8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):

March 20, 2008

Analytical Surveys, Inc.

(Exact Name of Registrant as Specified in Charter)

Colorado (State or Other Jurisdiction of Incorporation) 000-13111 (Commission File Number) 84-0846389 (IRS Employer Identification No.)

665 Martinsville Road, Basking Ridge, NJ 07920

(Address of Principal Executive Offices, including Zip Code)

Registrant's telephone number, including area code: (908) 524-0888

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

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

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

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

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

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

Item 1.01. Entry into a Material Definitive Agreement

Item 1.02. Termination of a Material Definitive Agreement

Item 2.01. Completion of Acquisition or Disposition of Assets

Item 3.02.	Unregistered Sales of Equity Securities
Item 5.02	Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

The Merger

 On March 20, 2008 (the “Effective Date”), Analytical Surveys, Inc. (the “Company”) consummated the previously announced Agreement and Plan of Merger (the “Merger Agreement”), among the Company, Axion Acquisition Corp., a Delaware corporation and direct wholly-owned subsidiary of the Company (the “Merger Sub”), and Axion International, Inc., a Delaware corporation (“Axion”).  Pursuant to the Merger Agreement, the Merger Sub was merged into Axion, with Axion continuing as the surviving corporation and a wholly-owned subsidiary of the Company.   Pursuant to the merger, each issued and outstanding share of Axion became 190,519 shares of common stock of the Company, or 36,762,521 shares in the aggregate constituting approximately 90.7% of the issued and outstanding capital stock of the Company.  A copy of the Merger Agreement has been previously filed as Exhibit 2.1 to the Company’s Current Report of Form 8-K, filed with the Securities and Exchange Commission on November 23, 2007.

 Axion is the exclusive licensee of revolutionary patented technologies developed for the production of structural plastic products such as railroad crossties, bridge infrastructure, utility poles, marine pilings and bulk heading.  These technologies which were developed by scientists at Rutgers University, transform recycled consumer and industrial plastics into structural products which are more durable and have a substantially greater useful life than traditional products made from wood, steel and concrete.  In addition, Axion’s recycled composite products will result in substantial reduction in greenhouse gases and also offer flexible design features not available in standard wood, steel or concrete products.

Appointment of Directors and Officers

 In connection with the merger, Rad Weaver and Hank Cohn resigned as members of the Company’s Board of Directors as of the Effective Date, and in their place James Kerstein and Marc Green were appointed as members of the Company’s Board.  Prior to his resignation, Mr. Weaver was a member of the Audit Committee.  In addition, Thomas Roddy and Edward Gistaro have agreed to resign as members of the Board ten days following such time as the Company files and mails an Information Statement on Schedule 14f-1 regarding a change in the majority of the Board.

 On the Effective Date, Lori Jones resigned as the Company’s Chief Executive Officer.  Ms. Jones will continue to serve as a director of the Company and as its Interim Chief Financial Officer.  In her place, Mr. Kerstein was appointed the Chief Executive Officer, and Mr. Green was appointed President and Treasurer of the Company.  In addition, Michael Martin, Axion’s Secretary, was appointed Secretary of the Company.  Accordingly, Ms. Jones employment agreement with the Company has been terminated.  Pursuant to her employment agreement, Ms. Jones was entitled to receive $50,000 upon the consummation of an acquisition, merger or other strategic transaction.  Ms. Jones has agreed to receive 100,000 shares of the Company’s Common Stock in lieu of such cash bonus.

 In addition, the Company agreed to issue to Messrs Weaver, Cohn, Roddy and Gistaro, as well as Rich Jonathan, a former director of the Company, 149,970 shares of Common Stock and $124,862 in cash in the aggregate for past due directors’ compensation.

James Kerstein.  Mr. Kerstein has served as the Chief Executive Officer of Axion since its inception in August 2006.  Prior to joining Axion, Mr. Kerstein was the President of Plast-O-Matic Valves Inc., a privately-held manufacturer of high end polymer valves focused on the semiconductor and wastewater industries.   From 1996 to 2004, he was the founder, Chief Executive Officer, President and Chairman of Polywood, Inc., a manufacturer of recycled plastic resins utilizing the Rutgers University developed technologies for the production of structural plastic products.  Mr. Kerstein is credited as a co-inventor on multiple patents dealing with formulations and uses of recycled plastics

Marc Green.  Mr. Green has served as President and Treasurer of Axion since its inception in August 2006.  From July 2007 to December 2007, Mr. Green was an Investment Advisor at Merrill Lynch Private Client Group advising high net worth individual.  Prior to joining Merrill Lynch, Mr. Green was a Senior Vice President of Keefe, Bruyette & Woods, an investment banking firm, managing institutional sales.  From Mach 2003 to September 2004, Mr. Green served as Chief Operating Officer of Polywood, Inc.

Michael Martin.  Mr. Martin is presently a partner in Regal Capital, LLC, an M&A firm that specializes in developing strategic financial and business models for emerging companies in strategic markets.  Mr. Martin currently represents companies involved with fire protection, alternative energy, alternative composite materials, sports nutrition, homeland security, oncology, water purification, and waste-to-energy companies. Prior to his partnership at Regal, Mr. Martin had served as Chief Executive Officer of BioEnergy of America, Inc., a company dedicated to developing renewable sources of energy, and as managing director of R&M Financial Associates, a merger and acquisition consulting firm specializing in small and mid-size companies across multiple industries.  From 1991 to 1999, he was Chairman and President of Proformix, Inc., a publicly traded manufacturer of computer equipment. He has also served as President of Centercore of NJ, a business-to-business consulting company, as well as President and of Centercore, Inc., a publicly traded manufacturing company.  Mr. Martin also serves on the Board of Directors of Adherex Technologies, Inc. and Millennium Biotechnologies Group, Inc.

Employment Agreements; Transactions with Related Persons

James Kerstein

 Axion has entered into an employment agreement, dated as of January 1, 2008, with Mr. Kerstein that provides for his continued employment with Axion as Chief Executive Officer through January 1, 2013. Under the terms of the employment agreement, Mr. Kerstein receives annual base compensation in the amount of $208,000, which will be increased to the following amounts upon reaching the following revenue milestones: (i) $388,000 upon Axion achieving annual revenues of $10,000,000, (ii) $488,000 upon Axion achieving annual revenues of $15,000,000, and (iii) $508,000 upon Axion achieving annual revenues of $25,000,000.  Mr. Kerstein is also entitled to receive benefits (including health insurance) provided to other senior executives and automobile allowance of $850 per month.

In addition, Mr. Kerstein was awarded options to purchase 16 shares of Common Stock of Axion at an exercise price of $1.00 per share.  As a result of the Merger, such options were automatically converted into the right to purchase 3,048,304 shares of Common Stock of the Company, at an exercise price of $.00001 per share.  The options are exercisable for a term of five years, of which (i) 762,076 shares vest upon Axion achieving annual revenues of $10,000,0000, (ii) 1,143,114 shares vest upon Axion achieving annual revenues of $15,000,000 and (iii) 1,143,114 shares vest upon Axion achieving annual revenues of $25,000,000; provided, all of the options vest in the event of (i) a change of control, as defined in his employment agreement, (ii) termination of Mr. Kerstein’s employment by Axion without cause, as defined in his employment agreement, or (iii) termination of Mr. Kerstein’s employment by Mr. Kerstein  for good reason, as defined in the employment agreement.

If Mr. Kerstein is terminated without cause, as defined in his employment agreement, or by Mr. Kerstein for good reason, as defined in his employment agreement, he will receive (i) the remainder of his salary, (ii) benefits provided to other senior executives and (iii) automobile allowance of $850 per month, each through the normal expiration date of his employment term.  If Mr. Kerstein is terminated due to his permanent disability, he will receive for a period of six months (i) his base salary, (ii) benefits provided to other senior executives and (iii) automobile allowance of $850 per month.  In addition, if Mr. Kerstein is terminated due to his death, he will receive base salary for a period of six months.

The agreement also contains covenants governing confidentiality, non-competition and non-solicitation upon the termination of his employment. The non-compete continues for a period of 12 months following termination of Mr. Kerstein’s employment.

Marc Green

 Axion has entered into an employment agreement, dated as of January 1, 2008, with Mr. Green that provides for his continued employment with Axion as President through January 1, 2011. Under the terms of the employment agreement, Mr. Green receives annual base compensation in the amount of $120,000, which will be increased to the following amounts upon reaching the following revenue milestones:  (i) $150,000 upon Axion achieving annual revenues of $10,000,000, and (ii) $180,000 upon Axion achieving annual revenues of $25,000,000.  Mr. Kerstein is also entitled to receive benefits (including health insurance) provided to other senior executives.

 In addition, Mr. Green was awarded options to purchase 8 shares of Common Stock of Axion at an exercise price of $1.00 per share.  As a result of the Merger, such options were automatically converted into the right to purchase 1,524,152 shares of Common Stock of the Company, at an exercise price of $.00001 per share.  The options are exercisable for a term of five years and vest upon Axion achieving annual revenues of $25,000,000; provided, all of the options vest in the event of (i) a change of control, as defined in his employment agreement, (ii) termination of Mr. Green’s employment by Axion without cause, as defined in his employment agreement, or (iii) termination of Mr. Green’s employment by Mr. Green for good reason, as defined in the employment agreement.

 If Mr. Green is terminated without cause, as defined in his employment agreement, or by Mr. Green for good reason, as defined in his employment agreement, he will receive (i) his base salary for up to one year, (ii) benefits provided to other senior executives (including health insurance) through the normal expiration date of his employment term and (iii) automobile allowance of $850 per month through the normal expiration date of his employment term.  If Mr. Green is terminated due to his permanent disability, he will receive for a period of six months (i) his base salary, and (ii) benefits provided to other senior executives.  In addition, if Mr. Green is terminated due to his death, he will receive base salary for a period of six months.

 The agreement also contains covenants governing confidentiality, non-competition and non-solicitation upon the termination of his employment. The non-compete continues for a period of 12 months following termination of Mr. Green’s employment.

Regal Capital, LLC

 Mr. Martin is the sole partner and member of Regal Capital, LLC (“Regal”).  Pursuant to an agreement dated December 6, 2007, Regal agreed to provide Axion with management consulting services.  As compensation, Axion agreed to pay Regal (i) 54 shares of Common Stock of Axion, (ii) a monthly fee of $10,000 each during the term of the consulting services, and (iii) an additional $230,000.

Amendment to Debentures

 Simultaneous with the Merger, pursuant to an Assignment and Amendment Agreement, ADH Ventures, LLC (“ADH Ventures”) purchased $1,000,000 of the outstanding principal amount of the Company’s 13% Secured Convertible Debentures (the “Debentures”) from the holders thereof, and an option to purchase the remaining $643,050 of Debentures within 30 days of the Effective Date.  In addition, the maturity date of the Debentures was extended from March 31, 2008 to June 30, 2008, which will be further extended automatically to March 30, 2009 in the event ADH Ventures exercises its option to purchase all of the remaining Debentures.  The holders of the Debentures also agreed to cancel 1,444,935 of the 2,374,101 warrants to purchase the Company’s Common Stock, which warrants had been issued in connection with the original issuance of the Debentures.  In the event, ADH Ventures exercises its option to purchase the remaining Debentures, the remaining 929,166 warrants also will be cancelled.

 The foregoing summaries of Mr. Kerstein’s employment agreement, Mr. Green’s employment agreement, Regal’s consulting agreement, the Assignment and Amendment Agreement and the Debentures are qualified in their entirety by reference to the copies of such agreements which are attached hereto as Exhibits.

Item 9.01                      Financial Statements and Exhibits

(a)           Financial Statements.

Financial statements of Axion, to the extent required, will be filed by an amendment to this Current Report on Form 8-K within 77 calendars days of the Effective Date.

(b)           Pro formal financial information.

Pro forma financial information, to the extent required, will be filed by an amendment to this Current Report on Form 8-K within 77 calendars days of the Effective Date.

(d)           Exhibits

2.1	Agreement and Plan of Merger, dated as of November 20, 2007, among the Company, the Merger Sub and Axion (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed with the SEC on November 23, 2007).
2.2	Certificate of Merger of the Merger Sub and Axion, dated March 20, 2008.
4.1	Form of the Company’s Amended and Restated 13% Secured Convertible Debenture due June 30, 2008
10.1	Employment Agreement, dated as of January 1, 2008, between James Kerstein and Axion.
10.2	Employment Agreement, dated as of January 1, 2008, between Marc Green and Axion.
10.3	Letter Agreement, dated December 6, 2007, between Regal and Axion.
10.4	Assignment and Amendment Agreement, dated March 20, 2008, among the Assignors named therein, ADH Ventures and the Company.
99.1	Press Release, dated March 25, 2008.

Signatures

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

Date:  March 26, 2008

ANALYTICAL SURVEYS, INC.

By:/s/   James Kerstein

Name:      James Kerstein

Title:        Chief Executive Officer

EX-2.2

Exhibit 2.2

CERTIFICATE OF MERGER

OF

AXION ACQUISITION CORP.,

a Delaware corporation

INTO

AXION INTERNATIONAL, INC.,

a Delaware corporation

(UNDER SECTION 251 OF THE GENERAL CORPORATION LAW

OF THE STATE OF DELAWARE)

*   *   *   *   *

Pursuant to Section 251(c) of the General Corporation Law of the State of Delaware, the undersigned corporation

DOES HEREBY CERTIFY:

FIRST:The name and state of incorporation of each of the constituent corporations of the merger is as follows:

NAME                      STATE OF INCORPORATION

Axion Acquisition Corp.                                                                                     Delaware corporation

Axion International, Inc.                                                                                     Delaware corporation

SECOND:That an Agreement and Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of Delaware.

THIRD:That the name of the surviving corporation of the merger is Axion International, Inc., a Delaware corporation.

FOURTH:That the Certificate of Incorporation of Axion International, Inc., a Delaware corporation which is surviving the merger, shall be the Certificate of Incorporation of the surviving corporation.

FIFTH:That the executed Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation, the address of which is 665 Martinsville Road, Basking Ridge, New Jersey 07920.

SIXTH:That a copy of the Agreement and Plan of Merger will be furnished on request and without cost, to any stockholder of either constituent corporation.

SEVENTH:The merger shall become effective forthwith upon the filing and recording of a Certificate of Merger in accordance with the requirements of Delaware law.

IN WITNESS WHEREOF, said surviving corporation has caused this Certificate of Merger to be signed by an authorized officer, the 20th day of March 2008.

AXION INTERNATIONAL, INC.

          By: /s/ James Kerstein

          Name:  James Kerstein

          Title:    CEO

EX-4.1

Exhibit 4.1

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

Original Issue Date: November 24, 2006

Original Conversion Price (subject to adjustment herein): $0.10

$_______________

AMENDED AND RESTATED

13% SECURED CONVERTIBLE DEBENTURE

DUE JUNE 30, 2008

 THIS AMENDED AND RESTATED 13% SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 13% Secured Convertible Debentures of Analytical Surveys, Inc., a Colorado corporation, having its principal place of business at c/o Axion International, Inc., 665 Martisville Road, Basking Ridge, New Jersey 07920 (the “Company”), designated as its 13% Secured Convertible Debenture due June 30, 2008 (this debenture, the “Debenture” and, collectively with the other such series of debentures, the “Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on the Maturity Date (as defined below) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.  This Debenture is subject to the following additional provisions:

Section 1. Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(c).

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), or (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, or (iii) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a three year period of more than one-half of the members of the Company’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Company of an agreement to which the Company  is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.  Any transaction between the Company and Axion International Inc., whether contemporaneous with the issuance of this amended and restated debenture, or otherwise, shall not be deemed to be a change of control.

“Closing Price” means, on any particular date, (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c) if the Common Stock is not then listed or quoted for the Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not publicly traded, the fair market value of  a share of Common Stock as determined by a qualified, independent appraiser selected in good faith by the Purchasers holding at least 50.1% in principal amount of the outstanding Debentures and reasonably acceptable to the Company.

“Common Stock” means the common stock, no par value per share, of the Company and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.

“Debenture Register” shall have the meaning set forth in Section 2(b).

“Equity Conditions” means, during the period in question, (i) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (ii) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (iii) (A) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (B) all of the Conversion Shares issuable pursuant to the Transaction Documents may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (iv) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is no existing Event of Default or no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (vii) the issuance of the shares in question (or, in the case of an Optional Redemption, the shares issuable upon conversion in full of the Optional Redemption) to the Holder would not violate the limitations set forth in Section 4(c) herein, (viii) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (ix) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information and (x) for a period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds 25,000 shares (subject to adjustment for forward and reverse stock splits and the like) per Trading Day.

“Event of Default” shall have the meaning set forth in Section 8.

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

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

“Interest Conversion Rate” means the lesser of (a) the Conversion Price or (b) 90% of the lesser of (i) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Interest Payment Date or (ii) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the date the applicable Interest Conversion Shares are issued and delivered if such delivery is after the Interest Payment Date; provided, in the event ADH Ventures, LLC becomes the holder of all of the outstanding Debentures, “Interest Conversion Rate” shall mean the Conversion Price.

“Interest Conversion Shares” shall have the meaning set forth in Section 2(a).

“Interest Notice Period” shall have the meaning set forth in Section 2(a).

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Interest Share Amount” shall have the meaning set forth in Section 2(a).

“Late Fees” shall have the meaning set forth in Section 2(c).

“Mandatory Default Amount”  means the sum of (i) the greater of (A) 120% of the outstanding principal amount of this Debenture, plus all accrued and unpaid interest thereon, or (B) the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (b) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture; provided, however, that solely in connection with Section 8(a)(viii), Mandatory Default Amount shall equal 100% of the outstanding principal amount of this Debenture, all accrued and unpaid interest thereon and all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

“Maturity Date” shall mean June 30, 2008; provided, in the event ADH Ventures, LLC becomes the holder of all of the outstanding Debentures, “Maturity Date” shall mean March 30, 2009.

“New York Courts” shall have the meaning set forth in Section 9(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Optional Redemption” shall have the meaning set forth in Section 6(a).

“Optional Redemption Amount” means the sum of (i) 120% of the principal amount of this Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of the Debenture.

“Optional Redemption Date” shall have the meaning set forth in Section 6(a).

“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).

“Optional Redemption Notice Date” shall have the meaning set forth in Section 6(a).

“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.

“Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement; (b) lease obligations and purchase money indebtedness of up to $100,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets; and (c) indebtedness that (i) is expressly subordinate to the Debentures and (ii) matures at a date later than the Maturity Date.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness under clause (a) or (c) thereunder; and (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of November 24, 2006, among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(d).

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Threshold Period” shall have the meaning set forth in Section 6(c).

“Trading Day” means a day on which the principal Trading Market is open for business, and, if the Common Stock is not then listed or quoted for trading on a Trading Market, Trading Day shall mean a Business Day.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the NASD over-the-Counter Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

Section 2. Interest.

(a)Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 13% per annum, payable quarterly on January 1, April 1, July 1 and October 1 during the terms hereof, on each Conversion Date (as to that principal amount then being converted) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock (the “Interest Conversion Shares”) at the Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof; provided, however, that payment in shares of Common Stock may only occur if (i) so long as ADH Ventures, LLC is not the holder of all of the Debentures, all of the Equity Conditions have been met (unless waived by the Holder in writing) during the 20 Trading Days immediately prior to the applicable Interest Payment Date  (the “Interest Notice Period”) and through and including the date such shares of Common Stock are actually issued to the Holder and (ii) the Company shall have given the Holder notice in accordance with the notice requirements set forth below.

(b)Company’s Election to Pay Interest in Cash or Shares of Common Stock.  Subject to the terms and conditions herein, the decision whether to pay interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company.  Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in such notice that the election contained in such notice shall apply to future Interest Payment Dates until revised by a subsequent notice.  During any Interest Notice Period, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date.  Subject to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash.  At any time the Company delivers a notice to the Holder of its election to pay the interest in shares of Common Stock, if a Registration Statement is effective as to such Interest Conversion Shares, the Company shall timely file a prospectus supplement pursuant to Rule 424 disclosing such election.

(c)Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Payment of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date.  Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein.  Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

(d)Late Fee.  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

(e)Prepayment.  Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder.

Section 3. Registration of Transfers and Exchanges.

a)Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

b)Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

c)Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.                                  Conversion.

a)Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof).  The Holder shall effect conversions by delivering to the Company a notice of conversion, the form of which is attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s), which records shall be reconciled by the Company and the Holder in writing (by facsimile, e-mail or other written form) after each such conversion.  The Company may deliver an objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of Conversion. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

b)Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $0.10 subject to adjustment herein (the “Conversion Price”).

c)Holder’s Restriction on Conversion. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company  subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures or the Warrants) beneficially owned by such Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.  To the extent that the limitation contained in this Section 4(c) applies, the determination of whether this Debenture is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by such Holder together with any Affiliates) and which principal amount of this Debenture is convertible, in each case subject to such aggregate percentage limitations. To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act.   For purposes of this Section 4(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be; (B) a more recent public announcement by the Company; or (C) a more recent notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture.

d)   Mechanics of Conversion.

i.Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

ii.Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which representing the number of shares of Common Stock being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest.

iii.Failure to Deliver Certificates.  If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the fifth Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such notice and Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return the Common Stock certificates representing the principal amount of this Debenture tendered for conversion to the Company.

iv.Obligation Absolute; Partial Liquidated Damages.  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment.  In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.  If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the fifth Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the tenth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such fifth Trading Day until such certificates are delivered.    Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

v.Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii).  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the terms hereof.

vi.Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Debenture.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

vii.Fractional Shares. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time.  If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

viii.Transfer Taxes.  The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 5. Certain Adjustments.

a)Stock Dividends and Stock Splits.  If the Company, at any time while this Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Debentures); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)Subsequent Equity Sales.  If, at any time while this Debenture is outstanding and until ADH Ventures, LLC becomes the holder of all of the outstanding Debentures, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents (other than in an Exempt Issuance) entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Company shall notify the Holder in writing, no later than 1 Business Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.  Notwithstanding anything herein to the contrary, this provision shall not apply in respect of any Exempt Issuance

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e)Fundamental Transaction. If, at any time while this Debenture is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 5(e) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

f)Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

g)Notice to the Holder.

i.Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  If the Company enters into a Variable Rate Transaction (as defined in the Purchase Agreement), despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

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

Section 6.  Redemption and Forced Conversion.

a)Optional Redemption at Election of Company.  Subject to the provisions of this Section 6, the Company may deliver a notice to the Holder (an “Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election to redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the 20th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date” and such redemption, the “Optional Redemption”).  The Optional Redemption Amount is payable in full on the Optional Redemption Date.  The Company may only effect an Optional Redemption if each of the Equity Conditions shall have been met on each Trading Day during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date payment of the Optional Redemption Amount is actually made.  If any of the Equity Conditions shall cease to be satisfied at any time during the 20 Trading Day period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the Company within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if, by a provision of the Transaction Documents, the Company is obligated to notify the Holder of the non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the Company) in which case the Optional Redemption Notice shall be null and void, ab initio.

b)Redemption Procedure.  The payment of cash or issuance of Common Stock, as applicable, pursuant to an Optional Redemption shall be payable on the Optional Redemption Date.  If any portion of the payment pursuant to an Optional Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full.  Notwithstanding anything herein contained to the contrary, if any portion of the Optional Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate such Optional Redemption, ab initio, and the Company shall have no further right to exercise such Optional Redemption.  The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.  The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full.

c)Forced Conversion. Notwithstanding anything herein to the contrary, if the VWAP for each of any 30 consecutive Trading Days (such period the “Threshold Period”), exceeds $0.20 (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the Original Issue Date), the Company may, within 1 Trading Day after the end of any such Threshold Period, deliver a written notice to the Holder (a “Forced Conversion Notice” and the date such notice is delivered to the Holder, the “Forced Conversion Notice Date”) to cause the Holder to convert all or part of the then outstanding principal amount of this Debenture plus, if so specified in the Forced Conversion Notice, accrued but unpaid interest, liquidated damages and other amounts owing to the Holder under this Debenture, it being agreed that the “Conversion Date” for purposes of Section 4 shall be deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such third Trading Day, the “Forced Conversion Date”).  The Company may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Company shall not be effective, unless all of the Equity Conditions are met on each Trading Day occurring during the applicable Threshold Period through and including the later of the Forced Conversion Date and the Trading Day after the date such Conversion Shares pursuant to such conversion are delivered to the Holder.  Any Forced Conversion shall be applied ratably to all Holders based on their initial purchases of Debentures pursuant to the Purchase Agreement, provided that any voluntary conversions by a Holder shall be applied against such Holder’s pro-rata allocation, thereby decreasing the aggregate amount forcibly converted hereunder if only a portion of this Debenture is forcibly converted.  For purposes of clarification, a Forced Conversion shall be subject to all of the provisions of Section 4, including, without limitation, the provision requiring payment of liquidated damages and limitations on conversions.

Section 7.  Negative Covenants. As long as any portion of this Debenture remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

a)repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (a) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (b) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture);

b)pay cash dividends or distributions on any equity securities of the Company;

c)enter into any transaction with any Affiliate of the Company (other than reasonable fees and compensation paid to and indemnity provided on behalf of officers, directors, employees or consultants of the Company or any of its Subsidiaries and transactions exclusively between or among the Company and any of its Subsidiaries) which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval);

d)issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below;

e) distribute to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security; or

f)enter into any agreement with respect to any of the foregoing.

Section 8. Events of Default.

a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 3 Trading Days;

ii.the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder and (B) 10 Trading Days after the Company has become or should have become aware of such failure;

iii.a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under any of the Transaction Documents (other than the Debentures);

iv.the Company or any Significant Subsidiary shall be subject to a Bankruptcy Event;

v.the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $500,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vi.the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40% of its and it Subsidiaries’ assets on a consolidated basis in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);

vii.the Company shall fail for any reason to deliver certificates to a Holder prior to the tenth Trading Day after a Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;

viii.any monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

b)Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company.  In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9.                                Miscellaneous.

a)Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, facsimile number (908) 542-0999, Attention: Presidentor such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 9 prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 9 between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

b)Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct debt obligation of the Company.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

c)Lost or Mutilated Debenture.  If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnify, if requested, all reasonably satisfactory to the Company.

d)Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

e)Waiver.  Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.  Any waiver by the Company or the Holder must be in writing.

f)Severability.  If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

g)Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h)Headings.  The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

i)Assumption.  Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed).  The provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.

j)Secured Obligation.  The obligations of the Company under this Debenture are secured by all assets of the Company and each Subsidiary pursuant to the Security Agreement, dated as of November 24, 2006, between the Company, the Subsidiaries and the Secured Parties (as defined therein).

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

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

ANALYTICAL SURVEYS, INC.

By:__________________________________________

     Name:

     Title:

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 13% Secured Convertible Debenture due June 30, 2008 of Analytical Surveys, Inc., a Colorado corporation (the “Company”), into shares of common stock, no par value per share (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

Schedule 1

CONVERSION SCHEDULE

The 13% Secured Convertible Debentures due on June 30, 2008 in the aggregate principal amount of $____________ are issued by Analytical Surveys, Inc., a Colorado corporation.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

Dated:

  Date of Conversion (or for first entry, Original Issue Date)   Amount of Conversion   Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount)   Company Attest

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of January 1, 2008 (the “Agreement”) between Axion International Inc., a Delaware corporation (the “Company”) with offices at 665 Martinsville Road, Suite 219, Basking Ridge, New Jersey 07920 and James Kerstein (the “Executive”).

WHEREAS, the Executive possesses valuable knowledge and skills that the Company believes will contribute to the successful operation of the Company's business and will have a prominent role in the development of the business the Company; and

WHEREAS, the Company desires to secure the services of the Executive, and the Executive desires to be in the employment of the Company and, in connection therewith, the Company and the Executive desire to enter into an employment agreement to, among other things, set forth the terms of such employment.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements hereinafter set forth and for other good and valuable consideration, the Company and the Executive hereby agree as follows:

1.   EMPLOYMENT AND DUTIES

1.1           General.  The Company hereby employs the Executive, and the Executive agrees to serve, as the Chief Executive Officer of the Company upon the terms and conditions herein contained during the Employment Term, and in such capacities the Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board of Directors of the Company (the “Board”). The Executive also agrees to serve, if elected, at no compensation in addition to that provided for in this Agreement, in the position of director of the Company and of any subsidiary of the Company during the Employment Term.

1.2           Exclusive Services.  For so long as the Executive is employed by the Company, he shall devote his full-time working hours to his duties hereunder. The Executive shall not, directly or indirectly, render services to any other person or organization or otherwise engage in activities which would interfere significantly with his faithful performance of his duties hereunder.

1.3           Term of Employment.  The Executive’s employment under this Agreement shall commence on the date hereof (the “Effective Date”) and shall terminate on the earliest of (i) the five year anniversary of the Effective Date, (ii) the death of the Executive or (iii) the termination of the Executive’s employment pursuant to this Agreement (the period during which the Executive is employed pursuant to this Agreement, including any extension thereof shall be referred to as the “Employment Term”).

2.           SALARY

2.1           (a)           Base Salary.  During the Employment Term, the Executive shall be entitled to receive a base salary (the “Base Salary”) at a rate of $208,000 per annum, payable weekly in equal installments in accordance with the Company’s payroll practices, with such increases as the Board may determine or as provided in the following subparagraph (b). Once increased, such higher amount shall constitute the Executive’s Base Salary.

 (b)        The Base Salary shall be increased during the Employment Term upon the Company’s achievement of revenue milestones (the “Revenue Milestones”) during each calendar year of the employment term (an “Employment Year”) based upon revenues recorded in the Company’s ordinary course of business. Increases of the Base Salary shall be effective at such time or times in an Employment Year as each new Revenue Milestone is achieved.  In the following Employment Year, increases in Base Salary shall occur upon achievement of Revenue Milestones for such Employment Year in excess of the Revenue Milestones previously achieved.  The Revenue Milestones and corresponding increases to Base Salary are set forth in Schedule I annexed hereto and made a part hereof.

2.2           Bonus.  In addition to the Executive’s Base Salary, the Company may pay to the Executive during the Employment Term an annual bonus (the “Annual Bonus”) based upon the Executive’s performance, the amount of which bonus (if any) shall be solely within the discretion of the Company as determined by the Board.

3.           EMPLOYEE BENEFITS

3.1           General Benefits.  The Executive shall be eligible to participate in health and benefit programs of the Company consistent with those benefit programs provided to other senior executives of the Company.

3.2           Vacation.  The Executive shall be entitled to twenty (20) days paid vacation each year in accordance with the applicable policies of the Company.

3.3           Reimbursement of Expenses.  The Company will reimburse the Executive for reasonable, ordinary and necessary business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied.

3.4           Automobile Allowance.  The Company shall pay the Executive an automobile allowance of $850 per month.

4.           STOCK OPTIONS.

4.1           The Company shall issue to the Executive options (the "Options") to purchase  up to sixteen (16) shares of Common Stock  (the “Option Shares”) at an exercise price of $1.00 per share for a term of five (5) years from the date hereof, of which (i) Options to purchase four (4) shares of Common Stock shall vest on such date as the Company has achieved annual revenues, in any Employment Year, of $10,000,000; (ii) Options to purchase six (6) shares of Common

Stock shall vest on such date as the Company has achieved annual revenues, in any Employment Year, of $15,000,000; and (iii) Options to purchase the remaining six (6) shares of Common Stock shall vest on such date as the Company has achieved annual revenues in any Employment Year of $25,000,000.

4.2           The Options shall not be exercisable until such time as they have vested in accordance with the terms herein.  Notwithstanding the foregoing, in the event of (i) a Change of Control; (ii) the Executive's employment is terminated by the Company Without Cause; and/or (iii) employment hereunder is terminated by the Executive for Good Reason, the Options which have not previously vested, shall immediately vest and become exercisable upon such event.  The Options shall provide for cashless exercise and piggyback registration rights.  If the Company at any time after the date hereof subdivides or combines (by any stock split, stock dividend, recapitalization, combination, reverse stock split or otherwise) its outstanding shares of Common Stock, the exercise price and the number of shares obtainable upon exercise of the Options shall likewise be proportionately reduced or increased, as applicable.  In the event of any recapitalization, merger, reorganization, reclassification, consolidation or sale of substantially all of the assets of the Company, the holders of the Company’s Common Stock are entitled to receive stock, securities or other assets with respect to or in exchange of the Company’s common Stock, then the Executive shall have the right thereafter to receive, upon exercise of the Option, the same amount and kind of stock, securities or other assets as he would have been entitled to received if he had, immediately prior to such recapitalization, merger, reorganization, reclassification, consolidation or sale, the holder of the shares of Common Stock underlying the Options.

4.3           "Change of Control" shall mean (i) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company to any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")); (ii) the liquidation or dissolution of the Company or the adoption of a plan by the stockholders of the Company relating to the dissolution or liquidation of the Company; or (iii) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, of more than 50% of the aggregate ordinary voting power of the Company; provided that the completion of the currently contemplated merger of the Company with Analytical (or in the event such merger is not completed, the merger of the Company with a publicly traded Company where the current shareholders of the Company remain the majority shareholders of the merged entity), shall not be a Change of Control for purposes of this Agreement.

5.           TERMINATION OF EMPLOYMENT

5.1 Termination for Cause: Termination Without Cause:

 Termination Permanent-Disability- Resignation

5.1.1                      General.  (a) If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled only to his accrued but unpaid Base Salary

(“Accrued Base Salary”) through and including the date of termination and any Options which have not vested as of the date of such termination shall be terminated and have no further force or effect.

(b)           If, prior to the expiration of the Employment Term, the Executive’s employment with the Company is terminated by the Company Without Cause or by the Executive for Good Reason, the Executive shall be entitled only to (i) his Accrued Base Salary through and including the date of termination; (ii) his Base Salary from the day after the termination date through the normal expiration date of the Employment Term, payable in equal installments on the same terms as at the end of the Employment Term; and (iii) the benefits set forth under Section 3 of this Agreement through the normal expiration date of the Employment Term.

(c)           If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company for Permanent Disability (as defined in Section 6), the Executive shall be entitled only to the payments and benefits provided for in Section 6 hereof.

(d)           If the Executive’s employment is due to the death of the Executive, the Executive (or his estate) shall be entitled only to (i) payment of his Accrued Base Salary through and including the date of death and (ii) six (6) months of his Base Salary as severance, payable in equal installments on the same terms as at the end of the Employment Term.

(e)           Notwithstanding anything to the contrary herein, the Company may elect, in its sole discretion, to pay any remaining installments of severance or other payments hereunder in a lump sum rather than in installments over time.

5.1.2                      Date of Termination/Resignation.  The date of termination for a termination by the Company for Cause shall be the date of the written notice of termination provided for in Section 5.1.3. The date of termination for a Termination Without Cause shall be as provided in Section 5.1.4. The date of termination for a termination for Permanent Disability shall be as provided in Section 6. The date of resignation shall be the date specified in the written notice of resignation from the Executive to the Company, or if no date is specified therein, ten (10) business days after receipt by the Company of written notice of resignation from the Executive.

5.1.3                      Notice of Termination for Cause.  Termination of the Executive’s employment by the Company for Cause shall be effected by delivery of a written notice of termination from the Company to the Executive, which notice shall specify the event or events set forth in Section 5.2 giving rise to such termination.

5.1.4                      Notice of Termination Without Cause.   Termination of the Executive’s employment for a Termination Without Cause shall be effected by written notice of termination from the Company to the Executive, specifying a termination date.

5.2           Definition of “for Cause”. For purposes of this Agreement, “Cause” shall mean (i)

a good faith finding by the Board of Directors of the Company that (A) the Executive has materially failed to perform his assigned duties for the Company and has failed to remedy such failure within twenty (20) days following written notice from the Company to the Executive notifying him of such failure, (B) the Executive has breached any material term of this Agreement, any Confidentiality, Non-Disclosure, Assignment of Inventions or other similar agreement between the Executive and the Company, or (C) the Executive has engaged in dishonesty, gross negligence or willful misconduct which could result in any material loss, damage or injury to the Company, or (ii) the conviction of the Executive of, or the entry of a pleading guilty or nolo contendere by the Executive to, any  felony punishable by imprisonment for more than one (1) year.

5.3           Definition of “Without Cause”. Termination “Without Cause” shall mean any termination by the Company of the Executive’s employment at any time during the Employment Term for any reason other than Cause, death or Permanent Disability.

5.4           Definition of “Good Reason”.  Termination by Executive for “Good Reason” shall mean termination by the Executive because of (i) a material reduction in the nature or scope of Executive’s position as Chief Executive Officer or his authorities, powers, duties, or responsibilities in such capacity; or (ii) a material breach by the Company of its affirmative or negative covenants or undertakings hereunder and such breach shall not be remedied within fifteen (15) days after notice to Company thereof (which notice shall be signed by Executive and refer to a specific breach of this Agreement).

6.           PERMANENT DISABILITY

If, prior to the expiration of the Employment Term, the Executive shall fail because of illness, physical or mental disability or other incapacity, for a period of three (3) consecutive months, or for shorter periods aggregating three (3) months during any twelve-month period, to render the services provided for by this Agreement, then the Company may, by written notice to the Executive after the last day of the third consecutive month of disability or the day on which the shorter periods of disability equal an aggregate of three (3) months, terminate the Executive’s employment for “Permanent Disability”, specifying a termination date no earlier than ten (10) business days after the date on which such notice is given. The determination of the Executive’s illness, physical or mental disability or other incapacity for purposes of determining Permanent Disability shall be made by an independent physician who is reasonably acceptable to the Executive and the Company and shall be final and binding and shall be based on such competent medical evidence as shall be presented to it by the Executive or by any physician or group of physicians or other competent medical experts employed by the Executive and/or the Company to advise such independent physician.

In the event of a termination of the Executive’s employment by the Company for Permanent Disability, the Executive shall be entitled only to (i) his Accrued Base Salary through and including the date of termination, (ii) six months of his Base Salary as severance, payable in equal installments on the same terms as at the end of the Employment Term and (iii) receive the benefits set forth under Section 3 of this Agreement during the six-month severance period.

Except as otherwise provided in this Section 6, following the effective date of a termination for Permanent Disability, the Company shall have no further obligation to the Executive under this Agreement.

7.           NONCOMPETITION/NONSOLICITATION AND CONFIDENTIALITY

7.1           Confidential Information.  During and after the Executive’s employment with the Company, the Executive will hold in confidence and not use, disclose or allow disclosure of Confidential Information (as defined below) except in the proper performance of the Executive’s duties to the Company. Upon termination of the Executive’s employment, the Executive will immediately deliver to the Company all Confidential Materials (as defined below) and destroy all electronic embodiments of Confidential Information.

7.2           Definition of “Confidential Information”.  For purposes of this Agreement, “Confidential Information” means Trade Secrets (as defined below) and other information of the Company identified as confidential and all Work Product (as defined below), whether disclosed in tangible form (including without limitation written documents, photographs, drawings, models, prototypes, samples, and magnetic and/or electronic media), or orally or visually or in other non-tangible form (including without limitation presentations, displays or inspections of tangible media or facilities). Confidential Information shall also include information received by the Company from third parties under an obligation of confidentiality.  Confidential Information does not include information which: (i) was known to the Executive prior to disclosure by the Company; (ii) is or becomes public knowledge without breach of this Agreement; or (iii) is received by the Executive from a third party without any violation of any obligation of confidentiality and without confidentiality restrictions; or (iv) is independently developed by the Executive without use of or reference to Confidential Information.

7.2.1                      “Confidential Materials” means tangible objects, materials or media in which Confidential Information is embodied, including all copies, excerpts, modifications, translations, enhancements and adaptations of the foregoing.

7.2.2                      “Intellectual Property” means all rights of every nature relating to intellectual property, including without limitation (i) all United States and foreign patents and patent applications now or hereafter filed (including continuations, continuations-in-part, divisionals, reissues, reexaminations and foreign counterparts thereof), and all rights with respect thereto, (ii) all Trade Secrets, (iii) all United States and foreign semiconductor mask work rights and registrations for such rights, and (iv) all copyrights and renewals thereof and other rights relating to literary or artistic works and data compilations (including without limitation author’s and moral rights and rights of publicity and privacy).

7.2.3                      “Trade Secrets” means all trade secrets under the laws of any jurisdiction, including but not limited to ideas, inventions, discoveries, developments, designs, improvements, prototypes, know-how, methods, processes, techniques, product specification and performance data, computer programs, and other data, in each case whether or not patentable, copyrightable or within any particular definition of trade secret; unpublished proprietary information relating to

the Company’s Intellectual Property; and business, marketing, sales, research, development, manufacturing, production and other plans and strategies; forecasts, financial statements, budgets and projections, licenses, prices and costs; customer and supplier lists and terms of customer and supplier contracts; personnel information; compilations of such information; and the existence and terms of this Agreement. The Executive’s Work Product is, without implying any other form of protection that may be available to the Company for such Work Product, a Trade Secret of the Company.

7.2.4                      “Work Product” means all tangible and intangible results of services rendered by the Executive during the term of the Executive’s employment with the Company that relate to the business of the Company or which were developed using the Company materials or Confidential Information.

7.3           Ownership of Work Product and Intellectual Property.

7.3.1                      The Executive is performing services and creating Work Product hereunder at the instance of the Company. It is therefore the parties’ intention that the Company is to own exclusively all rights and economic interests in the Work Product and all Intellectual Property embodied therein or related thereto, including without limitation any invention or discovery made or reduced to practice in the process of performing the services. This Agreement is to be construed to the maximum extent possible to produce the foregoing result, including but not limited to the construction of any ambiguities so as to achieve said result.

7.3.2                      Accordingly, the Executive agrees as follows:

(a)           All tangible Work Product which is a copyrightable work of authorship will be deemed a work made for hire owned by the Company under United States copyright laws; if an invention, Work Product is deemed to be owned by the Company upon creation.

(b)           The Executive will maintain adequate and current written records of all Work Product, which shall be available to and remain the property of the Company at all times.

(c)           The Executive shall promptly and fully disclose in writing to the Company all Trade Secrets, including without limitation inventions and works of authorship, which are related to the business activities of the Company authored, conceived, created or reduced to practice by the Executive (whether alone or jointly with others, whether during or outside the hours the Executive is providing services, and whether or not by the use of the Company’s equipment or other resources) during the term of this Agreement or within six (6) months thereafter, whether or not patentable or copyrightable.

(d)           The Executive hereby assigns to the Company irrevocably and unconditionally, to the fullest extent permitted by law under any interpretation of the relationship between the parties, all right, title and interest (including without limitation all Intellectual

Property rights) embodied in or associated with the Work Product which are related to the business activities of the Company and are authored, conceived, created or reduced to practice by the Executive during the term of this Agreement or which result within six (6) months thereafter from Confidential Information disclosed by the Company.

(e)           Promptly upon request by the Company and at the Company’s expense, the Executive shall execute and deliver to the Company all applications, assignments, agreements and other instruments and take such reasonable actions as the Company may deem helpful to fully vest the foregoing rights in the Company or to evidence such vesting. If the Company is unable, after reasonable effort, to secure the Executive’s signature on any patent application, copyright registration or other similar document, the Executive hereby irrevocably designates and appoints the Company and its duly authorized representatives as the Executive’s agent and attorney-in-fact to execute and file any such application or registration and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright registration and other forms of intellectual property protection with the same legal force and effect as if executed by the Executive.

(f)           The Executive hereby waives in favor of the Company and its assigns and licensees any and all artist’s or moral rights he may have pursuant to any state, provincial or federal laws or statutes of the United States in respect of any Work Product, and all similar rights under the laws of all jurisdictions.

7.4           Covenants Regarding Employees and Customers. During the Employment Term and for a period of twelve (12) months after the termination of the Executive’s employment with the Company for any reason, the Executive will not, without the Company’s prior consent:

(a)           recruit or solicit, offer employment to, or employ any person who was an employee or independent contractor of the Company on or within six (6) months before the termination of the Executive’s employment, or

(b)           work for, or solicit or accept any competing business from, any person or entity that was a customer of the Company on or within six (6) months before the date of termination of the Executive’s employment, or

(c)           compete with the Company directly or indirectly anywhere in the world in the business of developing, manufacturing and distributing prestige cosmetics.

The Executive will not engage in the actions prohibited in clauses (a), (b) and (c) directly or indirectly, or by being associated with any person or entity as owner, partner, employee, agent, consultant, director, officer, stockholder (other than as the owner of less than 5% of the outstanding stock of a publicly-traded corporation) or in any other capacity or manner whatever.

7.5           Injunctive Relief.  Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 7 may result in material and irreparable injury to the Company for which there is no

adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 7 or such other relief as may be required specifically to enforce any of the covenants in this Section 7.  If for any reason a final decision of any court determines that the restrictions under this Section 7 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted, modified or rewritten by such court to include as much of the duration and scope (geographic or otherwise) identified in this Section 7 as will render such restrictions valid and enforceable.

8.           INDEMNIFICATION

The Company shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, indemnify the Executive and his estate, heirs executors and administrators (the “Indemnitees”) from and against any and all expenses, liabilities or other matters referred to in or covered by said section.  The Company shall pay in advance of the final disposition of such action, suit or proceeding any and all expenses incurred by an Indemnitee upon the receipt of an undertaking by such Indemnitee to repay such amount if it shall be ultimately be determined that he is not entitled to be indemnified by the Company.

9.           MISCELLANEOUS

9.1           Notices.  All notices or communications hereunder shall be in writing, addressed as follows:

To the Company, to it at:

Axion International Inc.

665 Martinsville Road, Suite 219

Basking Ridge, New Jersey 07920

To the Executive:

James Kerstein

30 Corey Lane

Watchung, NJ 07069

Any such notice or communication shall be sent certified or registered mail, return receipt requested, or by telefax, addressed as above (or to such other address as such party may designate in writing from time to time), and the actual date of receipt shall determine the time at which notice was given.

9.2           Severability.  If a court of competent jurisdiction determines that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) such court shall have the authority to replace such invalid or

unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

9.3           Assignment.  This Agreement shall inure to the benefit of the heirs and representatives of the Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. The Company may assign this Agreement without prior written approval of the Executive upon the transfer of all or substantially all of its business and/or assets (whether by purchase, merger, consolidation or otherwise), provided that the successor to such business and/or assets shall expressly assume and agree to perform this Agreement.

9.4           Entire Agreement: Amendment.  This Agreement represents the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous contracts, arrangements or understandings between or among the Company and the Executive, regarding the subject matter hereof.  The Agreement may be amended at any time by mutual written agreement of the parties hereto.

9.5           Withholding.  The Company shall be entitled to withhold, or cause to be withheld, from payment any amount of withholding taxes required by law with respect to payments made to the Executive in connection with his employment hereunder.

9.6           Governing Law.  This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of New Jersey without reference to principles of conflict of laws.

9.7           Survival.  Sections 5 (relating to early termination), 6 (relating to Permanent Disability), 7 (relating to noncompetition, nonsolicitation and confidentiality), 8 (relating to indemnification) and 9.6 (relating to governing law) shall survive the termination hereof, whether such termination shall be by expiration of the Employment Term or an early termination pursuant to Sections 5 or 6 hereof.

9.8           Headings.  Headings to sections in this Agreement are for the convenience of the parties only and are not intended to be a part of or to affect the meaning or interpretation hereof.

9.9           Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by their authorized representatives and the Executive has hereunto set his hand, in each case effective as of the day and year first above written.

The Company

Axion International Inc.

By:/s/ Michael Martin

The Executive

/s/ James Kerstein                                                                

James Kerstein

SCHEDULE I

         Revenue Milestones                                                                                     Base Salary Rate Increased to:

         0                                                                                          $ 208,000

           $10,000,000                                                                                     $ 388,000

   $15,000,000                                                                                           $ 448,000  

 $25,000,000                                                                                           $ 508,000

Axion International Inc.

By:/s/ Michael Martin_____________

/s/ James Kerstein________________

James Kerstein

EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of January 1, 2008 (the “Agreement”) between Axion International Inc., a Delaware corporation (the “Company”) with offices at 665 Martinsville Road, Suite 219, Basking Ridge, New Jersey 07920 and Marc Green (the “Executive”).

WHEREAS, the Executive possesses valuable knowledge and skills that the Company believes will contribute to the successful operation of the Company's business and will have a prominent role in the development of the business the Company; and

WHEREAS, the Company desires to secure the services of the Executive, and the Executive desires to be in the employment of the Company and, in connection therewith, the Company and the Executive desire to enter into an employment agreement to, among other things, set forth the terms of such employment.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements hereinafter set forth and for other good and valuable consideration, the Company and the Executive hereby agree as follows:

1. EMPLOYMENT AND DUTIES

1.1           General.  The Company hereby employs the Executive, and the Executive agrees to serve, as the President of the Company upon the terms and conditions herein contained during the Employment Term, and in such capacities the Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board of Directors of the Company (the “Board”).  The services of the Executive shall be performed primarily at the Company’s facilities in Basking Ridge, New Jersey, or at such other location as the Company shall maintain its principal offices during the term of this Agreement. The Executive also agrees to serve, if elected, at no compensation in addition to that provided for in this Agreement, in the position of director of the Company and of any subsidiary of the Company during the Employment Term.

1.2           Exclusive Services.  For so long as the Executive is employed by the Company, he shall devote his full-time working hours to his duties hereunder. The Executive shall not, directly or indirectly, render services to any other person or organization or otherwise engage in activities which would interfere significantly with his faithful performance of his duties hereunder.

1.3           Term of Employment.  The Executive’s employment under this Agreement shall commence on the date hereof (the “Effective Date”) and shall terminate on the earliest of (i) the third anniversary of the Effective Date, (ii) the death of the Executive or (iii) the termination of the Executive’s employment pursuant to this Agreement (the period during which the Executive is employed pursuant to this Agreement, including any extension thereof shall be referred to as the “Employment Term”).

2.           SALARY

2.1           (a)           Base Salary.  During the Employment Term, the Executive shall be entitled to receive a base salary (the “Base Salary”) at a rate of $120,000 per annum, payable weekly in equal installments in accordance with the Company’s payroll practices, with such increases as the Board may determine or as provided in the following subparagraph (b). Once increased, such higher amount shall constitute the Executive’s Base Salary.

(b)           The Base Salary shall be increased during the Employment Term (i) by $30,000 at such time as the Company shall achieve annual revenues in excess of $10,000,000; and (ii) by an additional $30,000 at such time as the Company shall achieve annual revenues in excess of $25,000,000.

2.2  Bonus.  In addition to the Executive’s Base Salary, the Company may pay to the Executive during the Employment Term an annual bonus (the “Annual Bonus”) based upon the Executive’s performance, the amount of which bonus (if any) shall be solely within the discretion of the Company as determined by the Board.

3.           EMPLOYEE BENEFITS

3.1           General Benefits.  The Executive shall be eligible to participate in health and benefit programs of the Company consistent with those benefit programs provided to other senior executives of the Company.

3.2           Vacation.  The Executive shall be entitled to twenty (20) days paid vacation each year in accordance with the applicable policies of the Company.

3.3           Reimbursement of Expenses.  The Company will reimburse the Executive for (i) reasonable, ordinary and necessary business expenses, including the cost of airfare from the Executive’s residence in California to the Company’s principal place of business, incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied.

4.           STOCK OPTIONS.

4.1           The Company shall issue to the Executive options (the "Options") to purchase  up to eight (8) shares of Common Stock  (the “Option Shares”) at an exercise price of $1.00 per share for a term of five (5) years from the date hereof which Options shall vest on such date as the Company has achieved annual revenues in excess of $25,000,000.

4.2           The Options shall not be exercisable until such time as they have vested in accordance with the terms herein.  Notwithstanding the foregoing, in the event of (i) a Change of Control; (ii) the Executive's employment is terminated by the Company Without Cause; and/or (iii) employment hereunder is terminated by the Executive for Good Reason, the Options which

have not previously vested, shall immediately vest and become exercisable upon such event.  The Options shall provide for cashless exercise and piggyback registration rights.  If the Company at any time after the date hereof subdivides or combines (by any stock split, stock dividend, recapitalization, combination, reverse stock split or otherwise) its outstanding shares of Common Stock, the exercise price and the number of shares obtainable upon exercise of the Options shall likewise be proportionately reduced or increased, as applicable.  In the event of any recapitalization, merger, reorganization, reclassification, consolidation or sale of substantially all of the assets of the Company, the holders of the Company’s Common Stock are entitled to receive stock, securities or other assets with respect to or in exchange of the Company’s common Stock, then the Executive shall have the right thereafter to receive, upon exercise of the Option, the same amount and kind of stock, securities or other assets as he would have been entitled to received if he had, immediately prior to such recapitalization, merger, reorganization, reclassification, consolidation or sale, the holder of the shares of Common Stock underlying the Options.

4.3           "Change of Control" shall mean (i) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company to any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")); (ii) the liquidation or dissolution of the Company or the adoption of a plan by the stockholders of the Company relating to the dissolution or liquidation of the Company; or (iii) the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, of more than 50% of the aggregate ordinary voting power of the Company; provided that the completion of the currently contemplated merger of the Company with Analytical (or in the event such merger is not completed, the merger of the Company with a publicly traded Company where the current shareholders of the Company remain the majority shareholders of the merged entity), shall not be a Change of Control for purposes of this Agreement.

5.           TERMINATION OF EMPLOYMENT

5.1 Termination for Cause: Termination Without Cause:

 Termination Permanent-Disability- Resignation

5.1.1                      General.  (a) If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled only to his accrued but unpaid Base Salary (“Accrued Base Salary”) through and including the date of termination and any Options which have not vested as of the date of such termination shall be terminated and have no further force or effect.

(b)           If, prior to the expiration of the Employment Term, the Executive’s employment with the Company is terminated by the Company Without Cause or by the Executive for Good Reason, the Executive shall be entitled only to (i) his Accrued Base Salary through and including the date of termination; (ii) his Base Salary for the lesser of (a) one year; or (b) the period from the day after the termination date through the normal expiration date of the

Employment Term, payable in equal installments on the same terms as provided under the Company’s payroll practices; and (iii) the benefits set forth under Section 3 of this Agreement through the normal expiration date of the Employment Term.

(c)           If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company for Permanent Disability (as defined in Section 6), the Executive shall be entitled only to the payments and benefits provided for in Section 6 hereof.

(d)           If the Executive’s employment is due to the death of the Executive, the Executive (or his estate) shall be entitled only to (i) payment of his Accrued Base Salary through and including the date of death and (ii) six (6) months of his Base Salary as severance, payable in equal installments on the same terms as provided under the Company’s payroll practices.

(e)           Notwithstanding anything to the contrary herein, the Company may elect, in its sole discretion, to pay any remaining installments of severance or other payments hereunder in a lump sum rather than in installments over time.

5.1.2                      Date of Termination/Resignation.  The date of termination for a termination by the Company for Cause shall be the date of the written notice of termination provided for in Section 5.1.3. The date of termination for a Termination Without Cause shall be as provided in Section 5.1.4. The date of termination for a termination for Permanent Disability shall be as provided in Section 6. The date of resignation shall be the date specified in the written notice of resignation from the Executive to the Company, or if no date is specified therein, ten (10) business days after receipt by the Company of written notice of resignation from the Executive.

5.1.3                      Notice of Termination for Cause.  Termination of the Executive’s employment by the Company for Cause shall be effected by delivery of a written notice of termination from the Company to the Executive, which notice shall specify the event or events set forth in Section 5.2 giving rise to such termination.

5.1.4                      Notice of Termination Without Cause.   Termination of the Executive’s employment for a Termination Without Cause shall be effected by written notice of termination from the Company to the Executive, specifying a termination date.

5.2           Definition of “for Cause”. For purposes of this Agreement, “Cause” shall mean (i) a good faith finding by the Board of Directors of the Company that (A) the Executive has materially failed to perform his assigned duties for the Company and has failed to remedy such failure within twenty (20) days following written notice from the Company to the Executive notifying him of such failure, (B) the Executive has breached any material term of this Agreement, any Confidentiality, Non-Disclosure, Assignment of Inventions or other similar agreement between the Executive and the Company, or (C) the Executive has engaged in dishonesty, gross negligence or willful misconduct which could result in any material loss, damage or injury to the Company, or (ii) the conviction of the Executive of, or the entry of a pleading guilty or nolo contendere by the Executive to, any  felony punishable by imprisonment

for more than one (1) year.

5.3           Definition of “Without Cause”. Termination “Without Cause” shall mean any termination by the Company of the Executive’s employment at any time during the Employment Term for any reason other than Cause, death or Permanent Disability.

5.4           Definition of “Good Reason”.  Termination by Executive for “Good Reason” shall mean termination by the Executive because of (i) a material reduction in the nature or scope of Executive’s position as Chief Executive Officer or his authorities, powers, duties, or responsibilities in such capacity; or (ii) a material breach by the Company of its affirmative or negative covenants or undertakings hereunder and such breach shall not be remedied within fifteen (15) days after notice to Company thereof (which notice shall be signed by Executive and refer to a specific breach of this Agreement).

6.           PERMANENT DISABILITY

If, prior to the expiration of the Employment Term, the Executive shall fail because of illness, physical or mental disability or other incapacity, for a period of three (3) consecutive months, or for shorter periods aggregating three (3) months during any twelve-month period, to render the services provided for by this Agreement, then the Company may, by written notice to the Executive after the last day of the third consecutive month of disability or the day on which the shorter periods of disability equal an aggregate of three (3) months, terminate the Executive’s employment for “Permanent Disability”, specifying a termination date no earlier than ten (10) business days after the date on which such notice is given. The determination of the Executive’s illness, physical or mental disability or other incapacity for purposes of determining Permanent Disability shall be made by an independent physician who is reasonably acceptable to the Executive and the Company and shall be final and binding and shall be based on such competent medical evidence as shall be presented to it by the Executive or by any physician or group of physicians or other competent medical experts employed by the Executive and/or the Company to advise such independent physician.

In the event of a termination of the Executive’s employment by the Company for Permanent Disability, the Executive shall be entitled only to (i) his Accrued Base Salary through and including the date of termination, (ii) six months of his Base Salary as severance, payable in equal installments on the same terms as provided under the Company’s payroll practices, and (iii) receive the benefits set forth under Section 3 of this Agreement during the six-month severance period. Except as otherwise provided in this Section 6, following the effective date of a termination for Permanent Disability, the Company shall have no further obligation to the Executive under this Agreement.

7.           NONCOMPETITION/NONSOLICITATION AND CONFIDENTIALITY

7.1           Confidential Information.  During and after the Executive’s employment with the Company, the Executive will hold in confidence and not use, disclose or allow disclosure of Confidential Information (as defined below) except in the proper performance of the Executive’s

duties to the Company. Upon termination of the Executive’s employment, the Executive will immediately deliver to the Company all Confidential Materials (as defined below) and destroy all electronic embodiments of Confidential Information.

7.2           Definition of “Confidential Information”.  For purposes of this Agreement, “Confidential Information” means Trade Secrets (as defined below) and other information of the Company identified as confidential and all Work Product (as defined below), whether disclosed in tangible form (including without limitation written documents, photographs, drawings, models, prototypes, samples, and magnetic and/or electronic media), or orally or visually or in other non-tangible form (including without limitation presentations, displays or inspections of tangible media or facilities). Confidential Information shall also include information received by the Company from third parties under an obligation of confidentiality.  Confidential Information does not include information which: (i) was known to the Executive prior to disclosure by the Company; (ii) is or becomes public knowledge without breach of this Agreement; or (iii) is received by the Executive from a third party without any violation of any obligation of confidentiality and without confidentiality restrictions; or (iv) is independently developed by the Executive without use of or reference to Confidential Information.

7.2.1                      “Confidential Materials” means tangible objects, materials or media in which Confidential Information is embodied, including all copies, excerpts, modifications, translations, enhancements and adaptations of the foregoing.

7.2.2                      “Intellectual Property” means all rights of every nature relating to intellectual property, including without limitation (i) all United States and foreign patents and patent applications now or hereafter filed (including continuations, continuations-in-part, divisionals, reissues, reexaminations and foreign counterparts thereof), and all rights with respect thereto, (ii) all Trade Secrets, (iii) all United States and foreign semiconductor mask work rights and registrations for such rights, and (iv) all copyrights and renewals thereof and other rights relating to literary or artistic works and data compilations (including without limitation author’s and moral rights and rights of publicity and privacy).

7.2.3                      “Trade Secrets” means all trade secrets under the laws of any jurisdiction, including but not limited to ideas, inventions, discoveries, developments, designs, improvements, prototypes, know-how, methods, processes, techniques, product specification and performance data, computer programs, and other data, in each case whether or not patentable, copyrightable or within any particular definition of trade secret; unpublished proprietary information relating to the Company’s Intellectual Property; and business, marketing, sales, research, development, manufacturing, production and other plans and strategies; forecasts, financial statements, budgets and projections, licenses, prices and costs; customer and supplier lists and terms of customer and supplier contracts; personnel information; compilations of such information; and the existence and terms of this Agreement. The Executive’s Work Product is, without implying any other form of protection that may be available to the Company for such Work Product, a Trade Secret of the Company.

7.2.4                      “Work Product” means all tangible and intangible results of services

rendered by the Executive during the term of the Executive’s employment with the Company that relate to the business of the Company or which were developed using the Company materials or Confidential Information.

7.3           Ownership of Work Product and Intellectual Property.

7.3.1                      The Executive is performing services and creating Work Product hereunder at the instance of the Company. It is therefore the parties’ intention that the Company is to own exclusively all rights and economic interests in the Work Product and all Intellectual Property embodied therein or related thereto, including without limitation any invention or discovery made or reduced to practice in the process of performing the services. This Agreement is to be construed to the maximum extent possible to produce the foregoing result, including but not limited to the construction of any ambiguities so as to achieve said result.

7.3.2                      Accordingly, the Executive agrees as follows:

(a)           All tangible Work Product which is a copyrightable work of authorship will be deemed a work made for hire owned by the Company under United States copyright laws; if an invention, Work Product is deemed to be owned by the Company upon creation.

(b)           The Executive will maintain adequate and current written records of all Work Product, which shall be available to and remain the property of the Company at all times.

(c)           The Executive shall promptly and fully disclose in writing to the Company all Trade Secrets, including without limitation inventions and works of authorship, which are related to the business activities of the Company authored, conceived, created or reduced to practice by the Executive (whether alone or jointly with others, whether during or outside the hours the Executive is providing services, and whether or not by the use of the Company’s equipment or other resources) during the term of this Agreement or within six (6) months thereafter, whether or not patentable or copyrightable.

(d)           The Executive hereby assigns to the Company irrevocably and unconditionally, to the fullest extent permitted by law under any interpretation of the relationship between the parties, all right, title and interest (including without limitation all Intellectual Property rights) embodied in or associated with the Work Product which are related to the business activities of the Company and are authored, conceived, created or reduced to practice by the Executive during the term of this Agreement or which result within six (6) months thereafter from Confidential Information disclosed by the Company.

(e)           Promptly upon request by the Company and at the Company’s expense, the Executive shall execute and deliver to the Company all applications, assignments, agreements and other instruments and take such reasonable actions as the Company may deem helpful to fully vest the foregoing rights in the Company or to evidence such vesting. If the

Company is unable, after reasonable effort, to secure the Executive’s signature on any patent application, copyright registration or other similar document, the Executive hereby irrevocably designates and appoints the Company and its duly authorized representatives as the Executive’s agent and attorney-in-fact to execute and file any such application or registration and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright registration and other forms of intellectual property protection with the same legal force and effect as if executed by the Executive.

(f)           The Executive hereby waives in favor of the Company and its assigns and licensees any and all artist’s or moral rights he may have pursuant to any state, provincial or federal laws or statutes of the United States in respect of any Work Product, and all similar rights under the laws of all jurisdictions.

7.4           Covenants Regarding Employees and Customers. During the Employment Term and for a period of twelve (12) months after the termination of the Executive’s employment with the Company for any reason, the Executive will not, without the Company’s prior consent:

(a)           recruit or solicit, offer employment to, or employ any person who was an employee or independent contractor of the Company on or within six (6) months before the termination of the Executive’s employment, or

(b)           work for, or solicit or accept any competing business from, any person or entity that was a customer of the Company on or within six (6) months before the date of termination of the Executive’s employment, or

(c)           compete with the Company directly or indirectly anywhere in the world in the business of developing, manufacturing and distributing prestige cosmetics.

The Executive will not engage in the actions prohibited in clauses (a), (b) and (c) directly or indirectly, or by being associated with any person or entity as owner, partner, employee, agent, consultant, director, officer, stockholder (other than as the owner of less than 5% of the outstanding stock of a publicly-traded corporation) or in any other capacity or manner whatever.

7.5           Injunctive Relief.  Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 7 may result in material and irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 7 or such other relief as may be required specifically to enforce any of the covenants in this Section 7.  If for any reason a final decision of any court determines that the restrictions under this Section 7 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted, modified or rewritten by such court to include as much of the duration and scope (geographic or otherwise) identified in this Section 7 as will render such restrictions valid and enforceable.

8.           INDEMNIFICATION

The Company shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, indemnify the Executive and his estate, heirs executors and administrators (the “Indemnitees”) from and against any and all expenses, liabilities or other matters referred to in or covered by said section.  The Company shall pay in advance of the final disposition of such action, suit or proceeding any and all expenses incurred by an Indemnitee upon the receipt of an undertaking by such Indemnitee to repay such amount if it shall be ultimately be determined that he is not entitled to be indemnified by the Company.

9.           MISCELLANEOUS

9.1           Notices.  All notices or communications hereunder shall be in writing, addressed as follows:

To the Company, to it at:

Axion International Inc.

665 Martinsville Road, Suite 219

Basking Ridge, New Jersey 07920

To the Executive:

Marc Green

190 27th Avenue, Apt. 2

San Francisco, CA 94121

Any such notice or communication shall be sent certified or registered mail, return receipt requested, or by telefax, addressed as above (or to such other address as such party may designate in writing from time to time), and the actual date of receipt shall determine the time at which notice was given.

9.2           Severability.  If a court of competent jurisdiction determines that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) such court shall have the authority to replace such invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

9.3           Assignment.  This Agreement shall inure to the benefit of the heirs and representatives of the Executive and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. The Company may assign this Agreement without prior written approval of the Executive upon the transfer of all or substantially all of its business and/or assets (whether by

purchase, merger, consolidation or otherwise), provided that the successor to such business and/or assets shall expressly assume and agree to perform this Agreement.

9.4           Entire Agreement: Amendment.  This Agreement represents the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous contracts, arrangements or understandings between or among the Company and the Executive, regarding the subject matter hereof.  The Agreement may be amended at any time by mutual written agreement of the parties hereto.

9.5           Withholding.  The Company shall be entitled to withhold, or cause to be withheld, from payment any amount of withholding taxes required by law with respect to payments made to the Executive in connection with his employment hereunder.

9.6           Governing Law.  This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of New Jersey without reference to principles of conflict of laws.

9.7           Survival.  Sections 5 (relating to early termination), 6 (relating to Permanent Disability), 7 (relating to noncompetition, nonsolicitation and confidentiality), 8 (relating to indemnification) and 9.6 (relating to governing law) shall survive the termination hereof, whether such termination shall be by expiration of the Employment Term or an early termination pursuant to Sections 5 or 6 hereof.

9.8           Headings.  Headings to sections in this Agreement are for the convenience of the parties only and are not intended to be a part of or to affect the meaning or interpretation hereof.

9.9           Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by their authorized representatives and the Executive has hereunto set his hand, in each case effective as of the day and year first above written.

The Company
Axion International Inc.
By:/s/ Michael Martin
	Michael Martin
The Executive
Marc Green
Marc Green

EX-10.3

EXHIBIT 10.4

REGAL CAPITAL, LLC

24 ADDISON DRIVE

FAIRFIELD, NJ 07004

Axion International, Inc.                                                                                                                     December 6, 2007

30 Corey Lane

Watchung, NJ 07069

Dear Mr. Kerstein:

This letter will confirm our Agreement (the “Agreement”) pursuant to which Regal Capital, LLC (the “Consultant”), has been retained to serve as a management consultant and advisor to Axion International, Inc. (the “Company”) and/or its subsidiaries or affiliates for a period of 36 months commencing upon the merger of Company into a public entity.

1.Duties of Consultant.   The Consultant shall, at the request of the Company, upon reasonable notice, render the following services:

(i) assist the Company in the preparation of an in-depth business plan suitable for presentation to potential investors, underwriters, strategic partners and lenders.

(ii) introduce the Company to prospective underwriters, auditors and legal counsel.

(iii) provide financial guidance on issues of budgeting, compensation and financial structure.

(iv) assist the Company in developing sources of interim financing should interim financing be deemed required.

(v) introduce the Company to a public Company for purposes of effectuating a reverse merger.

(vi) provide advice and guidance regarding prospective appointments to the Board of Directors of the Company.

2.   Compensation.

2.1Initial Compensation.  As compensation for the services which have  previously been rendered by the Consultant on behalf of the Company with regard to the formulation of preliminary business concepts and in consideration of the Consultant’s commitment to enter into

this Agreement, the Company on the execution of this Agreement, shall issue to the Consultant 54 shares of common stock of the Company.

2.2           Deferred Compensation.  The Company shall pay the consultant an additional $230,000 for its services hereunder of which (i) $80,000 shall be paid on January 10, 2008; (ii) $80,000 shall be paid within ten (10) days of the Company’s receipt of its first purchase order for its products; and (iii) $70,000 shall be paid within ten (10) business days following the first shipment of the Company’s product to its customers.

3.Expenses.   The Company shall reimburse the Consultant for all of its reasonable and pre-approved travel and other out-of-pocket expenses incurred in connection with its engagement hereunder.

4.Relationship.   Nothing herein shall constitute Consultant as an employee or agent

of the Company, except to such extent as might hereinafter be agreed upon for a particular  obligate or commit the Company in any manner whatsoever.

5.Confidentiality.   Except in the course of the performance of its duties hereunder, Consultant agrees that it shall not disclose any trade secrets, know-how, or other proprietary information not in the public domain learned as a result of Consultant=s services to the Company unless and until such information become generally known or unless compelled to do so pursuant to subpoena or court order.

6.Information; Notice of Events.   The Company recognizes and confirms that the Consultant will be using information provided by or on behalf of the Company in connection with the performance of its duties under this Agreement, and that the Consultant does not assume any responsibility for and may rely upon, without independent verification, the accuracy and completeness of any such information.  The Company hereby warrants that any information relating to the Company that is furnished to the Consultant by or on behalf of the Company will be fair, accurate and complete and will not contain any material omissions or misstatements of fact.

7.Indemnity.   The Company shall indemnify the Consultant from liability it may incur in connection with the performance of its duties hereunder to the extent that such liability is a result of false information provided to the Consultant by the Company.

8.Governing Law; Submission to Jurisdiction.   This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State.  The Company and Consultant hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America located in the State of New York, City of New York, for any actions, suits or proceedings arising out of or relating to this letter and the transactions contemplated hereby (and agree not to commence any actions, suite or proceeding relating thereto except in such courts), and further agree that service of process for any a action, suit or proceeding brought against the Company or the Consultant, as the case may be, in any such court.  The Company and Consultant also hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this letter or the transactions contemplated hereby, in the courts of the State of New York or the United States of America located in the State of New York,

County of New York and hereby further irrevocably and unconditionally waive, and agree not to plead a claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

9.Miscellaneous.   This letter (a) incorporates the entire understanding of the partieswith respect to the subject matter hereof and supersedes all previous agreements should they exist with respect thereto, whether written or oral, (b) may not be amended, modified or waived except in a writing executed by the Company and the Consultant and their respective successors and assigns.  This letter may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes, but all such counterparts together shall constitute but one and the same instrument.  Delivery of an executed counterpart of this letter by facsimile shall be equally effective as delivery of an executed original counterpart of this letter.

Please confirm that the foregoing is in accordance with your understanding and agreement with the Consultant by signing and returning to us a copy of this letter, which shall become our binding agreement upon our receipt.

We are delighted to accept this engagement and look forward to working with you on this assignment.

Very truly yours,

By: /s/Michael Martin                                                                           

Name: Michael Martin

Title:  Partner

AGREED AND ACCEPTED AS OF

THE DATE FIRST ABOVE WRITTEN:

By: /s/James Kerstein                                                                           

Name:  James Kerstein

Title:  CEO

EX-10.4

Exhibit 10.5

ASSIGNMENT AND AMENDMENT AGREEMENT

ASSIGNMENT and AMENDMENT AGREEMENT (this “Agreement”), dated March 20, 2008 by and among the assignors listed on Schedule of Assignors attached hereto (the “Assignors”), ADH Ventures, LLC (the “Assignee”) and Analytical Surveys, Inc., a Colorado corporation (the “Company”).

WITNESSETH:

WHEREAS, the Assignors are holders of (a) the Company’s 13% Secured Convertible Debentures due March 31, 2008, as amended by the Amendment and Waiver Agreements, dated September 30, 2007 and December 30, 2007 (the “Debentures”) in the outstanding principal amount set forth on the Schedule of Assignors, and (b) warrants (the “Warrants”) to acquire a number of the Company’s common stock, with no par value (the “Common Stock”), as set forth in the Schedule of Assignors;

WHEREAS, the Debentures and the Warrants were issued to the Assignors pursuant to that certain Securities Purchase Agreement, dated as of November 24, 2006 (as amended, the “Purchase Agreement”), among the Assignors and the Company;

WHEREAS, the obligations under the Debenture are (a) guaranteed by the Subsidiary Guarantee, dated as of November 24, 2006 (the “Guarantee”), of Survey  Holdings, Inc. (the “Guarantor”) in favor of the holders of the Debentures and (b) secured by certain assets of the Company and the Guarantor pursuant to that certain Security Agreement, dated as of November 24, 2006 (the “Security Agreement”), among the Company, the Guarantor and the Assignors, and that certain Mortgage, dated as of November 24, 2006 (the “Mortgage”), by the Company in favor of the Assignors;

WHEREAS, in connection with the Purchase Agreement, the Assignors and the Company entered into a Registration Rights Agreement, dated as of November 24, 2006 (the “Registration Rights Agreement”) relating to the shares of Common Stock underlying the Debentures and the Warrants;

WHEREAS, the Assignors desire to sell to the Assignees, and the Assignees desire to purchase from the Assignors, $1,000,000 in principal amount of the Debentures;

WHEREAS, the Assignors have agreed to grant a 30 day option to the Assignee to purchase the remaining Debentures having a principal amount of approximately $650,000;

WHEREAS, the Company has formed a new subsidiary, Axion Acquisition Corp., a Delaware corporation, which has entered into a merger (the “Merger”) with Axion International, Inc., a Delaware corporation (the “New Guarantor”), thereby making the New Guarantor a wholly owned subsidiary of the Company;

WHEREAS, the parties desire to, among other things, (a) amend and restate the Debentures; (b) terminate the Purchase Agreement and the Registration Rights Agreement; (c) cancel the Warrants; and (d) complete the assignment of the Debentures.

NOW, THEREFORE, in consideration of the representations and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Restatement of Debentures.   Simultaneously, upon the Closing, as defined herein, the Assignors shall exchange the Debentures for replacement Debentures (“Replacement Debentures”) consisting of (a) Replacement Debentures in the aggregate principal amount of $1,000,000 with interest thereon paid by the Company to the Assignors through the date of such exchange (the “$1,000,000 Replacement Debentures”); and (b) the remaining Replacement Debentures (“Remaining Debentures”) being in such denominations (as shall equal in the aggregate the principal amount of the Debentures less the $1,000,000 Replacement Debentures). The Replacement Debentures and shall be amended and restated in the form attached hereto as Exhibit A.  The Remaining Debentures shall be issued and delivered to the Assignors respectively as provided in the Schedule of Assignors and the $1,000,000 Replacement Debentures shall be issued and delivered to the Assignee.

2.Assignment.

(a)Assignment of Debentures and Other Transaction Documents.  Subject to all of the terms hereof at the Closing, each of the Assignors shall (i) assign to the Assignee the $1,000,000 Replacement Debentures, free and clear of any claim, pledge, charge, lien and any other encumbrance whatsoever; and (ii) shall amend the Mortgage by adding the Assignee as a Mortgagee thereunder as set forth in Exhibit B (collectively, the “Assignment”).

(b)Closing.  The closing (the “Closing”) of the Assignment shall occur simultaneous with the closing of the Merger at the offices of Silverman Sclar Shin & Byrne PLLC, 381 Park Avenue South, New York, New York, or such other date and time as is mutually agreed to by the parties hereto.

(c)Purchase Price.  At the Closing, the Assignee shall deliver to each Assignor the purchase price for the $1,000,000 Replacement Debenture set forth opposite such Assignor’s name in the Schedule of Assignors, in United States dollars and in immediately available funds.

3.Option.

(a)Grant of Option.  The Assignors hereby grant to the Assignee an option (the “Option”) to purchase all or any part of the Remaining Debentures for a purchase price (the “Option Price”) equal to the outstanding principal amount of the Remaining Debentures being purchased together with interest accrued thereon as of the Exercise Date (as defined below), which Option shall be exercisable in the period commencing on the date of the Closing and within thirty (30) calendar days thereafter (the “Option Period”).  The Option shall be exercised by written notice (the “Exercise Notice”) by the Assignee to Robert Charron, Esq., Feldman Weinstein & Smith LLP, The Graybar Building, 420 Lexington Avenue, New York, New York

(b)10170 (the “Assignors’ Representative”) by overnight delivery of such notice within the Option Period.  “Exercise Date” shall mean the date the Exercise Notice is deposited with a nationally recognized overnight courier for next business day delivery to the Assignors’ Representative.  Subject to the delivery of the Option Price as set forth below, for all purposes, the assignment of the Remaining Debentures covered by the Exercise Notice shall be deemed to have occurred on the Exercise Date, and Assignee shall be deemed to be the holder and beneficial owner of such Remaining Debentures as of the Exercise Date.

(c)Deliveries Upon Exercise of Option.  The Option Price for the Remaining Debenture covered by the Exercise Notice shall be delivered to the holders of such Debentures in United States Dollars in immediate available funds within three (3) business days following the Exercise Date.  Upon receipt of the Option Price, the Assignors shall promptly deliver to the Assignee (i) the Remaining Debentures covered by the Exercise Notice duly endorsed for transfer to the Assignees, free and clear of any claim, pledge, charge, lien and any other encumbrance whatsoever; and (ii) an assignment to Assignee of Assignor’s interest in and to the Security Agreement, Mortgage and Guarantees to the extent of the Remaining Debentures being purchased.

(d)No Encumbrances.  Until the expiration of the Option Period, each Assignor shall continue to own, free and clear of any hypothecation, pledge, mortgage or other encumbrance (except pursuant to the Option), the Remaining Debentures set forth opposite such Assignor’s name in the Schedule of Assignors.

4.     Termination of Agreements.  Simultaneous with the consummation of the Assignment, the Purchase Agreement and the Registration Rights Agreement shall be terminated in their entirety and none of the parties hereto shall have any further obligations under such agreements; provided, however, Sections 4.1, 4.2 4.3, 4.4, 4.5, 4.6 (other than the first sentence), 4.7, 4.8, 4.10, 4.11, 4.12, 4.14(b), 4.15 and 4.19 and 5 of the Purchase Agreement and Section 5 of the Registration Rights Agreement shall survive such termination and remain in full force and effect in accordance with its terms.

5.    Cancellation of Warrants.  Simultaneous with the consummation of the Assignment, 60.6% of Warrants held by the Assignors (pro-rata among the Assignors, as set forth opposite each Assignor’s name under the column “Cancelled Warrants” in the Schedule of Assignors) shall be cancelled and none of the parties hereto shall have any further obligations under such portion of Warrants.  With respect to the remaining 39.4% of Warrants (the “Remaining Warrants”), each of the Assignors hereby agree (a) during the Option Period, not to exercise any of the Remaining Warrants and the Company shall have no obligation to honor any such exercise; and (b) until the expiration of the Option Period, to continue to own, free and clear of any hypothecation, pledge, mortgage or other encumbrance, the Remaining Warrants set forth opposite such Assignor’s name in the Schedule of Assignors. Upon exercise in full of the Option, the balance of the outstanding Warrants held by the Assignors shall be cancelled and none of the parties hereto shall have any further obligations under such portion of Warrants. At the closing of the Option, each of the Assignors shall deliver to the Company the Warrants set forth opposite such Assignor’s name in the Schedule of Assignors for cancellation.

6.Amendments to Security Agreement.  Simultaneous with the consummation of the Assignment, the Security Agreement shall be amended as follows:

(a)By adding the Assignee as a “Secured Party” thereunder;

(b)By deleting the last sentence of Section 4(c);

(c)By deleting Sections 4(n), 4(w) and 4(dd);

(d)By replacing the Assignee as “Agent” and by replacing all references to Harborview Master Fund with ADH Ventures, LLC under Section 18 and the Annex to Security Agreement; and

(e)Notwithstanding anything to the contrary contained in Sections 4(e) and 4(x), by permitting the Debtors to relocate their chief executive offices, their books of accounts, their records and tangible collateral to 665 Martinsville Road, Basking Ridge, NJ 07920.

7.New Guarantor.  In accordance with the terms of the Guarantee and the Security Agreement, at the Closing, the Company shall (a) cause the New Guarantor to deliver to the Assignee (i) an Assumption Agreement in the form attached hereto as Exhibit C and (ii) the Additional Debtor Joinder in the form attached hereto as Exhibit D; together with supplements to the Schedules to the Security Agreement and UCC-1 Financing Statement naming the New Guarantor as Debtor and the Assignee and Assignors as Secured Party, and (b) deliver to the Assignee as Pledged Securities (as defined in the Security Agreement) the certificates representing all of the issued and outstanding shares of the New Guarantor.

8.Amendment to Financing Statement.  The Assignors and the Company hereby authorize the Assignee to take all steps it deems reasonably necessary to perfect its security interest in the Collateral (as defined in the Security Agreement), including, without limitation, the filing of any amendment to financing statements adding the Assignee as a “Secured Party” thereunder.

9.Consent to Equity Issuances and Merger.  Notwithstanding Sections 4.13, 4.14 and 4.19 of the Purchase Agreement and Section 8(a)(viii) of the Debentures, the Assignors and the Assignee hereby waive (a) any and all rights to participate in the issuance of shares of the Company’s Common Stock pursuant to Section 4.13 of the Purchase Agreement (i) in connection with the Merger, (ii) to the current or former members of the Company’s Board of Directors as payment for past director fees in lieu of cash and (iii) to certain finders in connection with the Merger (collectively, the “Subject Issuances”); (b) any default pursuant to Section 4.14 of the Purchase Agreement arising out of the Subject Issuances; and (c) any default under Section 8(a)(viii) of the Debentures arising out of the Merger or the replacement of the members of the Company’s Board of Directors in connection with the Merger.

10.Representation and Warranties of Assignor.  Each of the Assignors hereby represents and warrants as to itself as follows:

(a)this Agreement  has been duly authorized, executed and delivered by, and is binding upon such Assignor;

(b)such Assignor is the sole owner and holder of the Debenture and the Warrants set forth opposite its name in the Schedule of Assignors, free and clear of all liens, claims and encumbrances, and has the full right to assign such Debenture, and Assignor has not previously pledged, hypothecated or assigned such Debenture or Warrant; and

(c)such Assignor is not now, nor has it been for the preceding three months, an “affiliate” (as such term is defined in Paragraph (a)(1) of Rule 144 under the Securities Act of 1933, as amended (the “1933 Act”)) of the Company.

11.Representation and Warranties of Assignee.  The Assignee hereby represents and warrants as follows:

(a)the Assignee is an “accredited investor” as defined in Regulation D under the 1933 Act.  The Assignee is purchasing the $1,000,000 Replacement Debentures, and upon exercise of the Option, will be purchasing the Remaining Debentures, for Assignee’s own account for investment purposes only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, or the shares issuable upon conversion thereof, nor with any present intention of distributing or selling the same, and it has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof;

(b)the Assignee understands that the $1,000,000 Replacement Debentures are being, and upon the exercise of the Option, the Remaining Debentures will be, assigned and transferred to the Assignee in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Assignors are relying upon the truth and accuracy of, and the Assignee’s compliance with, the representations, warranties, agreements and acknowledgments of the Assignee set forth herein in order to determine the availability of such exemptions and the eligibility of the Assignee to acquire the Replacement Debentures;

(c)the Assignee and his advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and the Additional Guarantor, including copies of the Company  most recent publicly available financial statements (as available on the SEC’s EDGAR system). The Assignee and his advisors, if any, have been afforded the opportunity to ask questions of the Assignors.  Neither such inquiries nor any other due diligence investigation conducted by the Assignee or any of his advisors or representatives shall modify, amend or affect the Assignee’s right to rely on the Assignors’ representations and warranties contained in this Agreement.  The Assignee understands that its investment in the Replacement Debentures (including the shares issuable upon conversion thereof) involves a significant degree of risk;

(d)the Assignee understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Replacement Debentures or the shares issuable upon conversion thereof;

(e)the Assignee understands that the sale or resale of the Replacement Debentures, or the shares issuable upon conversion thereof, has not been and is not being

(f)registered under the 1933 Act or any applicable state securities laws, and the Replacement Debentures and/or the shares issuable upon conversion thereof may not be transferred unless (i) such security is sold pursuant to an effective registration statement under the 1933 Act, or (ii) the security is sold or transferred pursuant to an exemption from such registration; and provided further that neither the Assignor nor any other person is under any obligation to comply with the terms and conditions of any exemption under the 1933 Act;

(g)this Agreement has been duly executed and delivered by, and is binding upon the Assignee; and

(h)the Assignee acknowledges that the Assignment is made without any representation, warranty or recourse, express, implied or statutory (other than as expressly set forth herein).

12.Miscellaneous.

(a)Effect of this Agreement.  Except as modified or terminated pursuant hereto, no other changes or modifications to any of the Transaction Documents (as defined in the Purchase Agreement) are intended or implied and in all other respects each of the Transaction Documents is hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof.  To the extent of conflict between the terms of this Agreement and any of the Transaction Documents, the terms of this Agreement shall control.

(b)Further Assurances.  The parties hereto shall execute and deliver such additional documents and take such additional action as may be necessary or desirable to effectuate the provisions and purposes of this Agreement.

(c)Binding Effect.  This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

(d)Severability.  Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement.

(e)Governing Law; Venue and Jurisdiction.  In all respects, including all matters of construction, validity and performance, this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles thereof.  Each of the parties hereto hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Agreement.  Each of the parties hereto irrevocably consents to the non-exclusive jurisdiction of Supreme Court of New York, New York County and the United States District Court for the Southern District of New York in any action or proceeding with respect to this Agreement.

(f)Counterparts.  This Agreement may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement.  Execution and delivery of this Agreement by exchange of facsimile copies bearing

(g)the facsimile signature of a party shall constitute a valid and binding execution and delivery of this Agreement by such party.

[signature pages follows]

IN WITNESS WHEREOF, the parties have executed this Assignment and Amendment Agreement as of the date first set forth above.

THE ASSIGNORS:

HARBORVIEW MASTER FUND LP

By:  Navigator Management LTD,

its authorized signatory

By:                                                                

Name:

Title:  Authorised Signatory

MONARCH CAPITAL FUND

By:  Navigator Management LTD,

its authorized signatory

By:                                                                

Name:

Title:  Director

DKR SOUNDSHORE OASIS

HOLDING FUND LTD

By:  DKR Oasis management Company LP

its investment manager

By:/s/ Barbara Burger

Name:  Barbara Burger

Title:  Authorized Signatory

THE ASSIGNEE:

ADH VENTURES, LLC

By:/s/ Frank Guarino

Name:  Frank Guarino

Title:

[signature pages continues]

THE COMPANY:

ANALYTICAL SURVEYS, INC.

By:/s/ Lori Jones

Name:  Lori Jones

Title:  CEO

The undersigned hereby consents to this Assignment and Amendment Agreement.

SURVEYS HOLDINGS, INC.

By:/s/ Lori Jones

Name:  Lori Jones

Title:  CEO

EX-99.1

Exhibit 99.1

For Immediate Release

Analytical Surveys and Axion International Complete Merger

BASKING RIDGE, NJ, March 25, 2008 – Analytical Surveys, Inc. (OTCBB: ANLT) ("Analytical") today announced that it has completed the acquisition of 100% of the common stock of Axion International, Inc. ("Axion"), through a merger of Analytical's newly formed subsidiary into Axion.  Pursuant to the merger, the former shareholders of Axion received 36.8 million shares of Common Stock of Analytical, constituting approximately 90.7% of the issued and outstanding Common Stock of Analytical.

In connection with the merger, James Kerstein, the Chief Executive Officer of Axion, and Marc Green, President of Axion, were appointed as members of Analytical's Board of Directors.  In additon, Mr. Kerstein was appointed Chief Executive Officer, and Mr. Green was appointed President.

Axion is the exclusive licensee of revolutionary patented technologies developed for the production of structural plastic products such as railroad crossties, bridge infrastructure, utility poles, marine pilings and bulk heading.  These technologies which were developed by scientists at Rutgers University, a principal shareholder of Axion, transform recycled consumer and industrial plastics into structural products which are more durable and have a substantially greater useful life than traditional products made from wood, steel and concrete.  In addition, Axion’s recycled composite products will result in substantial reduction in greenhouse gases and also offer flexible design features not available in standard wood, steel or concrete products.

Axion expects to commence production and sales by the third quarter 2008.

Jim Kerstein, CEO of Axion stated “The commencement of our operations utilizing these groundbreaking technologies coincides with our Country’s need to rebuild much of its transportation related infrastructure and the growing awareness of our need to expand the production and use of environmentally friendly products.  For example, North American freight and transit line railroads, which previously installed more than 200,000 crossties produced with the Rutgers’ technology, replace more than 18 million railroad crossties each year.  Railroad crossties which we will produce from recycled plastics will last approximately 50 years.  We are seeking to make substantial inroads in that market and to build bridges for both public and private projects. Our merger with Analytical Surveys puts us in a position to raise the additional capital we will need to effectively implement our planned production.”

Contact

James Kerstein, Chief Executive Officer

665 Martinsville Road, Basking Ridge, NJ 07920

(908) 542-0888

Website:  www.axionintl.com

Forward-Looking Statements

This press release contains "forward-looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934. Forward-looking statements are statements that are not historical facts, including statements about Axion's future plans and expectations.  These forward-looking statements, based upon current beliefs and expectations of Axion's and Analytical's management, are subject to various risks and uncertainties that could cause their actual results to differ materially from those currently anticipated.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: general economic conditions, timing approval and market acceptance of new products, introduction of new and superior products by others, fluctuations in customer demand, geopolitical and regulatory changes, risks in the product and technology development and ability to obtain additional financing.