seller will furnish to the Company in writing such information and representation letters

(Subscription Agreement)

with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.

11.4. Non-Registration Events. The Company and the Subscribers agree that the Sellers will suffer damages if the Registration Statement is not filed by the Filing Date and not declared effective by the Commission by the Effective Date, and any registration statement required under Section 11.1(i) or 11.1(ii) is not filed within 60 days after written request and declared effective by the Commission within 120 days after such request, and maintained in the manner and within the time periods contemplated by Section 11 hereof, and it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (A) the Registration Statement is not filed on or before the Filing Date, (B) is not declared effective on or before the Effective Date, (C) the Registration Statement is not declared effective within three (3) business days after receipt by the Company or its attorneys of a written or oral communication from the Commission that the Registration Statement will not be reviewed or that the Commission has no further comments, (D) if the registration statement described in Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such written request, or is not declared effective within 120 days after such written request, or (E) any registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but shall thereafter cease to be effective (without being succeeded within fifteen (15) business days by an effective replacement or amended registration statement) for a period of time which shall exceed 30 days in the aggregate per year (defined as a period of 365 days commencing on the date the Registration Statement is declared effective) or more than 20 consecutive days (each such event referred to in clauses A through E of this Section 11.4 is referred to herein as a “Non-Registration Event”), then the Company shall deliver to the holder of Registrable Securities, as Liquidated Damages, an amount equal to two percent (2%) for each thirty (30) days or part thereof, thereafter of the Purchase Price of the Notes remaining unconverted and purchase price of Shares issued upon conversion of the Notes owned of record by such holder which are subject to such Non-Registration Event. The Company must pay the Liquidated Damages in cash or an amount equal to two hundred percent of such cash Liquidated Damages if paid in additional shares of registered unlegended free-trading shares of Common Stock. Such Common Stock shall be valued at a per share value equal to eighty-five percent (85%) of the average of the five (5) lowest closing bid prices of the Common Stock as reported by Bloomberg L.P. for the twenty (20) trading days preceding the first day of each thirty (30) day or shorter period for which Liquidated Damages are payable. The Liquidated Damages must be paid within ten (10) days after the end of each thirty (30) day period or shorter part thereof for which Liquidated Damages are payable. In the event a Registration Statement is filed by the Filing Date but is withdrawn prior to being declared effective by the Commission, then such Registration Statement will be deemed to have not been filed. All oral or written and accounting comments received from the Commission relating to the Registration Statement must be responded to within fifteen (15) business days. Failure to timely respond to such comments from the Commission is a Non-Registration Event for which Liquidated Damages shall accrue and be payable by the Company to the holders of Registrable Securities at the same rate set forth above. Notwithstanding the foregoing, the Company shall not be liable to the Subscriber under this Section 11.4 for any events or delays occurring as a consequence of the acts or omissions of the Subscribers contrary to the obligations undertaken by Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to have occurred for times during which Registrable Securities are transferable by the holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act.

11.5. Expenses. All expenses incurred by the Company in complying with Section 11, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs

(Subscription Agreement)

of insurance and fee of one counsel for all Sellers are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of one counsel to the Seller, are called “Selling Expenses.” The Company will pay all Registration Expenses in connection with the registration statement under Section 11. Selling Expenses in connection with each registration statement under Section 11 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree.

11.6. Indemnification and Contribution.

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

(b) In the event of a registration of any of the Registrable Securities under the 1933 Act pursuant to Section 11, each Seller severally but not jointly will, to the extent permitted by law, indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the 1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim,

(Subscription Agreement)

damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the net proceeds actually received by the Seller from the sale of Registrable Securities covered by such registration statement.

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

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

11.7. Delivery of Unlegended Shares.

(Subscription Agreement)

(a) Within three (3) business days (such third (3^rd) business day being the “Unlegended Shares Delivery Date”) after the business day on which the Company has received (i) a notice that Registrable Securities have been sold either pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, and (iii) the original share certificates representing the shares of Common Stock that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Subscriber and/or Subscriber’s broker regarding compliance with the requirements of Rule 144, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Subscriber) an appropriate instruction and opinion of such counsel, directing the delivery of shares of Common Stock without any legends including the legend set forth in Section 4(e) above, reissuable pursuant to any effective and current Registration Statement described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933 Act (the “Unlegended Shares”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted Shares certificate, if any, to the Subscriber at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date. Transfer fees shall be the responsibility of the Seller.

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

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

(d) In addition to any other rights available to a Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as required pursuant to this Agreement, within seven (7) business days after the Unlegended Shares Delivery Date and the Subscriber purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by such Subscriber of the shares of Common Stock which the Subscriber was entitled to receive from the Company (a “Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to any remedies available to or elected by the Subscriber) the amount by which (A) the Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate purchase price of the shares of Common Stock delivered to the Company for reissuance as Unlegended Shares,

(Subscription Agreement)

together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if a Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of shares of Common Stock delivered to the Company for reissuance as Unlegended Shares, the Company shall be required to pay the Subscriber $1,000, plus interest. The Subscriber shall provide the Company written notice indicating the amounts payable to the Subscriber in respect of the Buy-In.

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

12. (a) Right of First Refusal. Until one year after the Actual Effective Date, the Subscribers shall be given not less than ten (10) business days prior written notice of any proposed sale by the Company of its common stock or other securities or debt obligations, except (i) securities issued or issuable to officers, directors, or full-time employees of the Company pursuant to stock grants, stock purchases, and/or stock option plans or any other stock incentive program, agreement, or arrangement approved by all of the disinterested members of the Company’s board of directors, (ii) securities issued as full or partial consideration in connection with a strategic merger, consolidation, or purchase of substantially all of the securities or assets of another corporation or entity, (iii) securities issued in connection with bank financing or equipment leasing transactions, (iv) shares of Common Stock issued upon conversions of the Notes or exercise of the Warrants or pursuant to the provisions of this Section 12, and (v) as has been described in the Reports or Other Written Information filed with the Commission or delivered to the Subscribers prior to the Closing Date (collectively the foregoing are “Excepted Issuances”). The Subscribers who exercise their rights pursuant to this Section 12(a) shall have the right during the ten (10) business days following receipt of the notice to purchase such amount of offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale in the same proportion to each other as their purchase of Notes in the Offering. In the event such terms and conditions are modified during the notice period, the Subscribers shall be given prompt notice of such modification and shall have the right during the ten (10) business days following the notice of modification, whichever is longer, to exercise such right.

(b) Offering Restrictions. Until the sooner of (i) the end of the Exclusion Period, or (ii) until all the Shares and Warrant Shares have been resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144, without regard to volume limitations, except for the Excepted Issuances, without the consent of holders of not less than eighty percent (80%) of outstanding Note principal, the Company will not issue any equity, convertible debt or other securities convertible into common stock or equity of the Company without the prior written consent of the Subscriber, which consent may be withheld for any reason.

(c) Favored Nations Provision. Other than the Excepted Issuances, if at any time Notes are outstanding the Company shall offer, issue or agree to issue any common stock or securities

(Subscription Agreement)

convertible into or exercisable for shares of common stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in respect of the Shares, or if less than the Warrant exercise price in respect of the Warrant Shares, without the consent of each Subscriber holding Notes and/or Shares, then the Company shall issue, for each such occasion, additional shares of Common Stock to each Subscriber so that the average per share purchase price of the shares of Common Stock issued to the Subscriber (of only the Common Stock or Warrant Shares still owned by the Subscriber) is equal to such other lower price per share and the Conversion Price and Warrant Exercise Price shall automatically be reduced to such other lower price per share. The average Purchase Price of the Shares and average exercise price in relation to the Warrant Shares shall be calculated separately for the Shares and Warrant Shares. The foregoing calculation and issuance shall be made separately for Shares received upon conversion and separately for Warrant Shares. The delivery to the Subscriber of the additional shares of Common Stock shall be not later than the closing date of the transaction giving rise to the requirement to issue additional shares of Common Stock. The Subscriber is granted the registration rights described in Section 11 hereof in relation to such additional shares of Common Stock except that the Filing Date and Effective Date vis-à-vis such additional common shares shall be, respectively, the sixtieth (60^th) and one hundred and twentieth (120^th) date after the closing date giving rise to the requirement to issue the additional shares of Common Stock. For purposes of the issuance and adjustment described in this paragraph, the issuance of any security of the Company carrying the right to convert such security into shares of Common Stock or of any warrant, right or option to purchase Common Stock shall result in the issuance of the additional shares of Common Stock upon the issuance of such convertible security, warrant, right or option and again at any time upon any subsequent issuances of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the Conversion Price in effect upon such issuance. The rights of the Subscriber set forth in this Section 12 are in addition to any other rights the Subscriber has pursuant to this Agreement, the Note, any Transaction Document, and any other agreement referred to or entered into in connection herewith. The provision of this Section 12(c) shall not apply to any offering which shall result in the Optional Redemption (as defined in Section 2.3 of the Note) of the whole (but not part) of the amount which may be redeemed by the Company pursuant to Section 2.3 of the Note.

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

13. Mutual General Release.

(a) Subject to the terms and conditions of this Agreement, each Subscriber agrees to and does hereby release and forever discharge Company and its agents, officers, directors, shareholders, employees, affiliates, insurers, assigns, and other successors in interest of and from any and all claims, demands, rights, liabilities, and causes of action, whether presently known or unknown, suspected or unsuspected, which such Subscriber may now have, has ever had, or may hereafter have against Company arising from or related to (i) the transactions described in the First Subscription Agreement, (ii) the issuance of the First Common Stock and First Warrants, (iii) the litigation (and its underlying allegations and circumstances) pending in Manicopa County Superior Court titled, Goldspring, Inc. v. Parent, et al. No. CV2004-021755, and (iv) any omissions, acts, or facts which have occurred up until the Closing, including, but not limited to, any claims in connection with such Subscriber’s original

(Subscription Agreement)

purchase of the First Common Stock and First Warrants, or any rights to indemnification or reimbursement from Company, whether pursuant to its organizational documents, contracts, or otherwise and whether or not relating to the foregoing, pending on, or asserted after the Closing Date.

(b) Subject to the terms and conditions of this Agreement, Company agrees to and does hereby release and forever discharge each Subscriber, and such Subscriber’s personal representatives, estates, spouses, agents, assigns, heirs, administrators, officers, directors, shareholders, employees, affiliates, insurers and other successors in interest (collectively “Subscriber Releasees”) of and from any and all claims, demands, rights, liabilities, and causes of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, which Company may now have, has ever had, or may hereafter have against such Subscriber Releasees arising from the transactions described in the First Subscription Agreement, the issuance of the First Common Stock and First Warrants or arising out of any omissions, acts, or facts which have occurred up until the Closing, including, but not limited to, any claims in connection with such Subscriber’s original purchase of the First Common Stock and First Warrants, or any rights to indemnification or reimbursement from Subscriber Releasees, whether pursuant to its organizational documents, contracts, or otherwise and whether or not relating to claims pending on the Closing Date.

(c) Each party irrevocably covenants to refrain from, directly or indirectly asserting any claim or demand, or commencing, instituting, or causing to be commenced, any proceeding of any kind against any party hereto, based upon any matter purported to be released pursuant to this Section 13.

(d) The foregoing notwithstanding, the Company and Subscriber shall indemnify and hold harmless the other from and against all loss, liability, claim, damage (including incidental and consequential damages), or expense (including costs of investigation and defense and reasonably attorney’s fees) involving third party claims, arising directly or indirectly from or in connection with the assertion by or on behalf of any third party of any claim or other matter purported to be released pursuant to this Section 13.

(e) Each Subscriber and Company understand that future claims, demands, rights, liabilities, and causes of action released under Sections 13(a) and (b) above, which presently are unknown, unforeseen, or not yet in existence may occur and consciously intend to release all such claims.

(f) Each Subscriber and Company represent and warrant that they have made no assignment, transfer, conveyance, pledge, or other disposition of any of the claims, demands, causes of action, obligations, damages, or liabilities released under Sections 13(a) and (b) above, and that they are fully entitled to give their full and complete release of all such claims and demands.

(g) Each Subscriber and Company agree and understand that once this Agreement becomes effective it may not be revoked, and no party may proceed against any other party hereto on account of any of the claims released herein. Each Subscriber and Company further agree and understand that any party defending an action or claim commenced, maintained, or prosecuted in violation of this Agreement will be entitled to recover from the party or parties bringing the action or claim any damages or costs, including reasonable attorney fees and costs, incurred in defending the action or claim.

14. Miscellaneous.

(a) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein,

(Subscription Agreement)

shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company, to: Goldspring, Inc., 8585 E. Hartford Drive, Suite 400, Scottsdale, AZ 85255, Attn: Robert T. Faber, President & CEO, telecopier: (480) ###-###-####, with a copy by telecopier only to: Greenberg Traurig LLP, 2375 E. Camelback Road, Suite 700, Phoenix, AZ 85016, Attn: Robert S. Kant, Esq., telecopier: (602) ###-###-####, and (ii) if to the Subscribers, to: the one or more addresses and telecopier numbers indicated on the signature pages hereto, with an additional copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) ###-###-####.

(b) Closing. The consummation of the transactions contemplated herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, upon the satisfaction of all conditions to Closing set forth in this Agreement (“Closing Date”). Provided the Escrow Agent has received all Company Documents and Subscriber Documents (as defined in the Escrow Agreement) on or before December 6, 2004, then the Closing Date for all purposes will be deemed to be November 30, 2004.

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

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

(e) Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. The parties and the individuals executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or

(Subscription Agreement)

rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

(f) Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to one or more preliminary and final injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 14(e) hereof, each of the Company, Subscriber and any signator hereto in his personal capacity hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in New York of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

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

[THIS SPACE INTENTIONALLY LEFT BLANK]

(Subscription Agreement)

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


		GOLDSPRING, INC. a Florida corporation
		By:		/s/ Robert T. Faber Name: Robert T. Faber Title: President & CEO
		Dated: November 30, 2004

FIRST WARRANTS

FIRST

CLASS A

GREEN SHOE

PRINCIPAL

SUBSCRIBER

PURCHASE PRICE

COMMON STOCK

WARRANTS

AMOUNT OF NOTE

GAMMA OPPORTUNITY CAPITAL PARTNERS, LP

750,000

1,630,435

815,218

832,550

605 Crescent Executive Court, Suite 416

Lake Mary, Florida 32746

Fax:

/s/ Jonathan P. Knight

(Signature)

By: Jonathan P. Knight

LONGVIEW FUND LP

750,000

1,630,435

815,218

832,550

600 Montgomery Street, 44^th Floor

San Francisco, CA 94111

Fax: (415) ###-###-####

/s/ Michael Rudolph

(Signature)

By: S. Michael Rudolph, CFO

LONGVIEW EQUITY FUND, LP

1,125,000

2,445,652

1,222,826

1,248,825

600 Montgomery Street, 44^th Floor

San Francisco, CA 94111

Fax: (415) ###-###-####

/s/ Wayne H. Coleson

(Signature)

By: Wayne H. Coleson, CEO

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


		GOLDSPRING, INC. a Florida corporation
		By:		/s/ Robert T. Faber Name: Robert T. Faber Title: President & CEO
		Dated: November 30, 2004

FIRST WARRANTS

FIRST

CLASS A

GREEN SHOE

PRINCIPAL

SUBSCRIBER

PURCHASE PRICE

COMMON STOCK

WARRANTS

AMOUNT OF NOTE

LONGVIEW INTERNATIONAL EQUITY FUND, LP

375,000

815,217

407,609

416,275

600 Montgomery Street, 44^th Floor

San Francisco, CA 94111

Fax: (415) ###-###-####

/s/ Wayne H. Coleson

(Signature)

By: Wayne H. Coleson, CEO

ALPHA CAPITAL AKTIENGESELLSCHAFT

500,000

1,086,957

543,479

555,033

Pradafant 7

9490 Furstentums

Vaduz, Lichtenstein

Fax: 011-42-32323196

/s/ Konrad Ackerman

(Signature)

By: Konrad Ackerman

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


		GOLDSPRING, INC. a Florida corporation
		By:		/s/ Robert T. Faber Name: Robert T. Faber Title: President & CEO
		Dated: November 30, 2004

FIRST WARRANTS

FIRST

CLASS A

GREEN SHOE

PRINCIPAL

SUBSCRIBER

PURCHASE PRICE

COMMON STOCK

WARRANTS

AMOUNT OF NOTE

CAPITAL VENTURES INTERNATIONAL

1,000,000

2,173,913

1,086,957

1,110,066

401 City Lane Avenue, Suite 220

Bala Cynwyd, PA 19004

Fax:

/s/ Martin Kobinger

(Signature)

By:

PORTSIDE GROWTH AND OPPORTUNITY FUND

250,000

543,478

271,739

277,516

C/o Ramius Capital Group, LLC

666 Third Avenue, 26^th Floor

New York, NY 10017

Fax: (212) ###-###-####

/s/ Jeffrey Smith

(Signature)

By: Jeffrey Smith, Authorized Signatory

ENABLE GROWTH PARTNERS L.P.

200,000

434,783

217,392

222,013

One Ferry Building, Suite 255

San Francisco, CA 94111

Fax: (415) ###-###-####

/s/ Mitch Levine

(Signature)

By: Mitch Levine

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004

FIRST WARRANTS

FIRST

GREEN

PRINCIPAL

PURCHASE

FIRST COMMON

CLASS A

SHOE

AMOUNT

SUBSCRIBER

PRICE

STOCK

WARRANTS

OF NOTE

WHALEHAVEN FUNDS LIMITED

150,000

326,087

163,044

166,510

3^rd Floor, 14 Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) ###-###-####

By: /s/ Evan Schemenauer

(Signature)

By: Evan Schemenauer - Director

STONESTREET LIMITED PARTNERSHIP

350,000

760,870

380,435

388,523

C/o Canaccord Capital Corporation
320 Bay Street, Suite 1300
Toronto, Ontario M5H 4A6, Canada
Fax: (416) ###-###-####

/s/ Michael Finkelstein

(Signature)

By: Michael Finkelstein - President

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004

FIRST WARRANTS

FIRST

GREEN

PRINCIPAL

PURCHASE

FIRST COMMON

CLASS A

SHOE

AMOUNT

SUBSCRIBER

PRICE

STOCK

WARRANTS

OF NOTE

SMITHFIELD FIDUCIARY LLC

250,000

543,478

271,739

277,516

C/o Highbridge Capital
9 West 57^th Street, 27^th Floor
New York, NY 10019
By: Adam Chill
Fax:

/s/ Adam J. Chill

(Signature)

By: Adam J. Chill

TCMP3 PARTNERS LLP

100,000

217,391

108,696

111,006

C/o Titan Capital Management
7 Century Drive, Suite 201
Parsippany, NJ 07054
Fax: (973) ###-###-####

/s/ Steven E. Slawson

(Signature)

By: Steven E. Slawson

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
BRISTOL INVESTMENT FUND, LTD.	$	300,000		652,174		326,087		326,087	$	333,020
Caledonia House, Jennett Street George Town, Grand Cayman Cayman Islands Fax: (323) ###-###-####
/s/ Paul Kessler

(Signature)
By: Paul Kessler, Director

VERTICAL VENTURES, LLC	$	250,000		543,478		271,739		271,739	$	277,516
641 Lexington Avenue, 26^th Floor New York, NY 10022 Fax: (212) ###-###-####
/s/ Joshua Silverman
(Signature)
By: Joshua Silverman

MERRIMAN CURHAN FORD CORPORATION 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	125,500		272,826		136,413		136,413	$	139,313
/s/ D. Jonathan Merriman
(Signature)
By: D. Jonathan Merriman

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
A. TOD HINDIN	$	50,000		108,696		54,348		54,348	$	55,503
601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####

/s/ A. Tod Hindin (Signature)
By:

KENNETH R. WERNER REV TST DTD 7/20/96	$	50,000		108,696		54,348		54,348	$	55,503
601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####

/s/ Kenneth R. Werner
(Signature)
By:

THOMAS P. O’SHEA, JR.	$	30,000		65,217		32,609		32,609	$	33,302
601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####

/s/ Tom O’Shea
(Signature)
By: Tom O’Shea

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
D. JONATHAN MERRIMAN 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	30,000		65,217		32,609		32,609	$	33,302

/s/ D. Jonathan Merriman
(Signature)
By:

BROCK GANELES 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	25,000		54,348		27,174		27,174	$	27,751

/s/ Brock Ganeles
(Signature)
By:

ELISE STERN 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	25,000		54,348		27,174		27,174	$	27,751

/s/ Elise Stern
(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
CRAIG E. SULTAN 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	25,000		54,348		27,174		27,174	$	27,751

/s/ Craig E. Sultan
(Signature)
By: Craig E. Sultan

CARL FRANKSON 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	25,000		54,348		27,174		27,174	$	27,751

/s/ Carl Frankson
(Signature)
By:

JON M. PLEXICO 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	20,000		43,478		21,739		21,739	$	22,201

/s/ Jon M. Plexico
(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robtert T Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
PETE MARCIL 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	20,000		43,478		21,739		21,739	$	22,201

/s/ Peter C. Marcil
(Signature)
By:

DAVID BAIN 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	20,000		43,478		21,739		21,739	$	22,201

/s/ David Bain
(Signature)
By: David Bain

STEVEN R. SARRACINO 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	19,500		42,391		21,196		21,196	$	21,646

/s/ Steven R. Sarracino
(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
GREGORY S. CURHAN 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ Gregory S. Curhan
(Signature)
By:

JOHN HIESTAND 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ John Hiestand
(Signature)
By:

ROBERT E. FORD 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ Robert E. Ford
(Signature)
By: Robert E. Ford

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
ERIC WOLD 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ Eric Wold
(Signature)
By:

CHRISTOPHER AGUILAR 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ Christopher Aguilar
(Signature)
By: Christopher Aguilar

PETER A. BLACKWOOD 601 Montgomery Street, Suite 1800 San Francisco, CA 94111 Fax: (415) ###-###-####	$	10,000		21,739		10,870		10,870	$	11,100

/s/ Peter A. Blackwood
(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
GENESIS MICROCAP INC. 483 Green Lanes London N13 4BS, England By: Lawrence S. Gibbons Fax: 011-087-0127-5687	$	100,000		217,391		108,696		108,696	$	111,006
/s/ Larry Gibbons

(Signature)
By: Lawrence S. Gibbons

JOHN V. WINFIELD 820 Moraga Drive Los Angeles, CA 90049 Fax: (310) ###-###-####	$	750,000		1,630,435		815,218		815,218	$	832,550
/s/ John V. Winfield

(Signature)
By:

JOHN V. WINFIELD IRA-1 820 Moraga Drive Los Angeles, CA 90049 Fax: (310) ###-###-####	$	500,000		1,086,957		543,479		543,479	$	555,033
/s/ John V. Winfield

(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004


					FIRST WARRANTS
	FIRST						GREEN		PRINCIPAL
	PURCHASE		FIRST COMMON		CLASS A		SHOE		AMOUNT
SUBSCRIBER	PRICE		STOCK		WARRANTS		WARRANTS		OF NOTE
JOHN V. WINFIELD IRA-2 820 Moraga Drive Los Angeles, CA 90049 Fax: (310) ###-###-####	$	250,000		543,478		271,739		271,739	$	277,516
/s/ John V. Winfield

(Signature)
By:

SANTA FE FINANCIAL CORP. 820 Moraga Drive Los Angeles, CA 90049 Fax: (310) ###-###-####	$	250,000		543,478		271,739		271,739	$	277,516
/s/ John V. Winfield

(Signature)
By:

PORTSMOUTH SQUARE, INC. 820 Moraga Drive Los Angeles, CA 90049 Fax: (310) ###-###-####	$	250,000		543,478		271,739		271,739	$	277,516
/s/ John V. Winfield

(Signature)
By:

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

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


GOLDSPRING, INC. a Florida corporation
By:	/s/ Robert T. Faber
	Name:	Robert T. Faber
	Title:	President & CEO


		Dated: November 30, 2004

FIRST WARRANTS

FIRST

GREEN

PRINCIPAL

PURCHASE

FIRST COMMON

CLASS A

SHOE

AMOUNT

SUBSCRIBER

PRICE

STOCK

WARRANTS

OF NOTE

INTERGROUP CORP.
820 Moraga Drive
Los Angeles, CA 90049
Fax: (310) ###-###-####

1,000,000

2,173,913

1,086,957

1,110,066

/s/ John V. Winfield

(Signature)

By:

ERIK FRANKLIN
534 Openaki Road
Denville, NJ 07834
Fax:

25,000

54,348

27,174

27,751

/s/ Erik Franklin

(Signature)

By: Erik Franklin

LIST OF EXHIBITS AND SCHEDULES


		Attachment 1		Disclosure Schedule

		Exhibit A		Form of Note

		Exhibit B		Form of Warrant

		Exhibit C		Escrow Agreement

		Exhibit D		Form of Legal Opinion

		Exhibit E		Form of Public Announcement or Form 8-K

		Schedule 5(a)		Subsidiaries and Subsidiary Guarantors

		Schedule 5(d)		Additional Issuances

		Schedule 5(q)		Undisclosed Liabilities

		Schedule 5(s)		Capitalization