AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT LAURUS MASTER FUND, LTD. and TRUEYOU.COM INC. Dated: May 4, 2007

Page

1.

Agreement to Sell and Purchase

3

2.

Fees and Warrant. On the Closing Date:

3

3.

Closing, Delivery and Payment

4

3.1

Closing

4

3.2

Delivery

4

4.

Representations and Warranties of the Company

4

4.1

Organization, Good Standing and Qualification

4

4.2

Subsidiaries

5

4.3

Capitalization; Voting Rights

6

4.4

Authorization; Binding Obligations

6

4.5

Liabilities

7

4.6

Agreements; Action

7

4.7

Obligations to Related Parties

9

4.8

Changes

10

4.9

Title to Properties and Assets; Liens, Etc

11

4.10

Intellectual Property

12

4.11

Compliance with Other Instruments

13

4.12

Litigation

13

4.13

Tax Returns and Payments

13

4.14

Employees

14

4.15

Registration Rights and Voting Rights

14

4.16

Compliance with Laws; Permits

15

4.17

Environmental and Safety Laws

15

4.18

Valid Offering

15

4.19

Full Disclosure

16

4.20

Insurance

16

4.21

SEC Reports

16

4.22

Listing

16

4.23

No Integrated Offering

17

4.24

Stop Transfer

17

4.25

Dilution

17

4.26

Patriot Act

17

4.27

ERISA

18

5.

Representations and Warranties of the Purchaser

19

5.1

No Shorting

19

5.2

Requisite Power and Authority

19

5.3

Investment Representations

19

5.4

The Purchaser Bears Economic Risk

20

5.5

Acquisition for Own Account

20

5.6

The Purchaser Can Protect Its Interest

20

5.7

Accredited Investor

20

5.8

Legends

20

Page(s)

6.

Covenants of the Company

21

6.1

Stop-Orders

21

6.2

Listing

21

6.3

Market Regulations

21

6.4

Reporting Requirements

22

6.5

Use of Funds

23

6.6

Access to Facilities

23

6.7

Taxes

24

6.8

Insurance

24

6.9

Intellectual Property

25

6.10

Properties

25

6.11

Confidentiality

26

6.12

Required Approvals

26

6.13

Reissuance of Securities

27

6.14

Opinion

29

6.15

Margin Stock

29

6.16

Financing Right of First Refusal

29

6.17

Authorization and Reservation of Shares

29

7.

Covenants of the Purchaser

29

7.1

Confidentiality

29

7.2

Non-Public Information

29

7.3

Limitation on Acquisition of Common Stock of the Company

30

8.

Covenants of the Company and the Purchaser Regarding Indemnification

31

8.1

Company Indemnification

31

8.2

Purchaser’s Indemnification

31

9.

Exercise of the Warrant

32

9.1

Mechanics of Exercise

32

10.

Registration Rights

33

10.1

Registration Rights Granted

33

10.2

Offering Restrictions

11.

Miscellaneous

33

11.1

Governing Law, Jurisdiction and Waiver of Jury Trial

33

11.2

Severability

34

11.3

Survival

35

11.4

Successors

35

11.5

Entire Agreement; Maximum Interest

35

11.6

Amendment and Waiver

36

11.7

Delays or Omissions

36

11.8

Notices

36

11.9

Attorneys’ Fees

37

11.10

Titles and Subtitles

38

11.11

Facsimile Signatures; Counterparts

38

11.12

Broker’s Fees

38

11.13

Construction

38

11.14

Restatement

38

Secured Term Note

Exhibit A

Warrant A

Exhibit B

Warrant B

Exhibit C

Warrant C

Exhibit D

Warrant D

Exhibit E

Warrant E

Exhibit F

          (a) The Company will issue and deliver to the Purchaser the New Warrants in connection with and in consideration of the Purchaser’s purchase of the Note pursuant to Section 1 hereof. The shares of the Company’s Common Stock (as defined in Section 4.3(a) below) issued upon the due and timely exercise of the Warrants will be referred to as the “Warrant Shares”. Subject to Section 11.4 hereof, all the representations, covenants, warranties, undertakings, and indemnification, and other rights made or granted to or for the benefit of the Purchaser by the Company are hereby also made and granted for the benefit of the Purchaser as holder of the Warrants.

          (b) Subject to the terms of Section 2(d) below, the Company shall pay to Laurus Capital Management, LLC, the manager of the Purchaser, a closing payment in an amount equal to $890,225 (representing three and one-half percent (3.50%) of the aggregate principal amount of the Note. The foregoing fee is referred to herein as the “Closing Payment.”

          (c) The Company shall reimburse the Purchaser for its reasonable expenses (including legal fees and expenses) incurred in connection with the preparation and negotiation of this Agreement and the Related Agreements (as hereinafter defined), and expenses incurred in connection with the Purchaser’s due diligence review of the Company and its Subsidiaries (as defined in Section 4.2) and all related matters. Amounts required to be paid under this Section 2(c) will be paid on the Closing Date and

shall be $10,000 for such expenses referred to in this Section 2(c), $15,000 of which has already been paid by the Company.

          (d) The Closing Payment and the expenses referred to in the preceding clause (c) shall be paid at closing out of funds held pursuant to the Escrow Agreement (as defined below) and a disbursement letter (the “Disbursement Letter”).

                    3.1 Closing. Subject to the terms and conditions herein, the closing of the transactions contemplated hereby (the “Closing”), shall take place on the date hereof, at such time or place as the Company and the Purchaser may mutually agree (such date is hereinafter referred to as the “Closing Date”).

                    3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the Closing Date, the Company will deliver to the Purchaser, among other things, the Note and the Warrants and the Purchaser will deliver to the Company, among other things, the amounts set forth in the Disbursement Letter by certified funds or wire transfer. (it being understood that $25,900,000 of the proceeds of the Note shall be placed in the Restricted Account (as defined in the Restricted Account Agreement referred to below)) The Company hereby acknowledges and agrees that Purchaser’s obligation to purchase the Note from the Company on the Closing Date shall be contingent upon the satisfaction (or waiver by the Purchaser in its sole discretion) of the items and matters set forth in the closing checklist provided by the Purchaser to the Company on or prior to the Closing Date.

                    4.1 Organization, Good Standing and Qualification. Each of the Company and each of its Subsidiaries is a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each of the Company and each of its Subsidiaries has the corporate, limited liability company or partnership, as the case may be, power and authority to own and operate its properties and assets and, insofar as it is or shall be a party thereto, to (1) execute and deliver or reaffirm (as the case may be) (i) this Agreement, (ii) the Note and the Warrants to be issued in connection with this Agreement, (iii) the Reaffirmation, Ratification and Amendment Agreement dated as of the date hereof between the Company, certain Subsidiaries of the Company and the Purchaser (as amended, modified, restated and/or supplemented from time to time, the “Reaffirmation Agreement”), respecting (among other things) (a) the Master Security Agreement dated as of June 30, 2006, between the Company, certain Subsidiaries of the Company and the Purchaser (as the same may have been and hereafter may be amended, modified, restated and/or supplemented from time to time, the “Master Security Agreement”), (b) the Stock Pledge Agreement dated as of June 30, 2006, among the Company, certain Subsidiaries of the Company and the Purchaser (as the same may have been and hereafter may be amended, modified, restated and/or or supplemented from time to time, the “Stock Pledge

Agreement”), (c) the Intellectual Property Security Agreement dated as of June 30, 2006, among the Company, certain Subsidiaries of the Company and the Purchaser (as the same may have been and hereafter may be amended, modified, restated and/or or supplemented from time to time, the “IP Security Agreement”), and (d) the Subsidiary Guaranty dated as of June 30, 2006, made by certain Subsidiaries of the Company (as the same may have been and hereafter may be amended, modified, restated and/or supplemented from time to time, the “Subsidiary Guaranty”); (iv) the Registration Rights Agreement relating to the Securities dated as of the date hereof between the Company and the Purchaser (as amended, modified, restated and/or supplemented from time to time, the “Registration Rights Agreement”); (v) the Amended and Restated Funds Escrow Agreement dated as of the date hereof among the Company, the Purchaser and the escrow agent referred to therein, substantially in the form of Exhibit E hereto (as amended, modified, restated and/or supplemented from time to time, the “Escrow Agreement”); (vi) the Warrants; (vii) the Restricted Account Agreement by and among the Purchaser, the Company and North Fork Bank, dated as of the date hereof (as amended, modified, restated and/or supplemented, the “Restricted Account Agreement”); (viii) the Restricted Account Side Letter by and among the Purchaser and the Company, dated as of the date hereof (as amended, modified restated and/or supplemented, the “Restricted Account Side Letter”); (ix) the letter agreement dated as of the date hereof between the Purchaser and the Company respecting the securities issueable pursuant to the Warrants (as amended, modified, restated and/or supplemented from time to time, the “Warrant Side Letter”; and (x) all other documents, instruments and agreements entered into on or after the date hereof in connection with the transactions contemplated hereby and thereby, as executed by the applicable parties and thereafter amended, modified, restated and/or supplemented from time to time (the documents, instruments and agreements referenced in the preceding clauses (ii) through (xii) (including sub-clauses (iii)(a), (iii)(b), (iii)(c) and (iii)(d) thereof), collectively, the “Related Agreements”); (2) issue and sell the Note; (3) issue and sell the Warrants and Warrant Shares; and (4) carry out the provisions of this Agreement and the Related Agreements and to carry on its business as presently conducted. Each of the Company and each of its Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign corporation, partnership or limited liability company, as the case may be, in all jurisdictions in which the nature or location of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so has not, or could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, liabilities, condition (financial or otherwise), properties, operations and prospects of the Company and its Subsidiaries, taken as a whole (a “Material Adverse Effect”).

                    4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company, the direct owner of such Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a “Subsidiary” of any person or entity means (i) a corporation or other entity whose shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other persons or entities performing similar functions for such person or entity, are owned, directly or indirectly, by such person or entity or (ii) a

corporation or other entity in which such person or entity owns, directly or indirectly, more than 50% of the equity interests at such time.

                    4.3 Capitalization; Voting Rights.

          (a) The authorized capital stock of the Company, as of the date hereof consists of 21,000,000 shares, of which 20,000,000 are authorized as shares of common stock, par value $0.001 per share (the “Common Stock”), and 16,756,438 shares of Common Stock are issued and outstanding, and 1,000,000 are authorized as shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), and 37,908.56 shares of Preferred Stock are issued and outstanding. The authorized, issued and outstanding capital stock of each Subsidiary of the Company is set forth on Schedule 4.3.

          (b) Except (i) as disclosed on Schedule 4.3 or provided in any Related Agreement, (ii) the shares reserved for issuance under the stock option plans of the Company and its Subsidiaries, and (iii) warrants, rights and shares granted pursuant to this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Company of any of its equity securities. Except as disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the Note or the Warrants, nor the issuance of any of the Warrant Shares, nor the consummation of any transaction contemplated hereby, will result in a change in the price or number of any equity securities of the Company outstanding under anti-dilution or other similar provisions contained in or affecting any such equity securities.

          (c) All issued and outstanding shares of the Company’s Common Stock and Preferred Stock: (i) have been duly authorized and validly issued and are fully paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

          (d) The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Company’s Certificate of Incorporation (the “Charter”). Except as disclosed on Schedule 4.3 or provided in any Related Agreement, the Warrant Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement, the Related Agreements and the Company’s Charter, the Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Securities are subject to the provisions of this Agreement, the Related Agreements and applicable law other than to the extent effectively waived hereunder or thereunder (including, without limitation, the Uniform Commercial Code in the case of the Note) and may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.

                    4.4 Authorization; Binding Obligations. All corporate, partnership or limited liability company, as the case may be, action on the part of the Company and each of its Subsidiaries (including their respective officers and directors) necessary for the

authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company and its Subsidiaries hereunder and under the other Related Agreements at the Closing and, the authorization, sale, issuance and delivery of the Note and Warrants has been taken or will be taken prior to the Closing. This Agreement and the Related Agreements, when executed and delivered and to the extent it is a party thereto, will be valid and binding obligations of each of the Company and each of its Subsidiaries, enforceable against each such person or entity in accordance with their terms, except:

          (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and

          (b) general principles of equity that restrict the availability of equitable or legal remedies.

                    4.5 Liabilities. Neither the Company nor any of its Subsidiaries has any liabilities that should have been but were not disclosed in any of the Company’s filings under the Securities Act or Securities Exchange Act of 1934 (“Exchange Act”) made on or prior to the date of this Agreement, including (without limitation) the SEC Reports, as hereinafter defined (collectively, the “Securities Filings”), except for (i) liabilities incurred in the ordinary course of business, and (ii) liabilities under documents governing Permitted Indebtedness and Permitted Guarantees, copies of which governing documents have been provided to the Purchaser.

                    4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed in any Securities Filings:

          (a) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company or any of its Subsidiaries is a party or by which it is bound containing any: (i) obligations (contingent or otherwise) of, or payments to, the Company or any of its Subsidiaries in excess of $50,000 (other than (A) obligations of, or payments to, the Company or any of its Subsidiaries arising from purchase, lease, license or sale agreements entered into in the ordinary course of business, (B) Permitted Indebtedness and Permitted Guarantees (as defined in Section 6.13(e) hereof), and (C) the matters disclosed in Schedule 4.7); or (ii) transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company or any of its Subsidiaries (other than licenses arising from the purchase of “off the shelf” or other standard products); or (iii) provisions restricting the development, manufacture or distribution of the Company’s or any of its Subsidiaries products or services; or (iv) indemnification by the Company or any of its Subsidiaries with respect to infringements of proprietary rights (other than indemnification provisions

protecting the licensor of licenses arising from the purchase of “off the shelf” or other standard products).

          (b) Since March 31, 2007 (the “Balance Sheet Date”), neither the Company nor any of its Subsidiaries has: (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $50,000 or, in the case of indebtedness and/or liabilities individually less than $50,000, in excess of $100,000 in the aggregate, other than Permitted Indebtedness and Permitted Guarantees; (iii) made any loans or advances to any person or entity not in excess, individually or in the aggregate, of $100,000, other than ordinary course advances for travel expenses, and other than intercompany loans and advances among the Company and its Subsidiaries set forth on Schedule 4.6; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.

          (c) For the purposes of subsections (a) and (b) above, all such indebtedness, liabilities, agreements, understandings, instruments, contracts or proposed transactions involving the same person or entity (including persons or entities the Company or any Subsidiary of the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

          (d) The Company maintains all disclosure controls and procedures required under applicable law (“Disclosure Controls”) designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported in accordance with and within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”).

          (e) The Company makes and keep books, records, and accounts, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets. The Company maintains internal control over financial reporting (“Financial Reporting Controls”) designed by, or under the supervision of, the Company’s principal executive and principal financial officers, and effected by the Company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”), including that:

          (i) material transactions are executed in accordance with management’s general or specific authorization or material deviations are timely detected;

          (ii) unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements are prevented or timely detected;

          (iii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the general or specific authorizations of, or policies and procedures established by, the Company’s management and/or board of directors;

          (iv) transactions are recorded as necessary to maintain accountability for all material assets; and

          (v) the recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.

          (f) There is no weakness in any of the Company’s Disclosure Controls or Financial Reporting Controls that is required to be disclosed in any of the Securities Filings, except as so disclosed.

                    4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7 or in the Securities Filings, there are no obligations of the Company or any of its Subsidiaries to officers, directors, stockholders or employees of the Company or of any of its Subsidiaries other than:

          (a) for payment of salary for services rendered and for bonus payments;

          (b) reimbursement for reasonable expenses incurred on behalf of the Company and its Subsidiaries;

          (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company and each Subsidiary of the Company, as applicable); and

          (d) obligations listed in the Company’s and each of its Subsidiary’s financial statements or disclosed in any of the Company’s Securities Filings.

          (a) any change in the business, assets, liabilities, condition (financial or otherwise), properties, operations or prospects of the Company or any of its Subsidiaries, which individually or in the aggregate has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (b) any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;

          (c) any material change, except in the ordinary course of business, in the contingent obligations of the Company or any of its Subsidiaries by way of guaranty, endorsement, indemnity, warranty or otherwise, other than (A) any Permitted Guarantees, or (B) any new licenses arising from the purchase of “off the shelf” or other standard products containing indemnification provisions protecting the licensor thereof;

          (d) any damage, destruction or loss, whether or not covered by insurance, which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (e) any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it;

          (f) any direct or indirect loans made by the Company or any of its Subsidiaries to any stockholder, employee, officer or director of the Company or any of its Subsidiaries, other than advances made in the ordinary course of business;

          (g) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder of the Company or any of its Subsidiaries;

          (h) any declaration or payment of any dividend or other distribution of the assets of the Company or any of its Subsidiaries (for the sake of clarity, advances and repayments of intercompany loans and advances among the Company and its Subsidiaries are not such distributions);

          (i) any labor organization activity related to the Company or any of its Subsidiaries;

          (j) any debt, obligation or liability incurred, assumed or guaranteed by the Company or any of its Subsidiaries, except those for immaterial amounts, for current liabilities incurred in the ordinary course of business, and for Permitted Indebtedness and Permitted Guarantees;

          (k) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets owned by the Company or any of its Subsidiaries;

          (l) any change in any material agreement to which the Company or any of its Subsidiaries is a party or by which either the Company or any of its Subsidiaries is bound which either individually or in the aggregate has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (m) any other event or condition of any character that, either individually or in the aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or

          (n) any arrangement or commitment by the Company or any of its Subsidiaries to do any of the acts described in subsection (a) through (m) above.

          (a) those resulting from taxes which have not yet become delinquent or are being contested as permitted by Section 6.7;

          (b) statutory liens incurred or imposed in the ordinary course (i) of mechanics, carriers, warehouses, processors, suppliers and laborers, (ii) respecting worker’s compensation, unemployment insurance, or social security, or (iii) as a condition precedent to the operation of business or the exercise of any of any authorizations, licenses or privileges, in each case to the extent and only for so long as the underlying obligations are not delinquent or are being diligently contested in good faith;

          (c) liens incurred in respect of judgments and awards discharged within 30 days from the making thereof;

          (d) in the case of real estate, easements, rights-of-way, restrictions, covenants and other agreements of record and other similar charges or encumbrances that (i) do not secure indebtedness or guarantees, and (ii) do not interfere with the use of or conduct of any business of the Company or any of its Subsidiaries thereon;

          (e) any cash deposits made or bonds posted in the ordinary course to secure performance under any contract or applicable law;

          (f) in the case of any account, intangible, instrument, lease, agreement or document, any contractual right, power, privilege, remedy, interest, defect, restriction, covenant, claim, counterclaim, right of recoupment, abatement, reduction or setoff, or defense of any account debtor or other party thereto, whether now existing or hereafter arising, and whether pursuant to the applicable contractual provisions or applicable law;

          (g) the security interests or liens (including leases treated as security interests or liens) encumbering Equipment or other assets purchased or leased with Permitted Indebtedness so long as they respectively secure only the corresponding Permitted Indebtedness or capitalized lease obligations and encumber only the assets so purchased or leased (and the products and proceeds thereof, insurance therefor and warranty and other contract rights related thereto) and no other assets of the Company or any of its Subsidiaries;

          (h) each currently existing lien described in Schedule 4.9 hereto, or any continuation, restatement, or replacement thereof on terms no less favorable in all material respects to the Purchaser than the lien being continued, restated or replaced;

          (i) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company or any of its Subsidiaries, so long as in each such case, such liens and encumbrances have no effect on the lien priority of the Purchaser in such property; and

          (j) those that have otherwise arisen in the ordinary course of business, so long as they have no effect on the lien priority of the Purchaser therein.

          (a) Each of the Company and each of its Subsidiaries owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and, to the Company’s knowledge, as presently proposed to be conducted (the “Intellectual Property”), without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.

          (b) Neither the Company nor any of its Subsidiaries has received any communications alleging that the Company or any of its Subsidiaries has violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company or any of its Subsidiaries aware of any basis therefor.

          (c) The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company or any of its Subsidiaries, except for inventions, trade secrets or proprietary information that have been rightfully assigned to the Company or any of its Subsidiaries.

          (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof; or

          (b) of any adjustment, deficiency, assessment or court decision in respect of its federal, state or other taxes.

                    4.14 Employees. Neither the Company nor any of its Subsidiaries has any collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company or any of its Subsidiaries. Except as disclosed in the Securities Filings or on Schedule 4.14, neither the Company nor any of its Subsidiaries is a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company’s knowledge: no employee of the Company or any of its Subsidiaries, nor any consultant with whom the Company or any of its Subsidiaries has contracted, is in violation of any term of any material employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company or any of its Subsidiaries because of the nature of the business to be conducted by the Company or any of its Subsidiaries; and to the Company’s knowledge the continued employment by the Company and its Subsidiaries of their present employees, and the performance of the Company’s and its Subsidiaries’ contracts with its independent contractors, will not result in any such violation. To the Company’s knowledge, no employee of the Company or any of its Subsidiaries is obligated under any material contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency that would interfere with their duties to the Company or any of its Subsidiaries. To the Company’s knowledge, neither the Company nor any of its Subsidiaries has received any notice alleging that any such violation has occurred. Except for employees who have a current effective employment or severance agreement with the Company or any of its Subsidiaries and any rights that may be available under applicable law, and except for the general severance policies of the Company and its Subsidiaries, no employee of the Company or any of its Subsidiaries has been granted the right to continued employment by the Company or any of its Subsidiaries or to any material compensation following termination of employment with the Company or any of its Subsidiaries. Except as set forth on Schedule 4.14, to the knowledge of the Company, no officer, key employee or group of employees intends to terminate his, her or their employment with the Company or any of its Subsidiaries, nor does the Company or any of its Subsidiaries have a present intention to terminate the employment of any officer, key employee or group of employees.

                    4.15 Registration Rights and Voting Rights. Except as set forth on Schedule 4.15, and except as disclosed in Securities Filings, neither the Company nor any of its Subsidiaries is presently under any obligation, and neither the Company nor any of its Subsidiaries has granted any rights, to register any of the Company’s or its Subsidiaries’

presently outstanding securities or any of its securities that may hereafter be issued. Except as set forth on Schedule 4.15 and except as disclosed in Securities Filings, to the Company’s knowledge, no stockholder of the Company or any of its Subsidiaries has entered into any agreement with respect to the voting of equity securities of the Company or any of its Subsidiaries.

                    4.16 Compliance with Laws; Permits. Neither the Company nor any of its Subsidiaries is in violation of any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or any SEC related regulation, or any other applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties, that has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or any other Related Agreement and the issuance of any of the Securities, except such as have been duly and validly obtained or filed, or with respect to any filings that must be made after the Closing, as will be filed by or on behalf of the Company in a timely manner or by or on behalf of the Purchaser. Each of the Company and its Subsidiaries has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

                    4.17 Environmental and Safety Laws. Neither the Company nor any of its Subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or any of its Subsidiaries or, to the Company’s knowledge, by any other person or entity on any property owned, leased or used by the Company or any of its Subsidiaries, other than in the normal course in accordance with such applicable statutes, laws or regulations. For the purposes of the preceding sentence, “Hazardous Materials” shall mean:

          (a) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials; or

          (b) any petroleum products or nuclear materials.

                    4.18 Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt

from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws.

                    4.19 Full Disclosure. Each of the Company and each of its Subsidiaries has provided to the Purchaser or its representatives all information requested by the Purchaser in connection with its decision to purchase the Note and Warrants, including all information the Company and its Subsidiaries believe is reasonably necessary to make such investment decision. Neither this Agreement, the Related Agreements, the exhibits and schedules hereto and thereto nor any other document delivered by the Company or any of its Subsidiaries to Purchaser or its attorneys or agents in connection herewith or therewith or with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. Any financial projections and other estimates provided to the Purchaser by the Company or any of its Subsidiaries were based on the Company’s and its Subsidiaries’ experience in the industry and on assumptions of fact and opinion as to future events which the Company or any of its Subsidiaries, at the date of the issuance of such projections or estimates, believed to be reasonable.

                    4.20 Insurance. Each of the Company and each of its Subsidiaries has general commercial, product liability, fire and casualty insurance policies with coverages that the Company believes are customary for companies similarly situated to the Company and its Subsidiaries in the same or similar business.

                    4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has filed all proxy statements, reports and other documents required to be filed by it under the Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, as amended (the “Exchange Act”). The Company has furnished the Purchaser copies of: (i) its Annual Reports on Form 10-KSB for its fiscal years ended June 30, 2006; and (ii) its Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2006 and the Form 8-K filings which it has made since June 30, 2006, to date (collectively, the “SEC Reports”). Except as set forth on Schedule 4.21 or subsequent SEC Reports set forth in this Section 4.21, each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

                    4.22 Listing. The Company’s Common Stock is quoted on the Pink Sheets® under the symbol “▇▇▇▇.▇▇” and is not listed or quoted on a Principal Market (as hereafter defined). For purposes hereof, the term “Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, NASDAQ Global Select Market, NASDAQ Global Market, American Stock Exchange or New York Stock Exchange (whichever of the foregoing, if any, is at the time the principal trading exchange or market for the Common Stock).

                    4.23 No Integrated Offering. Neither the Company, nor any of its Subsidiaries or 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 offering of the Securities pursuant to this Agreement or any of the Related Agreements to be integrated with prior offerings by the Company for purposes of the Securities Act that would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or Subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings.

                    4.24 Stop Transfer. The Securities are restricted securities as of the date of this Agreement. Neither the Company nor any of its Subsidiaries will issue any stop transfer order or other order impeding the sale and delivery of any of the Warrant Shares at such time as the Warrant Shares are registered for public sale or an exemption from registration is available, except as required by state and federal securities laws.

                    4.25 Dilution. The Company specifically acknowledges that its obligation to issue the shares of Common Stock 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.

                    4.26 Patriot Act. (a) The Company certifies that, to the best of Company’s knowledge, neither the Company nor any of its Subsidiaries has been designated, nor is or shall be owned or controlled, by a “suspected terrorist” as defined in U.S. Federal Executive Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, the Company hereby represents, warrants and covenants that: (i) none of the cash or property that the Company or any of its Subsidiaries will pay or will contribute to the Purchaser has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no contribution or payment by the Company or any of its Subsidiaries to the Purchaser, to the extent that they are within the Company’s and/or its Subsidiaries’ control, shall cause the Purchaser to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly notify the Purchaser if any of these representations, warranties or covenants ceases to be true and accurate regarding the Company or any of its Subsidiaries. The Company shall provide the Purchaser all additional information regarding the Company or any of its Subsidiaries that the Purchaser deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities. The Company understands and agrees that if at any time it is discovered that any of the foregoing representations, warranties or covenants are incorrect, or if otherwise required by applicable law or regulation related to money laundering or similar activities, the Purchaser may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of the Purchaser’s investment in the Company. The Company further understands that the Purchaser may release

confidential information about the Company and its Subsidiaries and, if applicable, any underlying beneficial owners, to proper authorities if the Purchaser, in its sole discretion, determines that it is in the best interests of the Purchaser in light of relevant rules and regulations under the laws set forth in subsection (ii) above.

                    4.27 ERISA. To the extent the Company or any of its Subsidiaries has any benefit plan subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), and the regulations and published interpretations thereunder: (i) neither the Company nor any of its Subsidiaries has engaged in any Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”)); (ii) each of the Company and each of its Subsidiaries has met all applicable minimum funding requirements under Section 302 of ERISA in respect of its plans; (iii) neither the Company nor any of its Subsidiaries has any knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither the Company nor any of its Subsidiaries has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than the Company’s or such Subsidiary’s employees; and (v) neither the Company nor any of its Subsidiaries has

withdrawn, completely or partially, from any multi-employer pension plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980.

                    5.1 No Shorting. The Purchaser or any of its affiliates and investment partners has not, will not and will not cause any person or entity to, directly or beneficially engage in “short sales” of the Company’s Common Stock or Preferred Stock as long as the Note and Warrants shall be outstanding.

                    5.2 Requisite Power and Authority. The Purchaser has full all necessary power and authority under all applicable provisions of law, to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All corporate action on the Purchaser’s part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of the Purchaser, enforceable in accordance with their terms, except:

          (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and

          (b) as limited by general principles of equity that restrict the availability of equitable and legal remedies.

                    5.3 Investment Representations. The Purchaser understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon the Purchaser’s representations contained in this Agreement, including, without limitation, the Purchaser’s representation (in Section 5,7) that it is an “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Note and the Warrants to be purchased by it under this Agreement and the Warrant Shares acquired by it upon the exercise of the Warrants, respectively. The Purchaser further confirms that it has had the opportunity to ask questions and receive answers from the Company regarding the Company’s and its Subsidiaries’ business, management and financial affairs and the terms and conditions of the Offering, the Note, the Warrants and the Securities and obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Purchaser or to which the Purchaser had access.

                    5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser must bear the economic risk of this investment until the Securities are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration that is available with respect to such sale.

                    5.5 Acquisition for Own Account. The Purchaser is acquiring the Note and Warrants and the Warrant Shares for the Purchaser’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution.

                    5.6 The Purchaser Can Protect Its Interest. The Purchaser represents that by reason of its, or of its management’s, business and financial experience, the Purchaser has the capacity to evaluate the merits and risks of its investment in the Note, the Warrants and the Securities and to protect its own interests in connection with the transactions contemplated in this Agreement and the Related Agreements. Further, the Purchaser is aware of no advertisement or other publication in connection with the transactions contemplated in the Agreement or the Related Agreements.

                    5.7 Accredited Investor. The Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

                    5.8 Legends.

          (a) The Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall bear a legend which shall be in substantially the following form until such shares are covered by an effective registration statement filed with the SEC:

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

          (b) The Warrants shall bear substantially the following 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, OR ANY APPLICABLE STATE SECURITIES LAWS. 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 UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ▇▇▇▇▇▇▇.▇▇▇ INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

                      (c) The Note shall bear substantially the following legend:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ▇▇▇▇▇▇▇.▇▇▇ INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

          (a) As soon as available after the end of each fiscal year of the Company, and in any event by no later than the first business day after the expiration of the period (including any extensions) required for filing of its annual report on Form 10-K with the SEC under the Exchange Act, a copy of such annual report, including the consolidated audited financial statements of the Company and its Subsidiaries together with a report of independent certified public accountants of recognized standing selected by the Company and reasonably acceptable to the Purchaser (the “Accountants”) (the current accountants being acceptable), which annual financial statements shall include each of the consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for the fiscal year then ended, all in reasonable detail and prepared in accordance with GAAP, together with (i) if and when available, copies of any management letters prepared by the Accountants; and (ii) a certificate of the Company’s President, Chief Executive Officer or Chief Financial Officer stating that such financial statements have been prepared to his knowledge in accordance with GAAP and whether or not such officer has knowledge of the occurrence and/or continuance of any Event of Default (as defined in the Note) and, if so, stating in reasonable detail the facts with respect thereto;

          (b) As soon as available after the end of each fiscal quarter of the Company, and in any event by no later than the first business day after the expiration of the period (including any extensions) required for filing of its quarterly report on Form 10-Q with the SEC under the Exchange Act, a copy of such quarterly report, including an unaudited consolidated balance sheet and statements of income, retained earnings and cash flows of the Company and its Subsidiaries as at the end of and for such quarter and for the year to date period then ended, in reasonable detail and prepared in accordance with GAAP, subject to year-end adjustments and accompanied by a certificate of the Company’s President, Chief Executive Officer or Chief Financial Officer, stating (i) that such financial statements have been prepared in accordance with GAAP to his knowledge, subject to year-end audit adjustments, and (ii) whether or not such officer has knowledge of the occurrence and/or continuance of any Event of Default (as defined in the Note) not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto;

          (c) As soon as available, and in any event within three (3) business days after the end of each week: (i) a report in the form of Exhibit G weekly and period to date actual and planned cash flow; (ii) accounts payable payment and balance information; (ii) month to date wholesales sales; (iii) weekly retail sales information from major customers (including Sephora and HSN) for so long as applicable; (iv) monthly P/Ls as

they are completed, and (v) , a copy of the Company’s regularly prepared internal unaudited consolidated financial statements, including (without limitation) balance sheets, statements of income, retained earnings and cash flows, and in reasonable detail and stating in comparative form to the figures for the corresponding Budget (as such term is defined in the Restricted Account Side Letter) all prepared in accordance with past practice, subject to year-end adjustments and accompanied by a certificate of the Company’s President, Chief Executive Officer or Chief Financial Officer, stating (A) that such financial statements have been prepared in accordance with past practice, subject to year-end audit adjustments; and (B) whether or not such officer has knowledge of the occurrence of any Event of Default (as defined in the Note) not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto; provided, however, that for the months in which the sales of the stores transaction and this transaction are booked, the Company will have 30 days after the end of the applicable month to prepare the monthly financial statements;

          (d) Promptly after (i) the filing thereof, copies of the Company’s most recent registration statements and annual, quarterly, monthly or other regular reports which the Company files with the Securities and Exchange Commission (the “SEC”), and (ii) the issuance thereof, copies of such financial statements, reports and proxy statements as the Company shall send to its stockholders; and

          (e) Promptly following request such other information respecting the Company and its Subsidiaries as the Purchaser shall reasonably request.

          (a) visit and inspect any of the properties of the Company or any of its Subsidiaries;

          (b) examine the corporate and financial records of the Company or any of its Subsidiaries (unless such examination is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and

          (c) discuss the affairs, finances and accounts of the Company or any of its Subsidiaries with the directors, officers and independent accountants of the Company or any of its Subsidiaries.

          (a) (i) directly or indirectly declare or pay any cash dividends, other than cash dividends paid to the Company or any of its wholly-owned Subsidiaries, (ii) issue any Preferred Stock that has a scheduled mandatory redemption date prior to the one year anniversary of the Maturity Date (as defined in the Note) or (iii) redeem any of its Preferred Stock or other equity interests;

          (b) liquidate, dissolve or effect a material reorganization (it being understood that in no event shall the Company or any of its Subsidiaries dissolve, liquidate or merge with any other person or entity (unless, in the case of such a merger involving the Company, the Company is the surviving entity, or, in the case of merger not involving the Company, any Subsidiary or any entity acquired by the Company or any Subsidiary, as applicable, is the surviving entity);

          (c) become subject to (including, without limitation, by way of amendment to or modification of) any agreement or instrument that by its terms would (under any circumstances) restrict the right of the Company or any of its Subsidiaries to perform the provisions of this Agreement, any Related Agreement or any of the currently and expressly agreements contemplated hereby or thereby;

          (d) materially alter or change the scope of the business of the Company and its Subsidiaries taken as a whole; or

          (e) (i) create, incur, assume or suffer to exist any indebtedness (exclusive of Permitted Indebtedness, as hereinafter defined) whether secured or unsecured, other than (A) the Company’s indebtedness owed under this Agreement or any Related Agreement, (B) the pari passu debt aggregating $4,000,000 (the “Pari Passu Indebtedness”) listed in Schedule 6.13(e) hereto and made a part hereof, and the other indebtedness (if any) set forth on Schedule 6.13(e) attached hereto and made a part hereof, and any refinancings or replacements thereof on terms no less favorable as a whole to the Purchaser than the indebtedness being refinanced or replaced , as determined by Purchaser in its sole discretion, (C) any indebtedness incurred to finance the purchase of equipment not in

excess of five percent (5%) of the fair market value of the Company’s and its Subsidiaries’ assets, and any indebtedness incurred in connection with the purchase of assets (other than equipment), or any restatements, refinancings or replacements thereof on terms no less favorable as a whole to the Purchaser than the indebtedness being restated, refinanced or replaced, as determined by Purchaser in its sole discretion, so long as any lien relating thereto shall only encumber the fixed assets so purchased or leased (and the products and proceeds thereof, insurance therefor and warranty and other contract rights related thereto) and no other assets of the Company or any of its Subsidiaries, (D) intercompany loans and advance among the Company and its subsidiaries, (E) short-term unsecured trade obligations for the purchase of goods or services in the ordinary course, and (F) additional subordinated debt in such amounts and on such subordination and other terms as the Purchaser may approve from time to time, and any refinancings or replacements thereof on terms no less favorable as a whole to the Purchaser than the indebtedness being refinanced or replaced, as determined by Purchaser in its sole discretion, (the indebtedness permitted by clauses (A) through (F) being referred to as “Permitted Indebtedness”); (ii) cancel any indebtedness owing to it in excess of $50,000 in the aggregate during any 12 month period, excluding the settlement of any account in the ordinary course, and any intercompany loans and advances among the Company and its Subsidiaries,; (iii) assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other person or entity, except for (A) the endorsement of negotiable instruments by the Company or any Subsidiary thereof for deposit or collection or similar transactions in the ordinary course of business, (B) any guarantees and indemnifications respecting indebtedness otherwise permitted to be outstanding pursuant to this clause (e), (C) guarantees by the Company or any Subsidiary of any obligation of any Subsidiary or the Company that could have been incurred directly by the guarantor without violating this Agreement or any Related Agreement, and (D) any guarantees of indebtedness set forth on Schedule 6.13(e) attached hereto and made a part hereof (the guarantees permitted by clauses (A) through (F) being referred to as “Permitted Guarantees”);

          (f) Enter into any material contract (as such term is defined in Item 1.01 of Form 8-K promulgated by the SEC);

          (g) Other than as set forth in the Budget, enter into any transaction in which the aggregate consideration to be paid by the Company, either individually or in the aggregate, exceeds $25,000; and

          (h) create or acquire any Subsidiary after the date hereof unless (i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes a party to the Master Security Agreement, the Stock Pledge Agreement and the Subsidiary Guaranty (either by executing a counterpart thereof or an assumption or joinder agreement in respect thereof) and, to the extent required by the Purchaser, satisfies each condition of this Agreement and the Related Agreements as if such Subsidiary were a Subsidiary on the Closing Date.

          (a) Proceeds obtained from any asset sale, other than in the ordinary course of business;

          (b) Proceeds obtained from the sale of any securities of the Company or of any of the Subsidiaries, except for (i) any Qualified Financing (which shall be applied as set forth in Section 6.15)

          (c) Proceeds obtained from the sale of any of the Collateral, other than in the ordinary course of business.

          (a) A “Qualified Financing” shall mean a financing by the Company or any of the Subsidiaries, or sale of any assets of the Company or any Subsidiary, outside the ordinary course of business, that:

          (i) has been approved by the Board of Directors of the Company, management of the Company and the Purchaser;

          (ii) will proportionately dilute all shareholders inclusive of any warrant or options outstanding, if applicable;

          (b) All net proceeds (after reasonable transaction expenses) obtained in a Qualified Financing shall be applied as follows:

          (i) 75% of the proceeds of a Qualified Financing shall be applied: first, to the Note; and secondly, to any other obligations of the Company to the Purchaser;

          (ii) 25% of the proceeds of a Qualified Financing shall be used by the Company for working capital purposes.

          (a) the holder thereof is permitted to dispose of such Warrant Shares pursuant to Rule 144(k) under the Securities Act; or

          (b) upon resale subject to an effective registration statement after such Warrant Shares are registered under the Securities Act.

          (i) All of the Company’s outstanding obligations to the Purchaser have been repaid;

          (ii) The Company’s Total Debt (as defined below) divided by the aggregate amount of EBITDA (as defined below) for a twelve month period has not exceeded 4.0 for four consecutive months.

          (iii) For purposes of this Agreement, “EBITDA” shall mean earnings before interest, taxes, depreciation and amortization, determined in accordance with generally accepted accounting principles as in effect from time to time in the United States of America, and for avoidance of doubt, shall not give effect to any extraordinary non-cash gains or non-cash losses.

          For purposes of this Agreement, “Total Debt” shall mean, for any person: (i) all indebtedness or other obligations of such person for borrowed money or for the deferred purchase price of property or services; (ii) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession

or sale of such property); (iv) all obligations under capital leases; (v) all reimbursement or other obligations of such person under or in respect of letters of credit and bankers acceptances, (vi) all reimbursement or other obligations of such person in respect of any bank guaranties, shipside bonds, surety bonds and similar instruments issued for the account of such person or as to which such person is otherwise liable for reimbursement of drawings or payments; (vii) all guaranty obligations of such person; and (viii) all indebtedness of another person (a “Third Party”) secured by any lien upon or in property owned by such person, whether or not such person has assumed or become liable for the payment of such indebtedness of such Third Party. For all purposes hereof, the Total Debt of any person shall include the Total Debt of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such person is a general partner or a joint venturer, unless such Total Debt is expressly made non-recourse to such person (subject only to customary recourse exceptions). (b) Until the earlier to occur of (i) cancellation of Warrant E and (b) the thirty-sixth (36^th) month anniversary of the date hereof, the Purchaser agrees that it shall not transfer Warrant E to any third party.

          (a) Provided the Purchaser has notified the Company of the Purchaser’s intention to sell the Warrant Shares in accordance with the Warrants and the Warrant Shares are included in an effective registration statement or are otherwise exempt from registration in the amount to be sold: (i) upon the exercise of the Warrants or part thereof, the Company shall, at its own cost and expense, take all necessary action (including the issuance of an opinion of counsel reasonably acceptable to the Purchaser following a request by the Purchaser) to assure that the Company’s transfer agent shall issue shares of the Company’s Common Stock in the name of the Purchaser (or its nominee) or such other persons as designated by the Purchaser in accordance with Section 9.1(b) hereof and in such denominations to be specified representing the number of Warrant Shares issuable upon such exercise; and (ii) the Company warrants that no instructions other than these instructions have been or will be given by the Company to the transfer agent of the Company’s Common Stock and that after the Effectiveness Date (as defined in the Registration Rights Agreement) the registered Warrant Shares issued will be freely transferable subject to the prospectus delivery requirements of the Securities Act and the provisions of this Agreement, and will not contain a legend restricting the resale or transferability of the registered Warrant Shares.

          (b) The Purchaser will give notice of its decision to exercise its right to exercise the Warrants or part thereof by telecopying or otherwise delivering an executed and completed notice of the number of shares to be subscribed to the Company (the “Form of Subscription”). The Purchaser will not be required to surrender the Warrants until the Purchaser receives a credit to the account of the Purchaser’s prime broker through the DWAC system (as defined below), representing the Warrant Shares or until the Warrants have been fully exercised. Each date on which a Form of Subscription is telecopied or delivered to the Company in accordance with the provisions hereof shall be deemed a “Exercise Date.” Pursuant to the terms of the Form of Subscription, the Company will issue instructions to the transfer agent accompanied by an opinion of counsel within three (3) business days of the date of the delivery to the Company of the duly and timely completed Form of Subscription and payment therefore (the “Instruction Date”) and shall use its best efforts to cause the transfer agent to promptly transmit the certificates representing the Warrant Shares set forth in the applicable Form of Subscription to the Holder by crediting the account of the Purchaser’s prime broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business days after the Instruction Date (the “Delivery Date”).

          (c) The Company understands that a delay in the delivery of the Warrant Shares in the form required pursuant to Section 9 hereof beyond the Delivery Date could result in economic loss to the Purchaser. In the event that the Company fails to direct its transfer agent to deliver the Warrant Shares to the Purchaser via the DWAC system within the time frame set forth in Section 9.1(b) above and the Warrant Shares are not delivered to the Purchaser by the Delivery Date, as compensation to the Purchaser for such loss, the Company agrees to pay late payments to the Purchaser for late issuance of the Warrant Shares in the form required pursuant to Section 9 hereof upon exercise of the Warrants in the amount equal to the greater of: (i) $500 per business day after the Delivery Date; or (ii) the Purchaser’s actual damages from such delayed delivery. The Company shall pay any payments incurred under this Section in immediately available funds upon demand and, in the case of actual damages, accompanied by reasonable documentation of the amount of such damages. Such documentation shall show the number of shares of Common Stock (if any) that the Purchaser was forced to purchase (in an open market transaction) which the Purchaser anticipated receiving upon such exercise, and shall be calculated as the amount by which (A) the Purchaser’s total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate amount of the Exercise Price for the Warrants, for which such Form of Subscription was not timely honored.

                    10.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser pursuant to the Registration Rights Agreement.

          (a) THIS AGREEMENT AND THE RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS; PROVIDED, HOWEVER, THAT THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO THE RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE APPLICABLE LAWS OF (A) THE STATE IN WHICH THE APPLICABLE COMPANY OR SUBSIDIARY IS ORGANIZED IN THE CASE OF TYPES OF COLLATERAL IN WHICH SECURITY INTERESTS CAN BE PERFECTED BY THE FILING OF UCC FINANCING STATEMENTS IN THAT STATE OR (B) IN ALL OTHER CASES THE STATE IN WHICH THE APPLICABLE ASSET OR PROPERTY IS LOCATED OR DEEMED LOCATED.

          (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR

AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY FEDERAL EXPRESS OR REGISTERED OR CERTIFIED MAIL DELIVERED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE COMPANY’S ACTUAL RECEIPT THEREOF OR FOUR (4) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS FOR DELIVERY BY SUCH MAIL AND PROPER POSTAGE PREPAID.

          (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

                    11.2 Severability. Wherever possible each provision of this Agreement and the Related Agreements shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement or any Related Agreement shall be prohibited by or invalid or illegal under applicable law such provision shall be ineffective to the extent of such prohibition or invalidity or illegality, without invalidating

the remainder of such provision or the remaining provisions thereof which shall not in any way be affected or impaired thereby.

                    11.3 Survival. The representations, warranties, covenants and agreements of the parties made herein shall survive any investigation made by the parties and the closing of the transactions contemplated hereby to the extent provided therein. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. All indemnities set forth herein shall survive the execution, delivery and termination of this Agreement and the Note, and the making and repayment of the obligations arising hereunder, under the Note and under the other Related Agreements.

                    11.4 Successors and Assigns. Except as otherwise expressly provided herein, this Agreement and the Related Agreements shall inure to the benefit of, and be binding upon and enforceable by, the successors, heirs, executors, administrators and permitted assigns of the parties hereto. The Purchaser shall not be permitted to assign this Agreement or Related Agreement or any of its rights hereunder or thereunder to a competitor of the Company unless an Event of Default (as defined in the Note) has occurred and is continuing. Notwithstanding anything to the contrary in this Agreement or any Related Agreement, and irrespective of any permitted assignment of this Agreement or any Related Agreement (in whole or in part): until the first anniversary of the date hereof: (a) the Company and its Subsidiaries shall be entitled at all times to deal exclusively with the Purchaser respecting this Agreement and the Related Agreements, the administration hereof and thereof and its performance hereunder and thereunder, including (without limitation) (i) any supplement to, modification, amendment, restatement or waiver of or departure from this Agreement or any Related Agreement or any release of Collateral (each a “Modification”), (ii) the delivery of any notice, report, other document or further assurance, or (iii) any payment or collateral administration; (b) the Purchaser shall not assign or delegate (in whole or in part) to any other person in its sole discretion its right or power to review, approve or sign any Modification or to administer this Agreement or any Related Agreement; and (c) no permitted assignee shall have any right or power whatsoever to review, approve or sign any Modification or to administer this Agreement or any Related Agreement, irrespective of its agreements and understandings with the Purchaser.

                    11.5 Entire Agreement; Maximum Interest. This Agreement and the exhibits and schedules hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof, and supersede and completely replace any and all (and no party shall be liable or bound to any other in any manner by any) prior or other representations, warranties, covenants, promises, assurances or other agreements or understandings (whether written, oral, express, implied or otherwise) with regard to the subjects hereof except as specifically set forth herein. Nothing contained in this Agreement, any Related Agreement 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 rate 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 rate permitted by such law, any payments in excess of such maximum shall be credited against principal amounts owed by the Company to the Purchaser (as a permitted prepayment without premium or penalty) and thus refunded to the Company.

                    11.6 Amendment and Waiver. Subject to Section 11.4 hereof:

          (a) Except as otherwise provided in subsection (b) or (c) of this Section with respect to waivers, this Agreement may be restated, supplemented, amended or modified only in a written agreement between the Company and the Purchaser.

          (b) The obligations of the Company and the rights of the Purchaser under this Agreement may be waived only with the written consent of the Purchaser.

          (c) The obligations of the Purchaser and the rights of the Company under this Agreement may be waived only with the written consent of the Company.

                    11.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement or the Related Agreements, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement or the Related Agreements, by law or otherwise afforded to any party, shall be cumulative and not alternative.

                    11.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given:

          (a) upon personal delivery to the party to be notified;

          (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next business day;

          (c) four (4) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or

          (d) one (1) business day after deposit on a business day in time for that evening’s pickup with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.

If to the Company,

▇▇▇▇▇▇▇.▇▇▇ INC.

to:

          ▇▇▇ ▇▇▇▇▇▇▇ ▇, ▇^▇▇ ▇▇▇▇▇

          ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇

          Attention: Chief Financial Officer

Attention: Chief Financial Officer

Facsimile: Facsimile: 203-295-2102

with a copy to:

          ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP

          ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

          ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

Facsimile: 212-704-6160

If to the Purchaser,

Laurus Master Fund, Ltd.

to:

c/o M&C Corporate Services Limited

▇.▇. ▇▇▇ ▇▇▇ ▇▇

▇▇▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇▇ ▇▇▇▇

South Church Street

Grand Cayman, Cayman Islands

Facsimile: ▇▇▇-▇▇▇-▇▇▇▇

with a copy to:

▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.

▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇

▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇

Facsimile: ▇▇▇-▇▇▇-▇▇▇▇

                    11.9 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement or any Related Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement and/or such Related Agreement, including, without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

                    11.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement and the Related Agreements are for convenience of reference only and are not to be considered in construing this Agreement or any Related Agreement.

                    11.11 Facsimile Signatures; Counterparts. This Agreement or any Related Agreement may be executed by facsimile signatures and in any number of counterparts of any such document or any of its signature pages, each of which may be delivered by fax, pdf or other electronic means, and each of which shall be an original, but all of which together for such document shall constitute one agreement.

                    11.12 Broker’s Fees. Except as set forth on Schedule 11.12 hereof, each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 11.12 being untrue.

                    11.13 Construction. Each party acknowledges that its legal counsel participated in the preparation of this Agreement and the Related Agreements and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Agreement or any Related Agreement to favor any party against the other.

                    11.14 Restatement. This Purchase Agreement amends, restates and completely replaces the Original SPA in its entirety.

COMPANY:

PURCHASER:

▇▇▇▇▇▇▇.▇▇▇ INC.

LAURUS MASTER FUND, LTD.

By:

By:

Name:

Name:

Title:

Title:

1.

Common Stock, par value $0.01, authorized 70,000,000 shares; issued and outstanding 43,209,498 shares.

2.

Series A Preferred Stock, par value $0.01, authorized 20,000 shares; issued and outstanding 0 shares.

3.

Series B Preferred Stock, par value $0.01, authorized 600,000 shares; issued and outstanding 0 shares.

4.

Series C Preferred Stock, par value $0.01, authorized 20,000 shares; issued and outstanding 0 shares.

5.

Series D Preferred Stock, par value $0.01, authorized 8,200 shares; issued and outstanding 0 shares.

6.

Series E Preferred Stock, par value $0.01, authorized 500 shares; issued and outstanding 0 shares.

7.

Series G Preferred Stock, par value $0.01, authorized 12,000 shares; issued and outstanding 0 shares.

8.

Series H Preferred Stock, par value $0.01, authorized 5,000 shares, issued and outstanding 0 shares.

1.

Warrant issued to Pequot Healthcare Institutional Fund, L.P. dated December 20, 2005.

2.

Warrant issued to Pequot Healthcare Fund, L.P. dated December 20, 2005.

3.

Warrant issued to Pequot Mariner Master Fund, L.P. dated December 20, 2005.

4.

Warrant issued to Premium Series PCC Ltd. – Cell 32 dated December 20, 2005.

5.

Warrant issued to Premium Series PCC Ltd. – Cell 33 dated December 20, 2005.

6.

Warrant issued to Pequot Navigator Offshore Fund, Inc. dated December 20, 2005.

7.

Warrant issued to Pequot Scout Fund, L.P. dated December 20, 2005.

8.

Warrant issued to Pequot Healthcare Offshore Fund, Inc. dated December 20, 2005.

9.

Warrant issued to Pequot Diversified Master Fund, Ltd. dated December 20, 2005.

10.

Warrant issued to Pequot Diversified Master Fund, Ltd. dated December 20, 2005.

11.

Warrant issued to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ International dated December 20, 2005.

12.

Warrant issued to ▇. ▇▇▇▇▇▇▇▇▇ McBaine dated December 20, 2005.

13.

Warrant issued to Lagunitas Partners, L.P. dated December 20, 2005.

14.

Warrant issued to Firefly Partners dated December 20, 2005.

15.

Warrant issued to ▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust dated December 20, 2005.

16.

Warrant issued to VFT Special Ventures, Ltd. dated December 20, 2005.

17.

Warrant issued to Seapine Investments, LLC dated December 20, 2005.

18.

Warrant issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated December 20, 2005.

19.

Warrant issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated December 20, 2005.

20.

Warrant issued to ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor Trust dated December 20, 2005.

21.

Warrant issued to ▇▇▇▇ ▇. ▇▇▇▇ dated December 20, 2005.

22.

Warrant issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇ dated December 20, 2005.

23.

Warrant issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dated December 20, 2005.

24.

Warrant issued to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ dated December 20, 2005.

25.

Warrant issued to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated December 20, 2005.

26.

Warrant issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇ dated December 20, 2005.

27.

Warrant issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. dated December 20, 2005.

28.

Warrant issued to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ dated December 20, 2005.

29.

Warrant issued to ▇▇▇ ▇▇▇▇▇ dated December 20, 2005.

30.

Warrant issued to ▇▇▇▇ ▇▇▇▇▇▇ dated December 20, 2005.

31.

Warrant issued to ▇▇▇▇▇ ▇▇▇▇▇▇▇ dated December 20, 2005.

32.

Warrant issued to ▇▇▇▇▇▇ ▇▇▇▇▇ dated December 20, 2005.

33.

Warrant issued to ▇▇▇ ▇▇▇▇▇ dated December 20, 2005.

34.

Warrant issued to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust dated December 20, 2005.

35.

Warrant issued to ▇▇▇▇ ▇▇▇▇ dated December 20, 2005.

36.

Warrant issued to ▇▇▇▇ ▇’▇▇▇▇ dated December 20, 2005.

37.

Warrant issued to Ballyshannon Family Partnership, L.P. dated December 20, 2005.

38.

Warrant issued to Ballyshannon Partners, L.P. dated December 20, 2005.

39.

Warrant issued to Cabernet Partners, L.P. dated December 20, 2005.

40.

Warrant issued to Northwood Capital Partners, L.P. dated December 20, 2005.

41.

Warrant issued to ▇▇▇▇▇▇ ▇▇▇▇▇▇ dated December 20, 2005.

42.

Warrant issued to ▇▇▇ ▇▇▇▇ dated December 20, 2005.

43.

Warrant issued to GGCP, Inc. dated December 20, 2005.

44.

Warrant issued to ▇▇▇▇▇▇▇ ▇▇▇▇ dated December 20, 2005.

45.

Warrant issued to Valesco Healthcare Overseas Fund, Ltd. dated December 22, 2005.

46.

Warrant issued to Valesco Healthcare Partners I LP dated December 22, 2005.

47.

Warrant issued to Valesco Healthcare Partners II LP dated December 22, 2005.

48.

Warrant issued to North Sound Legacy Institutional Fund LLC dated December 22, 2005.

49.

Warrant issued to North Sound Legacy International Ltd. dated December 22, 2005.

50.

Warrant issued to Pequot Navigator Offshore Fund, Inc. dated December 30, 2005.

51.

Warrant issued to Pequot Scout Fund, L.P. dated December 30, 2005.

52.

Warrant issued to Pequot Mariner Master Fund, L.P. dated December 30, 2005.

53.

Warrant issued to Pequot Diversified Master Fund, Ltd. dated December 30, 2005.

54.

Letter Agreement, dated July 11, 2005, among ▇▇▇▇, ▇▇▇▇▇▇▇ PBG Acquisition Sub, LLC, Anushka Boca Acquisition Sub, LLC, Wild Hare Acquisition Sub, LLC, ▇▇▇▇▇▇▇▇ Corporation, Advanced K, LLC and Technology Investment Capital Corp.

55.

Certificate of Designation for the Series B Convertible Preferred Stock of the Company.

56.

Certificate of Designation for the Series C Convertible Preferred Stock of the Company.

57.

Certificate of Designation for the Series D Convertible Preferred Stock of the Company.

58.

Amended and Restated Securityholders Agreement dated December 20, 2005 among KAAI, FCRR, L Capital and certain shareholders of ▇▇▇▇

▇▇.

Common Stock Warrant Series A issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

60.

Common Stock Warrant Series B issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

61.

Common Stock Warrant Series C issued to Laurus Master Fund, Ltd. Dated June 30, 2006.

62.

Warrant issued to ▇▇▇▇▇▇▇ Investments LLC dated July 11, 2006.

63.

Warrant issued to Pequot Healthcare Fund, L.P. dated July 11, 2006.

64.

Warrant issued to Pequot Healthcare Offshore Fund, Inc. dated July 11, 2006.

65.

Warrant issued to Premium Series PCC Limited – Cell 32 dated July 11, 2006.

66.

Warrant issued to Pequot Diversified Master Fund, Ltd. dated July 11, 2006.

67.

Warrant issued to Pequot Healthcare Institutional Fund, L.P. dated July 11, 2006.

68.

Warrant issued to North Sound Legacy Institutional Fund LLC dated July 11, 2006.

69.

Warrant issued to North Sound Legacy International Ltd. dated July 11, 2006.

70.

Warrant issued to Technology Investment Capital Corp. dated July 11, 2006.

71.

Warrant issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated July 11, 2006.

72.

Warrant issued to ▇▇▇ ▇▇▇▇▇ dated July 11, 2006.

73.

Warrant issued to ▇▇▇▇▇▇▇ Investments LLC dated July 11, 2006.

74.

Warrant issued to Pequot Healthcare Fund, L.P. dated July 11, 2006.

75.

Warrant issued to Pequot Healthcare Offshore Fund, Inc. dated July 11, 2006.

76.

Warrant issued to Premium Series PCC Limited – Cell 32 dated July 11, 2006.

77.

Warrant issued to Pequot Diversified Master Fund, Ltd. dated July 11, 2006.

78.

Warrant issued to Pequot Healthcare Institutional Fund, L.P. dated July 11, 2006.

79.

Warrant issued to Laurus Master Fund, Ltd. dated December 22, 2006.

80.

Warrant issued to Vicis Capital Master Fund LLC dated December 22, 2006.

81.

Warrant issued to ▇▇▇▇▇▇▇ Investments LLC dated December 22, 2006.

82.

Warrant issued to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated December 22, 2006.

83.

Warrant issued to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated December 22, 2006.

84.

Warrant issued to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dated December 22, 2006.

85.

Warrant issued to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated December 22, 2006.

86.

Warrant issued to ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ dated December 22, 2006.

87.

Warrant issued to ▇▇▇▇ ▇▇▇▇▇▇ dated December 22, 2006.

88.

Warrant issued to ▇▇▇▇ ▇▇▇▇▇▇▇▇ dated December 22, 2006.

1.

Borg Construction ▇. ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC, case number 0706039055, Plaintiff filed a contractor’s lien for work completed at the Water Tower location.

2.

Default Notice dated April 12, 2007 from for the Chevy Chase Landlord, to ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC (f/k/a Advanced K, LLC), as tenant, and ▇▇▇▇▇▇▇ Advanced Aesthetics, Inc., as guarantor, in connection with tenant and guarantor’s failure to post a $645,000 letter of credit and failure to pay rent in the amount of $80,452.12 (as of April 9, 2007).

3.

See Schedule 4.12.

4.

Liens from the following entities that were issued for a loan that is being converted in common stock as of this transaction and, will therefore, be terminated at closing: ▇▇▇▇▇▇▇ Investments LLC, ▇▇▇▇▇▇ ▇▇▇▇▇▇, Laurus Funds, Vicis Capiral Master Fund LLC, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, CSFN I LLC and ▇▇▇▇ ▇▇▇▇▇▇▇

5.

Liens from the four parties that as of March 27, 2007 entered into an intercreditor agreement with Laurus Funds: North Sound Legacy International Ltd., North Sound Legacy Institutional Fund LLC, ▇▇▇▇▇▇ ▇▇▇▇▇▇, and Seapine Investments LLC.

1.

Three Day Notice to Pay or to Quit given by South Coast Plaza for unpaid rent in the amount of $115,782.69.

2.

Biosea II International, Inc. v ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ case number 2007 CA003669XXXXMB. This case is to prohibit Defendant’s use of the Anushka trade name and to allow Plaintiffs to void certain restrictive covenants.

3.

Complainant ▇▇▇▇ ▇▇▇▇▇▇ filed a retaliatory discharge claim with the EEOC, charge number ▇▇▇-▇▇▇▇-▇▇▇▇▇, against Anushka PBG Acquisition, LLC.

4.

Complainant ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ filed a retaliatory discharge claim with the EEOC, charge number ▇▇▇-▇▇▇▇-▇▇▇▇▇, against the Wild Hare Acquisition LLC. She also filed a worker’s compensation claim.

5.

G & I IV Wharfside, LLC v. Wild Hare Acquisition Sub, LLC, Palm Beach County, FL case no 502007CC003037XXXXSB. A complaint for possession has been settled through agreement by Defendant Tenant to make certain payments, but if Defendant fails to make such payments, Plaintiff Landlord shall be entitled to immediately enter a final judgment for eviction and writ of possession.

6.

Main Electric Supply Company ▇. ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC, Los Angeles County Superior Court, CA case number 06C02137. Action to foreclose mechanic’s lien related to the ▇▇▇▇▇▇▇ Hills construction.

7.

▇▇▇▇▇▇ Construction ▇. ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC, Los Angeles County Superior Court, CA case number SC091490. Action to foreclose a mechanic’s lien related to the ▇▇▇▇▇▇▇ Hills construction.

8.

Borg Construction ▇. ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC, case number 0706039055, Plaintiff filed a contractor’s lien for work completed at the Water Tower location.

9.

TREA Wilshire Rodeo LLC has a claim against ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC (formerly Advanced K, LLC) for unpaid and back and future rent related to Tenant’s closing of the store in ▇▇▇▇▇▇▇ Hills.

10.

▇▇▇▇▇▇▇ Advanced Aesthetics, Inc. has entered into a settlement agreement with Tri-North Builders to delay Tri-North’s lien rights in exchange for certain payments to be made to Tri-North.

11.

The Landlord of the West Palm facility, Chritstal, Inc., filed an action on March 7, 2007 in Palm Beach County Court (Case number 502007CC003069XXXXMB) against, ▇▇▇▇▇▇▇▇ Corporation, claiming that there had been a rental shortfall due to the fact that the leased premises are larger than what is indicated in the lease agreement. Landlord further claimed that Tenant owed amounts due for an increase in real estate taxes due to the increase in the assesed value of the property due to tenants improvements. Landlord failed to provide any proof for either claim and at a hearing in the case, the judge dismissed the action. An order for dismissal is being drafted and will be entered with the court. Although, Landlord failed to provide any proof, there may be some merit to Landlord’s claim. Landlord and Tenant are currently in discussions to resolve the matter, although no agreement has been reached.

12.

UBS Securities, LLC ▇. ▇▇▇▇▇▇▇ Advanced Aesthetics, Inc., filed in Supreme Court of the State of New York, County of New York filed September 15, 2006. UBS filed against KAAI for breach of contract related to services in obtaining financing. UBS is seeking damages of $1,750,000 plus interest and costs.

13.

See schedule 4.6 and 4.9.

1.

The Company has filed returns for all federal and state tax returns, based upon its 2006 year end. All returns are considered current.

2.

The Company has the following sales tax audits open:

1) New York

2) Illinois

3) California

3.

The Company has received a notice from Florida that the Company did not file a 6/30/05 Corporate Income / Franchise and Emergency Excise Tax return. As the Share Exchange Agreement did not occur until December 2005, the Company does not agree with the notice and intends to challenge the requirement.

4.

The Company has determined that Texas franchise tax reports submitted under the name Advanced Aesthetics Sub, Inc., should have been filed under ▇▇▇▇▇▇▇ Advanced Aesthetics, LLC. The Company has prepared and filed revised returns for all affected years on April 23, 2007. It is estimated that it will take the state several weeks to complete its review and issue a good standing certificate.

5.

The Company has received a notice of delinquent property taxes for Dallas Texas. The Company had already issued a check, cashed on April 16, 2007 but not reflected on the notice that covers most of the liability. The remaining liability is $2,826.07.

6.

The Company is currently preparing a delinquent Norwalk, Connecticut property tax return. The liability can not be determined until the return is filed and the tax is calculated by the town. Due to the limited assets maintained in Norwalk, the liability is not expected to be significant. The liability will not be over $75,000.

1.

Under the sale of the stores’ disclosed in schedule 4.6, employees in the stores and certain supervisory and administrative personnel will begin working for the new stores’ owner as of the transaction date.

1.

$2,000,000 Secured Demand Note dated March 16, 2007 issued by ▇▇▇▇▇▇▇.▇▇▇, Inc. to North Sound Legacy Institutional Fund LLC, North Sound Legacy International Ltd., ▇▇▇▇▇▇ ▇▇▇▇▇▇, and Seapine Investments, LLC.

2.

$2,000,000 Secured Demand Note dated March 27, 2007 issued by ▇▇▇▇▇▇▇.▇▇▇, Inc. to North Sound Legacy Institutional Fund LLC, North Sound Legacy International Ltd., ▇▇▇▇▇▇ ▇▇▇▇▇▇, and Seapine Investments, LLC.

3.

$5,000,000 performance deposit owed to Sephora USA, payable upon attainment of specified levels of net revenues and capital expenditures of Cosmedicine.

4.

$2,586,203 accrued interest owed to LCapital prior to Share Exchange Agreement that was not converted.