Document:

Unassociated Document

    DRIFTWOOD
      VENTURES, INC.

    

    2007
      EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN

     

    
      
        	
                1.

              	
                DEFINITIONS.

              

      

       

    

    
      	 	
              Unless
                otherwise specified or unless the context otherwise requires, the
                following terms, as used in this Driftwood Ventures, Inc. 2007 Employee,
                Director and Consultant Stock Plan, have the following
                meanings:

            

    

    

    
      	 	 	
              Administrator
                means the Board of Directors, unless it has delegated power to act
                on its
                behalf to the Committee, in which case the Administrator means the
                Committee.

            

    

    

    
      	 	 	
              Affiliate
                means a corporation which, for purposes of Section 424 of the Code,
                is a
                parent or subsidiary of the Company, direct or
                indirect.

            

    

    

    
      	 	 	
              Agreement
                means an agreement between the Company and a Participant delivered
                pursuant to the Plan, in such form as the Administrator shall
                approve.

            

    

    

    
      	 	 	
              Board
                of Directors
                means the Board of Directors of the
                Company.

            

    

    

    
      	 	 	
              Cause
                means dishonesty with respect to the Company or any Affiliate,
                insubordination, substantial malfeasance or non-feasance of duty,
                unauthorized disclosure of confidential information, breach by the
                Participant of any provision of any employment, consulting, advisory,
                nondisclosure, non-competition or similar agreement between the
                Participant and the Company, and conduct substantially prejudicial
                to the
                business of the Company or any Affiliate; provided, however, that
                any
                provision in an agreement between the Participant and the Company
                or an
                Affiliate, which contains a conflicting definition of Cause for
                termination and which is in effect at the time of such termination,
                shall
                supersede this definition with respect to that Participant. The
                determination of the Administrator as to the existence of Cause will
                be
                conclusive on the Participant and the
                Company.

            

    

    

    
      	 	 	
              Code
                means the United States Internal Revenue Code of 1986, as
                amended.

            

    

    

    
      	 	 	
              Committee
                means the committee of the Board of Directors to which the Board
                of
                Directors has delegated power to act under or pursuant to the provisions
                of the Plan.

            

    

    

    
      	 	 	
              Common
                Stock
                means shares of the Company’s common stock, $.001 par value per
                share.

            

    

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              Company
                means Driftwood Ventures, Inc., a Delaware
                corporation.

            

    

    

    
      	 	 	
              Disability
                or
                Disabled
                means permanent and total disability as defined in Section 22(e)(3)
                of the
                Code.

            

    

    

    
      	 	 	
              Employee
                means any employee of the Company or of an Affiliate (including,
                without
                limitation, an employee who is also serving as an officer or director
                of
                the Company or of an Affiliate), designated by the Administrator
                to be
                eligible to be granted one or more Stock Rights under the
                Plan.

            

    

    

    
      	 	 	
              Fair
                Market Value
                of
                a Share of Common Stock means:

            

    

    

    (1) If
      the
      Common Stock is listed on a national securities exchange or traded in the
      over-the-counter market and sales prices are regularly reported for the Common
      Stock, the closing or, if not applicable, the last price of the Common Stock
      on
      the composite tape or other comparable reporting system for the trading day
      on
      the applicable date and if such applicable date is not a trading day, the last
      market trading day prior to such date; 

    

    (2) If
      the
      Common Stock is not traded on a national securities exchange but is traded
      on
      the over-the-counter market, if sales prices are not regularly reported for
      the
      Common Stock for the trading day referred to in clause (1), and if bid and
      asked prices for the Common Stock are regularly reported, the mean between
      the
      bid and the asked price for the Common Stock at the close of trading in the
      over-the-counter market for the trading day on which Common Stock was traded
      on
      the applicable date and if such applicable date is not a trading day, the last
      market trading day prior to such date; and

    

    (3) If
      the
      Common Stock is neither listed on a national securities exchange nor traded
      in
      the over-the-counter market, such value as the Administrator, in good faith,
      shall determine.

    

    
      	 	 	
              ISO
                means an option meant to qualify as an incentive stock option under
                Section 422 of the Code.

            

    

    

    
      	 	 	
              Non-Qualified
                Option
                means an option which is not intended to qualify as an
                ISO.

            

    

    

    
      	 	 	
              Option
                means an ISO or Non-Qualified Option granted under the
                Plan.

            

    

    

    
      	 	 	
              Participant
                means an Employee, director or consultant of the Company or an Affiliate
                to whom one or more Stock Rights are granted under the Plan. As
                used herein, “Participant” shall include “Participant’s Survivors” where
                the context requires.

            

    

    

    
      	 	 	
              Plan
                means this Driftwood Ventures, Inc. 2007 Employee, Director and Consultant
                Stock Plan.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              Shares
                means shares of the Common Stock as to which Stock Rights have been
                or may
                be granted under the Plan or any shares of capital stock into which
                the
                Shares are changed or for which they are exchanged within the provisions
                of Paragraph 3 of the Plan. The Shares issued under the Plan may be
                authorized and unissued shares or shares held by the Company in its
                treasury, or both.

            

    

    

    
      	 	 	
              Stock-Based
                Award
                means a grant by the Company under the Plan of an equity award or
                an
                equity based award which is not an Option or a Stock Grant.
                

            

    

    

    
      	 	 	
              Stock
                Grant
                means a grant by the Company of Shares under the
                Plan.

            

    

    

    
      	 	 	
              Stock
                Right
                means a right to Shares or the value of Shares of the Company granted
                pursuant to the Plan -- an ISO, a Non-Qualified Option, a Stock Grant
                or a
                Stock-Based Award.

            

    

    

    
      	 	 	
              Survivor
                means a deceased Participant’s legal representatives and/or any person or
                persons who acquired the Participant’s rights to a Stock Right by will or
                by the laws of descent and
                distribution.

            

    

     

    
      
        	
                2.

              	
                PURPOSES
                  OF THE PLAN.

              

      

    

    

    The
      Plan
      is intended to encourage ownership of Shares by Employees and directors of
      and
      certain consultants to the Company and its Affiliates in order to attract and
      retain such people, to induce them to work for the benefit of the Company or
      of
      an Affiliate and to provide additional incentive for them to promote the success
      of the Company or of an Affiliate. The Plan provides for the granting of ISOs,
      Non-Qualified Options, Stock Grants and Stock-Based Awards.

     

    
      	
              3.

            	
              SHARES
                SUBJECT TO THE PLAN.

            

    

    

    (a) The
      number of Shares which may be issued from time to time pursuant to this Plan
      shall be one million (1,000,000) shares, or the equivalent of such number of
      Shares after the Administrator, in its sole discretion, has interpreted the
      effect of any future stock split, stock dividend, combination, recapitalization
      or similar transaction in accordance with Paragraph 24 of the Plan.

    

    (b)
      If an
      Option ceases to be “outstanding”, in whole or in part (other than by exercise),
      or if the Company shall reacquire (at not more than its original issuance price)
      any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any
      Stock Right expires or is forfeited, cancelled, or otherwise terminated or
      results in any Shares not being issued, the unissued Shares which were subject
      to such Stock Right shall again be available for issuance from time to time
      pursuant to this Plan. Notwithstanding the foregoing, if a Stock Right is
      exercised, in whole or in part, by tender of Shares or if the Company’s tax
      withholding obligation is satisfied by withholding Shares, the number of Shares
      deemed to have been issued under the Plan for purposes of the limitation set
      forth in Paragraph 3(a) above shall be the number of Shares that were subject
      to
      the Stock Right or portion thereof, and not the net number of Shares actually
      issued.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    
      	
              4.

            	
              ADMINISTRATION
                OF THE PLAN.

            

    

    

    The
      Administrator of the Plan will be the Board of Directors, except to the extent
      the Board of Directors delegates its authority to the Committee, in which case
      the Committee shall be the Administrator. Subject to the provisions of the
      Plan,
      the Administrator is authorized to:

    

    
      	 	
              a.

            	
              Interpret
                the provisions of the Plan and all Stock Rights and to make all rules
                and
                determinations which it deems necessary or advisable for the
                administration of the Plan;

            

    

    

    
      	 	
              b.

            	
              Determine
                which Employees, directors and consultants shall be granted Stock
                Rights;

            

    

    

    
      	 	
              c.

            	
              Determine
                the number of Shares for which a Stock Right or Stock Rights shall
                be
                granted, provided, however, that in no event shall Stock Rights with
                respect to more than 250,000 Shares be granted to any Participant
                in any
                fiscal year;

            

    

    

    
      	 	
              d.

            	
              Specify
                the terms and conditions upon which a Stock Right or Stock Rights
                may be
                granted; 

            

    

    

    
      	 	
              e.

            	
              Make
                changes to any outstanding Stock Right, including, without limitation,
                to
                reduce or increase the exercise price or purchase price, accelerate
                the
                vesting schedule or extend the expiration date, provided that no
                such
                change shall impair the rights of a Participant under any grant previously
                made without such Participant’s consent;

            

    

    

    
      	 	
              f.

            	
              Buy
                out for a payment in cash or Shares, a Stock Right previously granted
                and/or cancel any such Stock Right and grant in substitution therefor
                other Stock Rights, covering the same or a different number of Shares
                and
                having an exercise price or purchase price per share which may be
                lower or
                higher than the exercise price or purchase price of the cancelled
                Stock
                Right, based on such terms and conditions as the Administrator shall
                establish and the Participant shall accept;
                and

            

    

    

    
      	 	
              g.

            	
              Adopt
                any sub-plans applicable to residents of any specified jurisdiction
                as it
                deems necessary or appropriate in order to comply with or take advantage
                of any tax or other laws applicable to the Company or to Plan Participants
                or to otherwise facilitate the administration of the Plan, which
                sub-plans
                may include additional restrictions or conditions applicable to Stock
                Rights or Shares issuable pursuant to a Stock
                Right;

            

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    provided,
      however, that all such interpretations, rules, determinations, terms and
      conditions shall be made and prescribed in the context of not causing any
      adverse tax consequences under Section 409A of the Code and preserving the
      tax
      status under Section 422 of the Code of those Options which are designated
      as
      ISOs. Subject to the foregoing, the interpretation and construction by the
      Administrator of any provisions of the Plan or of any Stock Right granted under
      it shall be final, unless otherwise determined by the Board of Directors, if
      the
      Administrator is the Committee. In addition, if the Administrator is the
      Committee, the Board of Directors may take any action under the Plan that would
      otherwise be the responsibility of the Committee.

    

    To
      the
      extent permitted under applicable law, the Board of Directors or the Committee
      may allocate all or any portion of its responsibilities and powers to any one
      or
      more of its members and may delegate all or any portion of its responsibilities
      and powers to any other person selected by it. The Board of Directors or the
      Committee may revoke any such allocation or delegation at any time.

    
      

      
        	
                5.

              	
                ELIGIBILITY
                  FOR PARTICIPATION.

              

      

    

    

    The
      Administrator will, in its sole discretion, name the Participants in the Plan,
      provided, however, that each Participant must be an Employee, director or
      consultant of the Company or of an Affiliate at the time a Stock Right is
      granted. Notwithstanding the foregoing, the Administrator may authorize the
      grant of a Stock Right to a person not then an Employee, director or consultant
      of the Company or of an Affiliate; provided, however, that the actual grant
      of
      such Stock Right shall be conditioned upon such person becoming eligible to
      become a Participant at or prior to the time of the execution of the Agreement
      evidencing such Stock Right. ISOs may be granted only to Employees.
      Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to
      any
      Employee, director or consultant of the Company or an Affiliate. The granting
      of
      any Stock Right to any individual shall neither entitle that individual to,
      nor
      disqualify him or her from, participation in any other grant of Stock
      Rights.

     

    
      
        
          	
                  6.

                	
                  TERMS
                    AND CONDITIONS OF OPTIONS.

                

        

      

       

    

    Each
      Option shall be set forth in writing in an Option Agreement, duly executed
      by
      the Company and, to the extent required by law or requested by the Company,
      by
      the Participant. The Administrator may provide that Options be granted subject
      to such terms and conditions, consistent with the terms and conditions
      specifically required under this Plan, as the Administrator may deem appropriate
      including, without limitation, subsequent approval by the shareholders of the
      Company of this Plan or any amendments thereto. The Option Agreements shall
      be
      subject to at least the following terms and conditions:

    

    
      	 	
              a.

            	
              Non-Qualified
                Options:
                Each Option intended to be a Non-Qualified Option shall be subject
                to the
                terms and conditions which the Administrator determines to be appropriate
                and in the best interest of the Company, subject to the following
                minimum
                standards for any such Non-Qualified
                Option:

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              i.

            	
              Option
                Price:
                Each Option Agreement shall state the option price (per share) of
                the
                Shares covered by each Option, which option price shall be determined
                by
                the Administrator but shall not be less than the Fair Market Value
                per
                share of Common Stock. 

            

    

    

    
      	 	 	
              ii.

            	
              Number
                of Shares:
                Each Option Agreement shall state the number of Shares to which it
                pertains.

            

    

     

    
      	 	 	
              iii.

            	
              Option
                Periods:
                Each Option Agreement shall state the date or dates on which it first
                is
                exercisable and the date after which it may no longer be exercised,
                and
                may provide that the Option rights accrue or become exercisable in
                installments over a period of months or years, or upon the occurrence
                of
                certain conditions or the attainment of stated goals or
                events.

            

    

    

    
      	 	 	
              iv.

            	
              Option
                Conditions:
                Exercise of any Option may be conditioned upon the Participant’s execution
                of a Share purchase agreement in form satisfactory to the Administrator
                providing for certain protections for the Company and its other
                shareholders, including requirements
                that:

            

    

    

    
      	 	 	 	
              A.

            	
              The
                Participant’s or the Participant’s Survivors’ right to sell or transfer
                the Shares may be restricted; and

            

    

    

    
      	 	 	 	
              B.

            	
              The
                Participant or the Participant’s Survivors may be required to execute
                letters of investment intent and must also acknowledge that the Shares
                will bear legends noting any applicable
                restrictions.

            

    

    

    
      	 	
              b.

            	
              ISOs:
                Each Option intended to be an ISO shall be issued only to an Employee
                and
                be subject to the following terms and conditions, with such additional
                restrictions or changes as the Administrator determines are appropriate
                but not in conflict with Section 422 of the Code and relevant regulations
                and rulings of the Internal Revenue
                Service:

            

    

    

    
      	 	 	
              i.

            	
              Minimum
                standards:
                The ISO shall meet the minimum standards required of Non-Qualified
                Options, as described in Paragraph 6(a) above, except clause (i)
                thereunder.

            

    

    

    
      	 	 	
              ii.

            	
              Option
                Price:
                Immediately before the ISO is granted, if the Participant owns, directly
                or by reason of the applicable attribution rules in Section 424(d) of
                the Code:

            

    

    

    
      	 	 	 	
              A.

            	
              10%
                or
                less
                of
                the total combined voting power of all classes of stock of the Company
                or
                an Affiliate, the Option price per share of the Shares covered by
                each ISO
                shall not be less than 100% of the Fair Market Value per share of
                the
                Shares on the date of the grant of the Option;
                or

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    
      	 	 	 	
              B.

            	
              More
                than 10% of the total combined voting power of all classes of stock
                of the
                Company or an Affiliate, the Option price per share of the Shares
                covered
                by each ISO shall not be less than 110% of the Fair Market Value
                on the
                date of grant.

            

    

    

    
      	 	 	
              iii.

            	
              Term
                of Option:
                For Participants who own:

            

    

    

    
      	 	 	 	
              A.

            	
              10%
                or
                less
                of
                the total combined voting power of all classes of stock of the Company
                or
                an Affiliate, each ISO shall terminate not more than ten years from
                the
                date of the grant or at such earlier time as the Option Agreement
                may
                provide; or

            

    

    

    
      	 	 	 	
              B.

            	
              More
                than 10% of the total combined voting power of all classes of stock
                of the
                Company or an Affiliate, each ISO shall terminate not more than five
                years
                from the date of the grant or at such earlier time as the Option
                Agreement
                may provide.

            

    

    

    
      	 	 	
              iv.

            	
              Limitation
                on Yearly Exercise:
                The Option Agreements shall restrict the amount of ISOs which may
                become
                exercisable in any calendar year (under this or any other ISO plan
                of the
                Company or an Affiliate) so that the aggregate Fair Market Value
                (determined at the time each ISO is granted) of the stock with respect
                to
                which ISOs are exercisable for the first time by the Participant
                in any
                calendar year does not exceed
                $100,000.

            

    

     

    
      	
              7.

            	
              TERMS
                AND CONDITIONS OF STOCK GRANTS.

            

    

    

    Each
      offer of a Stock Grant to a Participant shall state the date prior to which
      the
      Stock Grant must be accepted by the Participant, and the principal terms of
      each
      Stock Grant shall be set forth in an Agreement, duly executed by the Company
      and, to the extent required by law or requested by the Company, by the
      Participant. The Agreement shall be in a form approved by the Administrator
      and
      shall contain terms and conditions which the Administrator determines to be
      appropriate and in the best interest of the Company, subject to the following
      minimum standards:

    

    
      	 	
              (a)

            	
              Each
                Agreement shall state the purchase price (per share), if any, of
                the
                Shares covered by each Stock Grant, which purchase price shall be
                determined by the Administrator but shall not be less than the minimum
                consideration required by the Delaware General Corporation Law on
                the date
                of the grant of the Stock Grant;

            

    

    

    
      	 	
              (b)

            	
              Each
                Agreement shall state the number of Shares to which the Stock Grant
                pertains; and

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    
      	 	
              (c)

            	
              Each
                Agreement shall include the terms of any right of the Company to
                restrict
                or reacquire the Shares subject to the Stock Grant, including the
                time and
                events upon which such rights shall accrue and the purchase price
                therefor, if any.

            

    

     

    
      	
              8.

            	
              TERMS
                AND CONDITIONS OF OTHER STOCK-BASED AWARDS.
                

            

    

    

    The
      Administrator shall have the right to grant other Stock-Based Awards based
      upon
      the Common Stock having such terms and conditions as the Administrator may
      determine, including, without limitation, the grant of Shares based upon certain
      conditions, the grant of securities convertible into Shares and the grant of
      stock appreciation rights, phantom stock awards or stock units. The principal
      terms of each Stock-Based Award shall be set forth in an Agreement, duly
      executed by the Company and, to the extent required by law or requested by
      the
      Company, by the Participant. The Agreement shall be in a form approved by the
      Administrator and shall contain terms and conditions which the Administrator
      determines to be appropriate and in the best interest of the Company.

    

    The
      Company intends that the Plan and any Stock-Based Awards granted hereunder
      be
      exempt from the application of Section 409A of the Code or meet the requirements
      of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code
      (and any successor provisions of the Code) and the regulations and other
      guidance issued thereunder (the “Requirements”), to the extent applicable, and
      be operated in accordance with such Requirements so that any compensation
      deferred under any Stock-Based Award (and applicable investment earnings) shall
      not be included in income under Section 409A of the Code. Any ambiguities in
      the
      Plan shall be construed to effect the intent as described in this Paragraph
      8.

    
       

      
        	
                9.

              	
                EXERCISE
                  OF OPTIONS AND ISSUE OF SHARES.

              

      

       

    

    An
      Option
      (or any part or installment thereof) shall be exercised by giving written notice
      to the Company or its designee, together with provision for payment of the
      full
      purchase price in accordance with this Paragraph for the Shares as to which
      the
      Option is being exercised, and upon compliance with any other condition(s)
      set
      forth in the Option Agreement. Such notice shall be signed by the person
      exercising the Option, shall state the number of Shares with respect to which
      the Option is being exercised and shall contain any representation required
      by
      the Plan or the Option Agreement. Payment of the purchase price for the Shares
      as to which such Option is being exercised shall be made (a) in United
      States dollars in cash or by check, or (b) at the discretion of the
      Administrator, through delivery of shares of Common Stock having a Fair Market
      Value equal as of the date of the exercise to the cash exercise price of the
      Option and held for at least six months, or (c) at the discretion of the
      Administrator, by having the Company retain from the shares otherwise issuable
      upon exercise of the Option, a number of shares having a Fair Market Value
      equal
      as of the date of exercise to the exercise price of the Option, or (d) at the
      discretion of the Administrator, by delivery of the grantee’s personal recourse
      note bearing interest payable not less than annually at no less than 100% of
      the
      applicable Federal rate, as defined in Section 1274(d) of the Code, or
      (e) at the discretion of the Administrator, in accordance with a cashless
      exercise program established with a securities brokerage firm, and approved
      by
      the Administrator, or (f) at the discretion of the Administrator, by any
      combination of (a), (b), (c), (d) and (e) above or (g) at the discretion of
      the
      Administrator, payment of such other lawful consideration as the Administrator
      may determine. Notwithstanding the foregoing, the Administrator shall accept
      only such payment on exercise of an ISO as is permitted by Section 422 of the
      Code.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    The
      Company shall then reasonably promptly deliver the Shares as to which such
      Option was exercised to the Participant (or to the Participant’s Survivors, as
      the case may be). In determining what constitutes “reasonably promptly,” it is
      expressly understood that the issuance and delivery of the Shares may be delayed
      by the Company in order to comply with any law or regulation (including, without
      limitation, state securities or “blue sky” laws) which requires the Company to
      take any action with respect to the Shares prior to their issuance. The Shares
      shall, upon delivery, be fully paid, non-assessable Shares.

    

    The
      Administrator shall have the right to accelerate the date of exercise of any
      installment of any Option; provided that the Administrator shall not accelerate
      the exercise date of any installment of any Option granted to an Employee as
      an
      ISO (and not previously converted into a Non-Qualified Option pursuant to
      Paragraph 27) without the prior approval of the Employee if such acceleration
      would violate the annual vesting limitation contained in Section 422(d) of
      the
      Code, as described in Paragraph 6(b)(iv).

    

    The
      Administrator may, in its discretion, amend any term or condition of an
      outstanding Option provided (i) such term or condition as amended is permitted
      by the Plan, (ii) any such amendment shall be made only with the consent of
      the
      Participant to whom the Option was granted, or in the event of the death of
      the
      Participant, the Participant’s Survivors, if the amendment is adverse to the
      Participant, and (iii) any such amendment of any Option shall be made only
      after
      the Administrator determines whether such amendment would constitute a
“modification” of any Option which is an ISO (as that term is defined in Section
      424(h) of the Code) or would cause any adverse tax consequences for the holder
      of any Option including, but not limited to, pursuant to Section 409A of the
      Code.

    

    
      	
              10.

            	
              ACCEPTANCE
                OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

            

    

    

    A
      Stock
      Grant or Stock-Based Award (or any part or installment thereof) shall be
      accepted by executing the applicable Agreement and delivering it to the Company
      or its designee, together with provision for payment of the full purchase price,
      if any, in accordance with this Paragraph for the Shares as to which such Stock
      Grant or Stock-Based Award is being accepted, and upon compliance with any
      other
      conditions set forth in the applicable Agreement. Payment of the purchase price
      for the Shares as to which such Stock Grant or Stock-Based Award is being
      accepted shall be made (a) in United States dollars in cash or by check, or
      (b)
      at the discretion of the Administrator, through delivery of shares of Common
      Stock held for at least six months and having a Fair Market Value equal as
      of
      the date of acceptance of the Stock Grant or Stock Based-Award to the purchase
      price of the Stock Grant or Stock-Based Award, or (c) at the discretion of
      the
      Administrator, by delivery of the grantee’s personal recourse note bearing
      interest payable not less than annually at no less than 100% of the applicable
      Federal rate, as defined in Section 1274(d) of the Code, or (d) at the
      discretion of the Administrator, by any combination of (a), (b) and (c) above;
      or (e) at the discretion of the Administrator, payment of such other lawful
      consideration as the Administrator may determine.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    The
      Company shall then, if required by the applicable Agreement, reasonably promptly
      deliver the Shares as to which such Stock Grant or Stock-Based Award was
      accepted to the Participant (or to the Participant’s Survivors, as the case may
      be), subject to any escrow provision set forth in the applicable Agreement.
      In
      determining what constitutes “reasonably promptly,” it is expressly understood
      that the issuance and delivery of the Shares may be delayed by the Company
      in
      order to comply with any law or regulation (including, without limitation,
      state
      securities or “blue sky” laws) which requires the Company to take any action
      with respect to the Shares prior to their issuance.

    

    The
      Administrator may, in its discretion, amend any term or condition of an
      outstanding Stock Grant, Stock-Based Award or applicable Agreement provided
      (i)
      such term or condition as amended is permitted by the Plan, (ii) any such
      amendment shall be made only with the consent of the Participant to whom the
      Stock Grant or Stock-Based Award was made, if the amendment is adverse to the
      Participant, and (iii) any such amendment shall be made only after the
      Administrator determines whether such amendment would cause any adverse tax
      consequences to the Participant, including, but not limited to, pursuant to
      Section 409A of the Code.

     

    
      	
              11.

            	
              RIGHTS
                AS A SHAREHOLDER.

            

    

    

    No
      Participant to whom a Stock Right has been granted shall have rights as a
      shareholder with respect to any Shares covered by such Stock Right, except
      after
      due exercise of the Option or acceptance of the Stock Grant or as set forth
      in
      any Agreement, and tender of the full purchase price, if any, for the Shares
      being purchased pursuant to such exercise or acceptance and registration of
      the
      Shares in the Company’s share register in the name of the
      Participant.

     

    
      	
              12.

            	
              ASSIGNABILITY
                AND TRANSFERABILITY OF STOCK RIGHTS.

            

    

    

    By
      its
      terms, a Stock Right granted to a Participant shall not be transferable by
      the
      Participant other than (i) by will or by the laws of descent and distribution,
      or (ii) as approved by the Administrator in its discretion and set forth in
      the
      applicable Agreement. Notwithstanding the foregoing, an ISO transferred except
      in compliance with clause (i) above shall no longer qualify as an ISO. The
      designation of a beneficiary of a Stock Right by a Participant, with the prior
      approval of the Administrator and in such form as the Administrator shall
      prescribe, shall not be deemed a transfer prohibited by this Paragraph. Except
      as provided above, a Stock Right shall only be exercisable or may only be
      accepted, during the Participant’s lifetime, by such Participant (or by his or
      her legal representative) and shall not be assigned, pledged or hypothecated
      in
      any way (whether by operation of law or otherwise) and shall not be subject
      to
      execution, attachment or similar process. Any attempted transfer, assignment,
      pledge, hypothecation or other disposition of any Stock Right or of any rights
      granted thereunder contrary to the provisions of this Plan, or the levy of
      any
      attachment or similar process upon a Stock Right, shall be null and
      void.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    
      	
              13.

            	
              EFFECT
                ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH
                OR
                DISABILITY.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Option Agreement, in the event of a
      termination of service (whether as an employee, director or consultant) with
      the
      Company or an Affiliate before the Participant has exercised an Option, the
      following rules apply:

    

    
      	 	
              a.

            	
              A
                Participant who ceases to be an employee, director or consultant
                of the
                Company or of an Affiliate (for any reason other than termination
                for
                Cause, Disability, or death for which events there are special rules
                in
                Paragraphs 14, 15, and 16, respectively), may exercise any Option
                granted
                to him or her to the extent that the Option is exercisable on the
                date of
                such termination of service, but only within such term as the
                Administrator has designated in a Participant’s Option
                Agreement.

            

    

    

    
      	 	
              b.

            	
              Except
                as provided in Subparagraph (c) below, or Paragraph 15 or 16, in
                no event
                may an Option intended to be an ISO, be exercised later than three
                months
                after the Participant’s termination of
                employment.

            

    

    

    
      	 	
              c.

            	
              The
                provisions of this Paragraph, and not the provisions of Paragraph
                15 or
                16, shall apply to a Participant who subsequently becomes Disabled
                or dies
                after the termination of employment, director status or consultancy;
                provided, however, in the case of a Participant’s Disability or death
                within three months after the termination of employment, director
                status
                or consultancy, the Participant or the Participant’s Survivors may
                exercise the Option within one year after the date of the Participant’s
                termination of service, but in no event after the date of expiration
                of
                the term of the Option.

            

    

    

    
      	 	
              d.

            	
              Notwithstanding
                anything herein to the contrary, if subsequent to a Participant’s
                termination of employment, termination of director status or termination
                of consultancy, but prior to the exercise of an Option, the Board
                of
                Directors determines that, either prior or subsequent to the Participant’s
                termination, the Participant engaged in conduct which would constitute
                Cause, then such Participant shall forthwith cease to have any right
                to
                exercise any Option.

            

    

    

    
      	 	
              e.

            	
              A
                Participant to whom an Option has been granted under the Plan who
                is
                absent from the Company or an Affiliate because of temporary disability
                (any disability other than a Disability as defined in Paragraph 1
                hereof),
                or who is on leave of absence for any purpose, shall not, during
                the
                period of any such absence, be deemed, by virtue of such absence
                alone, to
                have terminated such Participant’s employment, director status or
                consultancy with the Company or with an Affiliate, except as the
                Administrator may otherwise expressly provide; provided however that
                for
                ISOs any leave of absence granted by the Administrator of greater
                than
                ninety days unless pursuant to a contract or statute that guarantees
                the
                right to reemployment shall cause such ISO to become a Non-Qualified
                Option. 

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    
      	 	
              f.

            	
              Except
                as required by law or as set forth in a Participant’s Option Agreement,
                Options granted under the Plan shall not be affected by any change
                of a
                Participant’s status within or among the Company and any Affiliates, so
                long as the Participant continues to be an employee, director or
                consultant of the Company or any
                Affiliate.

            

    

     

    
      	
              14.

            	
              EFFECT
                ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Option Agreement, the following rules
      apply if the Participant’s service (whether as an employee, director or
      consultant) with the Company or an Affiliate is terminated for Cause prior
      to
      the time that all his or her outstanding Options have been
      exercised:

    

    
      	 	
              a.

            	
              All
                outstanding and unexercised Options as of the time the Participant
                is
                notified his or her service is terminated for Cause will immediately
                be
                forfeited.

            

    

    

    
      	 	
              b.

            	
              Cause
                is not limited to events which have occurred prior to a Participant’s
                termination of service, nor is it necessary that the Administrator’s
                finding of Cause occur prior to termination. If the Administrator
                determines, subsequent to a Participant’s termination of service but prior
                to the exercise of an Option, that either prior or subsequent to
                the
                Participant’s termination the Participant engaged in conduct which would
                constitute Cause, then the right to exercise any Option is
                forfeited.

            

    

     

    
      	
              15.

            	
              EFFECT
                ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Option Agreement:

    

    
      	 	
              a.
                

            	
              A
                Participant who ceases to be an employee, director or consultant
                of the
                Company or of an Affiliate by reason of Disability may exercise any
                Option
                granted to such Participant:

            

    

    

    (i) To
      the
      extent that the Option has become exercisable but has not been exercised on
      the
      date of Disability; and

    

    (ii) In
      the
      event rights to exercise the Option accrue periodically, to the extent of a
      pro
      rata portion through the date of Disability of any additional vesting rights
      that would have accrued on the next vesting date had the Participant not become
      Disabled. The proration shall be based upon the number of days accrued in the
      current vesting period prior to the date of Disability.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    
      	 	
              b.

            	
              A
                Disabled Participant may exercise such rights only within the period
                ending one year after the date of the Participant’s Disability,
                notwithstanding that the Participant might have been able to exercise
                the
                Option as to some or all of the Shares on a later date if the Participant
                had not become Disabled and had continued to be an employee, director
                or
                consultant or, if earlier, within the originally prescribed term
                of the
                Option.

            

    

    

    
      	 	
              c.

            	
              The
                Administrator shall make the determination both of whether Disability
                has
                occurred and the date of its occurrence (unless a procedure for such
                determination is set forth in another agreement between the Company
                and
                such Participant, in which case such procedure shall be used for
                such
                determination). If requested, the Participant shall be examined by
                a
                physician selected or approved by the Administrator, the cost of
                which
                examination shall be paid for by the
                Company.

            

    

     

    
      	
              16.

            	
              EFFECT
                ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR
                CONSULTANT.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Option Agreement:

    

    
      	 	
              a.

            	
              In
                the event of the death of a Participant while the Participant is
                an
                employee, director or consultant of the Company or of an Affiliate,
                such
                Option may be exercised by the Participant’s
                Survivors:

            

    

    

    (i)
       To
      the
      extent that the Option has become exercisable but has not been exercised on
      the
      date of death; and

    

    (ii) In
      the
      event rights to exercise the Option accrue periodically, to the extent of a
      pro
      rata portion through the date of death of any additional vesting rights that
      would have accrued on the next vesting date had the Participant not died. The
      proration shall be based upon the number of days accrued in the current vesting
      period prior to the Participant’s date of death.

    

    
      	 	
              b.

            	
              If
                the Participant’s Survivors wish to exercise the Option, they must take
                all necessary steps to exercise the Option within one year after
                the date
                of death of such Participant, notwithstanding that the decedent might
                have
                been able to exercise the Option as to some or all of the Shares
                on a
                later date if he or she had not died and had continued to be an employee,
                director or consultant or, if earlier, within the originally prescribed
                term of the Option.

            

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    
      	
              17.

            	
              EFFECT
                OF TERMINATION OF SERVICE ON UNACCEPTED STOCK GRANTS.

            

    

    

    In
      the
      event of a termination of service (whether as an employee, director or
      consultant) with the Company or an Affiliate for any reason before the
      Participant has accepted a Stock Grant, such offer shall terminate.

    

    For
      purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom
      a
      Stock Grant has been offered and accepted under the Plan who is absent from
      work
      with the Company or with an Affiliate because of temporary disability (any
      disability other than a Disability as defined in Paragraph 1 hereof), or who
      is
      on leave of absence for any purpose, shall not, during the period of any such
      absence, be deemed, by virtue of such absence alone, to have terminated such
      Participant’s employment, director status or consultancy with the Company or
      with an Affiliate, except as the Administrator may otherwise expressly
      provide.

    

    In
      addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change
      of employment or other service within or among the Company and any Affiliates
      shall not be treated as a termination of employment, director status or
      consultancy so long as the Participant continues to be an employee, director
      or
      consultant of the Company or any Affiliate.

    

    
      	
              18.

            	
              EFFECT
                ON STOCK GRANTS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR
                DEATH OR
                DISABILITY.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Stock Grant Agreement, in the event of a
      termination of service (whether as an employee, director or consultant), other
      than termination for Cause, Disability, or death for which events there are
      special rules in Paragraphs 19, 20, and 21, respectively, before all forfeiture
      provisions or Company rights of repurchase shall have lapsed, then the Company
      shall have the right to cancel or repurchase that number of Shares subject
      to a
      Stock Grant as to which the Company’s forfeiture or repurchase rights have not
      lapsed.

    

    
      	
              19.

            	
              EFFECT
                ON STOCK GRANTS OF TERMINATION OF SERVICE FOR CAUSE.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Stock Grant Agreement, the following rules
      apply if the Participant’s service (whether as an employee, director or
      consultant) with the Company or an Affiliate is terminated for
      Cause:

    

    
      	 	
              a.

            	
              All
                Shares subject to any Stock Grant that remain subject to forfeiture
                provisions or as to which the Company shall have a repurchase right
                shall
                be immediately forfeited to the Company as of the time the Participant
                is
                notified his or her service is terminated for
                Cause.

            

    

    

    
      	 	
              b.

            	
              Cause
                is not limited to events which have occurred prior to a Participant’s
                termination of service, nor is it necessary that the Administrator’s
                finding of Cause occur prior to termination. If the Administrator
                determines, subsequent to a Participant’s termination of service, that
                either prior or subsequent to the Participant’s termination the
                Participant engaged in conduct which would constitute Cause, then
                the
                Company’s right to repurchase all of such Participant’s Shares shall
                apply.

            

    

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    
      	
              20.

            	
              EFFECT
                ON STOCK GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Stock Grant Agreement, the following rules
      apply if a Participant ceases to be an employee, director or consultant of
      the
      Company or of an Affiliate by reason of Disability: to the extent the forfeiture
      provisions or the Company’s rights of repurchase have not lapsed on the date of
      Disability, they shall be exercisable; provided, however, that in the event
      such
      forfeiture provisions or rights of repurchase lapse periodically, such
      provisions or rights shall lapse to the extent of a pro rata portion of the
      Shares subject to such Stock Grant through the date of Disability as would
      have
      lapsed had the Participant not become Disabled. The proration shall be based
      upon the number of days accrued prior to the date of Disability.

    

    The
      Administrator shall make the determination both of whether Disability has
      occurred and the date of its occurrence (unless a procedure for such
      determination is set forth in another agreement between the Company and such
      Participant, in which case such procedure shall be used for such determination).
      If requested, the Participant shall be examined by a physician selected or
      approved by the Administrator, the cost of which examination shall be paid
      for
      by the Company.

     

    
      	
              21.

            	
              EFFECT
                ON STOCK GRANTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR
                CONSULTANT.

            

    

    

    Except
      as
      otherwise provided in a Participant’s Stock Grant Agreement, the following rules
      apply in the event of the death of a Participant while the Participant is an
      employee, director or consultant of the Company or of an Affiliate: to the
      extent the forfeiture provisions or the Company’s rights of repurchase have not
      lapsed on the date of death, they shall be exercisable; provided, however,
      that
      in the event such forfeiture provisions or rights of repurchase lapse
      periodically, such provisions or rights shall lapse to the extent of a pro
      rata
      portion of the Shares subject to such Stock Grant through the date of death
      as
      would have lapsed had the Participant not died. The proration shall be based
      upon the number of days accrued prior to the Participant’s death.

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
       

      
        	
                22.

              	
                PURCHASE
                  FOR INVESTMENT.

              

      

    

    

    Unless
      the offering and sale of the Shares to be issued upon the particular exercise
      or
      acceptance of a Stock Right shall have been effectively registered under the
      Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”),
      the Company shall be under no obligation to issue the Shares covered by such
      exercise unless and until the following conditions have been
      fulfilled:

    

    
      	 	
              a.

            	
              The
                person(s) who exercise(s) or accept(s) such Stock Right shall warrant
                to
                the Company, prior to the receipt of such Shares, that such person(s)
                are
                acquiring such Shares for their own respective accounts, for investment,
                and not with a view to, or for sale in connection with, the distribution
                of any such Shares, in which event the person(s) acquiring such Shares
                shall be bound by the provisions of the following legend which shall
                be
                endorsed upon the certificate(s) evidencing their Shares issued pursuant
                to such exercise or such grant:

            

    

    

    
      	 	 	 	
              “The
                shares represented by this certificate have been taken for investment and
                they may not be sold or otherwise transferred by any person, including
                a
                pledgee, unless (1) either (a) a Registration Statement with respect
                to
                such shares shall be effective under the Securities Act of 1933,
                as
                amended, or (b) the Company shall have received an opinion of counsel
                satisfactory to it that an exemption from registration under such
                Act is
                then available, and (2) there shall have been compliance with all
                applicable state securities laws.”

            

    

    

    
      	 	
              b.

            	
              At
                the discretion of the Administrator, the Company shall have received
                an
                opinion of its counsel that the Shares may be issued upon such particular
                exercise or acceptance in compliance with the 1933 Act without
                registration thereunder.

            

    

    

    

    
      	
              23.

            	
              DISSOLUTION
                OR LIQUIDATION OF THE COMPANY.

            

    

    

    Upon
      the
      dissolution or liquidation of the Company, all Options granted under this Plan
      which as of such date shall not have been exercised and all Stock Grants and
      Stock-Based Awards which have not been accepted will terminate and become null
      and void; provided, however, that if the rights of a Participant or a
      Participant’s Survivors have not otherwise terminated and expired, the
      Participant or the Participant’s Survivors will have the right immediately prior
      to such dissolution or liquidation to exercise or accept any Stock Right to
      the
      extent that the Stock Right is exercisable or subject to acceptance as of the
      date immediately prior to such dissolution or liquidation. Upon the dissolution
      or liquidation of the Company, any outstanding Stock-Based Awards shall
      immediately terminate unless otherwise determined by the Administrator or
      specifically provided in the applicable Agreement.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

    
      	
              24.

            	
              ADJUSTMENTS.

            

    

    

    Upon
      the
      occurrence of any of the following events, a Participant’s rights with respect
      to any Stock Right granted to him or her hereunder shall be adjusted as
      hereinafter provided, unless otherwise specifically provided in a Participant’s
      Agreement:

    

    a. Stock
      Dividends and Stock Splits.
      If
      (i) the shares of Common Stock shall be subdivided or combined into a
      greater or smaller number of shares or if the Company shall issue any shares
      of
      Common Stock as a stock dividend on its outstanding Common Stock, or
      (ii) additional shares or new or different shares or other securities of
      the Company or other non-cash assets are distributed with respect to such shares
      of Common Stock, the number of shares of Common Stock deliverable upon the
      exercise of an Option or acceptance of a Stock Grant shall be appropriately
      increased or decreased proportionately, and appropriate adjustments shall be
      made including, in the purchase price per share, to reflect such events. The
      number of Shares subject to the limitations in Paragraph 3(a) and
      4(c) shall
      also be proportionately adjusted upon the occurrence of such
      events.

    

    b. Corporate
      Transactions.
      If the
      Company is to be consolidated with or acquired by another entity in a merger,
      consolidation, or sale of all or substantially all of the Company’s assets other
      than a transaction to merely change the state of incorporation (a “Corporate
      Transaction”), the Administrator or the board of directors of any entity
      assuming the obligations of the Company hereunder (the “Successor Board”),
      shall, as to outstanding Options, either (i) make appropriate provision for
      the
      continuation of such Options by substituting on an equitable basis for the
      Shares then subject to such Options either the consideration payable with
      respect to the outstanding shares of Common Stock in connection with the
      Corporate Transaction or securities of any successor or acquiring entity; or
      (ii) upon written notice to the Participants, provide that such Options must
      be
      exercised (either (A) to the extent then exercisable or, (B) at the discretion
      of the Administrator, any such Options being made fully exercisable for purposes
      of this Subparagraph), within a specified number of days of the date of such
      notice, at the end of which period such Options shall terminate; or (iii)
      terminate such Options in exchange for a cash payment equal to the excess of
      the
      Fair Market Value of the Shares subject to such Options (either (A) to the
      extent then exercisable or, (B) at the discretion of the Administrator, any
      such
      Options being made fully exercisable for purposes of this Subparagraph) over
      the
      exercise price thereof.

    

    With
      respect to outstanding Stock Grants, the Administrator or the Successor Board,
      shall either (i) make appropriate provisions for the continuation of such Stock
      Grants on the same terms and conditions by substituting on an equitable basis
      for the Shares then subject to such Stock Grants either the consideration
      payable with respect to the outstanding Shares of Common Stock in connection
      with the Corporate Transaction or securities of any successor or acquiring
      entity; or (ii) terminate such Stock Grants in exchange for a cash payment
      equal
      to the excess of the Fair Market Value of the Shares subject to such Stock
      Grants over the purchase price thereof, if any. In addition, in the event of
      a
      Corporate Transaction, the Administrator may waive any or all Company forfeiture
      or repurchase rights with respect to outstanding Stock Grants.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    c. Recapitalization
      or Reorganization.
      In the
      event of a recapitalization or reorganization of the Company other than a
      Corporate Transaction pursuant to which securities of the Company or of another
      corporation are issued with respect to the outstanding shares of Common Stock,
      a
      Participant upon exercising an Option or accepting a Stock Grant after the
      recapitalization or reorganization shall be entitled to receive for the purchase
      price paid upon such exercise or acceptance of the number of replacement
      securities which would have been received if such Option had been exercised
      or
      Stock Grant accepted prior to such recapitalization or
      reorganization.

    

    d. Adjustments
      to Stock-Based Awards.
      Upon
      the happening of any of the events described in Subparagraphs a, b or c above,
      any outstanding Stock-Based Award shall be appropriately adjusted to reflect
      the
      events described in such Subparagraphs. The Administrator or the Successor
      Board
      shall determine the specific adjustments to be made under this Paragraph 24,
      including, but not limited to the effect if any, of a Change of Control and,
      subject to Paragraph 4, its determination shall be conclusive.

    

    e. Modification
      of Options.
      Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph
      a,
      b or c above with respect to Options shall be made only after the Administrator
      determines whether such adjustments would constitute a “modification” of any ISO
      (as that term is defined in Section 424(h) of the Code) or would cause any
      adverse tax consequences for the holders of such Options, including, but not
      limited to, pursuant to Section 409A of the Code. If the Administrator
      determines that such adjustments made with respect to Options would constitute
      a
      modification or other adverse tax consequence, it may refrain from making such
      adjustments, unless the holder of an Option specifically agrees in writing
      that
      such adjustment be made and such writing indicates that the holder has full
      knowledge of the consequences of such “modification” on his or her income tax
      treatment with respect to the Option. This paragraph shall not apply to the
      acceleration of the vesting of any ISO that would cause any portion of the
      ISO
      to violate the annual vesting limitation contained in Section 422(d) of the
      Code, as described in Paragraph 6b(iv).

    

    
      	
              25.

            	
              ISSUANCES
                OF SECURITIES.

            

    

    

    Except
      as
      expressly provided herein, no issuance by the Company of shares of stock of
      any
      class, or securities convertible into shares of stock of any class, shall
      affect, and no adjustment by reason thereof shall be made with respect to,
      the
      number or price of shares subject to Stock Rights. Except as expressly provided
      herein, no adjustments shall be made for dividends paid in cash or in property
      (including without limitation, securities) of the Company prior to any issuance
      of Shares pursuant to a Stock Right.

     

    
      	
              26.

            	
              FRACTIONAL
                SHARES.

            

    

    

    No
      fractional shares shall be issued under the Plan and the person exercising
      a
      Stock Right shall receive from the Company cash in lieu of such fractional
      shares equal to the Fair Market Value thereof.

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    

    
      	
              27.

            	
              CONVERSION
                OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

            

    

    

    The
      Administrator, at the written request of any Participant, may in its discretion
      take such actions as may be necessary to convert such Participant’s ISOs (or any
      portions thereof) that have not been exercised on the date of conversion into
      Non-Qualified Options at any time prior to the expiration of such ISOs,
      regardless of whether the Participant is an employee of the Company or an
      Affiliate at the time of such conversion. At the time of such conversion, the
      Administrator (with the consent of the Participant) may impose such conditions
      on the exercise of the resulting Non-Qualified Options as the Administrator
      in
      its discretion may determine, provided that such conditions shall not be
      inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
      Participant the right to have such Participant’s ISOs converted into
      Non-Qualified Options, and no such conversion shall occur until and unless
      the
      Administrator takes appropriate action. The Administrator, with the consent
      of
      the Participant, may also terminate any portion of any ISO that has not been
      exercised at the time of such conversion.

     

    
      	
              28.

            	
              WITHHOLDING.

            

    

    

    In
      the
      event that any federal, state, or local income taxes, employment taxes, Federal
      Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are
      required by applicable law or governmental regulation to be withheld from the
      Participant’s salary, wages or other remuneration in connection with the
      exercise or acceptance of a Stock Right or in connection with a Disqualifying
      Disposition (as defined in Paragraph 29) or upon the lapsing of any forfeiture
      provision or right of repurchase or for any other reason required by law, the
      Company may withhold from the Participant’s compensation, if any, or may require
      that the Participant advance in cash to the Company, or to any Affiliate of
      the
      Company which employs or employed the Participant, the statutory minimum amount
      of such withholdings unless a different withholding arrangement, including
      the
      use of shares of the Company’s Common Stock or a promissory note, is authorized
      by the Administrator (and permitted by law). For purposes hereof, the fair
      market value of the shares withheld for purposes of payroll withholding shall
      be
      determined in the manner set forth under the definition of Fair Market Value
      provided in Paragraph 1 above, as of the most recent practicable date prior
      to
      the date of exercise. If the fair market value of the shares withheld is less
      than the amount of payroll withholdings required, the Participant may be
      required to advance the difference in cash to the Company or the Affiliate
      employer. The Administrator in its discretion may condition the exercise of
      an
      Option for less than the then Fair Market Value on the Participant’s payment of
      such additional withholding. 

    

    
      	
              29.

            	
              NOTICE
                TO COMPANY OF DISQUALIFYING DISPOSITION.

            

    

    

    Each
      Employee who receives an ISO must agree to notify the Company in writing
      immediately after the Employee makes a Disqualifying Disposition of any shares
      acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is
      defined in Section 424(c) of the Code and includes any disposition (including
      any sale or gift) of such shares before the later of (a) two years after the
      date the Employee was granted the ISO, or (b) one year after the date the
      Employee acquired Shares by exercising the ISO, except as otherwise provided
      in
      Section 424(c) of the Code. If the Employee has died before such stock is sold,
      these holding period requirements do not apply and no Disqualifying Disposition
      can occur thereafter.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    

    
      	
              30.

            	
              TERMINATION
                OF THE PLAN.

            

    

    

    The
      Plan
      will terminate on August 17, 2017, the date which is ten years from the
earlier
      of the
      date of its adoption by the Board of Directors and the date of its approval
      by
      the shareholders of the Company. The Plan may be terminated at an earlier date
      by vote of the shareholders or the Board of Directors of the Company; provided,
      however, that any such earlier termination shall not affect any Agreements
      executed prior to the effective date of such termination.

    

    
      	
              31.

            	
              AMENDMENT
                OF THE PLAN AND AGREEMENTS.

            

    

    

    The
      Plan
      may be amended by the shareholders of the Company. The Plan may also be amended
      by the Administrator, including, without limitation, to the extent necessary
      to
      qualify any or all outstanding Stock Rights granted under the Plan or Stock
      Rights to be granted under the Plan for favorable federal income tax treatment
      as may be afforded incentive stock options under Section 422 of the Code
      (including deferral of taxation upon exercise), and to the extent necessary
      to
      qualify the shares issuable upon exercise or acceptance of any outstanding
      Stock
      Rights granted, or Stock Rights to be granted, under the Plan for listing on
      any
      national securities exchange or quotation in any national automated quotation
      system of securities dealers. Any amendment approved by the Administrator which
      the Administrator determines is of a scope that requires shareholder approval
      shall be subject to obtaining such shareholder approval. Any modification or
      amendment of the Plan shall not, without the consent of a Participant, adversely
      affect his or her rights under a Stock Right previously granted to him or her.
      With the consent of the Participant affected, the Administrator may amend
      outstanding Agreements in a manner which may be adverse to the Participant
      but
      which is not inconsistent with the Plan. In the discretion of the Administrator,
      outstanding Agreements may be amended by the Administrator in a manner which
      is
      not adverse to the Participant.

    

    
      	
              32.

            	
              EMPLOYMENT
                OR OTHER RELATIONSHIP.

            

    

    

    Nothing
      in this Plan or any Agreement shall be deemed to prevent the Company or an
      Affiliate from terminating the employment, consultancy or director status of
      a
      Participant, nor to prevent a Participant from terminating his or her own
      employment, consultancy or director status or to give any Participant a right
      to
      be retained in employment or other service by the Company or any Affiliate
      for
      any period of time.

     

    
      	
              33.

            	
              GOVERNING
                LAW.

            

    

    

    This
      Plan
      shall be construed and enforced in accordance with the law of
      Delaware.

    

    
      
        
        

      

      
        20SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT (this “Agreement”),
      dated
      as of March 31, 2008, by and among GlobalNet Corporation, a Nevada corporation,
      with headquarters located at 2361 Campus Drive, Suite 101, Irvine, CA 92612
      (the
“Company”),
      and
      each of the purchasers set forth on the signature pages hereto (the
“Buyers”).

     

    WHEREAS:

     

    A. The
      Company and the Buyers are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the rules and
      regulations as promulgated by the United States Securities and Exchange
      Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
      Act”);

     

    B. Buyers
      desire to purchase and the Company desires to issue and sell, upon the terms
      and
      conditions set forth in this Agreement (i) 8% convertible debentures of the
      Company, in the form attached hereto as Exhibit
      “A”,
      in the
      aggregate principal amount of Eighty Five Thousand Dollars ($85,000) (together
      with any debenture(s) issued in replacement thereof or as a dividend thereon
      or
      otherwise with respect thereto in accordance with the terms thereof, the
“Debentures”),
      convertible into shares of common stock, $.005 par value per share, of the
      Company (the “Common
      Stock”),
      upon
      the terms and subject to the limitations and conditions set forth in such
      Debentures and (ii) warrants, in the form attached hereto as Exhibit
      “B”,
      to
      purchase 10,000,000 shares of Common Stock (the “Warrants”).

     

    C. Each
      Buyer wishes to purchase, upon the terms and conditions stated in this
      Agreement, such principal amount of Debentures and number of Warrants as is
      set
      forth immediately below its name on the signature pages hereto; and

     

    D. Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit
      “C”
      (the
“Registration
      Rights Agreement”),
      pursuant to which the Company has agreed to provide certain registration rights
      under the 1933 Act and the rules and regulations promulgated thereunder, and
      applicable state securities laws.

     

    NOW
      THEREFORE,
      the
      Company and each of the Buyers severally (and not jointly) hereby agree as
      follows:

     

    1. PURCHASE
      AND SALE OF DEBENTURES AND WARRANTS.

     

    a. Purchase
      of Debentures and Warrants.
      On the
      Closing Date (as defined below), the Company shall issue and sell to each Buyer
      and each Buyer severally agrees to purchase from the Company such principal
      amount of Debentures and number of Warrants as is set forth immediately below
      such Buyer’s name on the signature pages hereto, for an aggregate of Eighty Five
      Thousand Dollars ($85,000) principal amount of Debentures and Warrants to
      purchase an aggregate of 10,000,000 shares of Common Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    b. Form
      of Payment.
      On the
      Closing Date (as defined below), (i) each Buyer shall pay the purchase price
      for
      the Debentures and the Warrants to be issued and sold to it at the Closing
      (as
      defined below) (the “Purchase
      Price”)
      by
      wire transfer of immediately available funds to the Company, in accordance
      with
      the Company’s written wiring instructions, against delivery of the Debentures in
      the principal amount equal to the Purchase Price and the number of Warrants
      as
      is set forth immediately below such Buyer’s name on the signature pages hereto,
      and (ii) the Company shall deliver such Debentures and Warrants duly executed
      on
      behalf of the Company, to such Buyer, against delivery of such Purchase Price.
      

     

    c. Closing
      Date.
      Subject
      to the satisfaction (or written waiver) of the conditions thereto set forth
      in
      Section 6 and Section 7 below, the date and time of the issuance and sale of
      the
      Debentures and the Warrants pursuant to this Agreement (the “Closing
      Date”)
      shall
      be 12:00 noon, Eastern Standard Time on March 31, 2008 or such other mutually
      agreed upon time. The closing of the transactions contemplated by this Agreement
      (the “Closing”)
      shall
      occur on the Closing Date at such location as may be agreed to by the
      parties.

     

    2. BUYERS’
      REPRESENTATIONS AND WARRANTIES.
      Each
      Buyer severally (and not jointly) represents and warrants to the Company solely
      as to such Buyer that:

     

    a. Investment
      Purpose.
      As of
      the date hereof, the Buyer is purchasing the Debentures and the shares of Common
      Stock issuable upon conversion of or otherwise pursuant to the Debentures
      (including, without limitation, such additional shares of Common Stock, if
      any,
      as are issuable (i) on account of interest on the Debentures, (ii) as a result
      of the events described in Sections 1.3 and 1.4(g) of the Debentures and Section
      2(c) of the Registration Rights Agreement or (iii) in payment of the Standard
      Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this
      Agreement, such shares of Common Stock being collectively referred to herein
      as
      the “Conversion
      Shares”)
      and
      the Warrants and the shares of Common Stock issuable upon exercise thereof
      (the
“Warrant
      Shares”
and,
      collectively with the Debentures, Warrants and Conversion Shares, the
“Securities”)
      for
      its own account and not with a present view towards the public sale or
      distribution thereof, except pursuant to sales registered or exempted from
      registration under the 1933 Act; provided,
      however,
      that by
      making the representations herein, the Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act.

     

    b. Accredited
      Investor Status.
      The
      Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
      Regulation D (an “Accredited
      Investor”).

     

    c. Reliance
      on Exemptions.
      The
      Buyer understands that the Securities are being offered and sold to it in
      reliance upon specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying upon
      the truth and accuracy of, and the Buyer’s compliance with, the representations,
      warranties, agreements, acknowledgments and understandings of the Buyer set
      forth herein in order to determine the availability of such exemptions and
      the
      eligibility of the Buyer to acquire the Securities.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    d. Information.
      The
      Buyer and its advisors, if any, have been, and for so long as the Debentures
      and
      Warrants remain outstanding will continue to be, furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Securities which have been requested
      by
      the Buyer or its advisors. The Buyer and its advisors, if any, have been, and
      for so long as the Debentures and Warrants remain outstanding will continue
      to
      be, afforded the opportunity to ask questions of the Company. Notwithstanding
      the foregoing, the Company has not disclosed to the Buyer any material nonpublic
      information and will not disclose such information unless such information
      is
      disclosed to the public prior to or promptly following such disclosure to the
      Buyer. Neither such inquiries nor any other due diligence investigation
      conducted by Buyer or any of its advisors or representatives shall modify,
      amend
      or affect Buyer’s right to rely on the Company’s representations and warranties
      contained in Section 3 below. The Buyer understands that its investment in
      the
      Securities involves a significant degree of risk.

     

    e. Governmental
      Review.
      The
      Buyer 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 Securities.

     

    f. Transfer
      or Re-sale.
      The
      Buyer understands that (i) except as provided in the Registration Rights
      Agreement, the sale or re-sale of the Securities has not been and is not being
      registered under the 1933 Act or any applicable state securities laws, and
      the
      Securities may not be transferred unless (a) the Securities are sold pursuant
      to
      an effective registration statement under the 1933 Act, (b) the Buyer shall
      have
      delivered to the Company an opinion of counsel that shall be in form, substance
      and scope customary for opinions of counsel in comparable transactions to the
      effect that the Securities to be sold or transferred may be sold or transferred
      pursuant to an exemption from such registration, which opinion shall be accepted
      by the Company, (c) the Securities are sold or transferred to an “affiliate” (as
      defined in Rule 144 promulgated under the 1933 Act (or a successor rule)
      (“Rule
      144”))
      of
      the Buyer who agrees to sell or otherwise transfer the Securities only in
      accordance with this Section 2(f) and who is an Accredited Investor, (d) the
      Securities are sold pursuant to Rule 144, or (e) the Securities are sold
      pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation
      S”),
      and
      the Buyer shall have delivered to the Company an opinion of counsel that shall
      be in form, substance and scope customary for opinions of counsel in corporate
      transactions, which opinion shall be accepted by the Company; (ii) any sale
      of
      such Securities made in reliance on Rule 144 may be made only in accordance
      with
      the terms of said Rule and further, if said Rule is not applicable, any re-sale
      of such Securities under circumstances in which the seller (or the person
      through whom the sale is made) may be deemed to be an underwriter (as that
      term
      is defined in the 1933 Act) may require compliance with some other exemption
      under the 1933 Act or the rules and regulations of the SEC thereunder; and
      (iii)
      neither the Company nor any other person is under any obligation to register
      such Securities under the 1933 Act or any state securities laws or to comply
      with the terms and conditions of any exemption thereunder (in each case, other
      than pursuant to the Registration Rights Agreement). Notwithstanding the
      foregoing or anything else contained herein to the contrary, the Securities
      may
      be pledged as collateral in connection with a bona fide
      margin
      account or other lending arrangement. In the event that the Company does not
      accept the opinion of counsel provided by the Buyer with respect to the transfer
      of Securities pursuant to an exemption from registration, such as Rule 144
      or
      Regulation S, within three (3) business days of delivery of the opinion to
      the
      Company, the Company shall pay to the Buyer liquidated damages of three percent
      (3%) of the outstanding amount of the Debentures per month plus accrued and
      unpaid interest on the Debentures, prorated for partial months, in cash or
      shares at the option of the Buyer (“Standard
      Liquidated Damages Amount”).
      If
      the Buyer elects to be paid the Standard Liquidated Damages Amount in shares
      of
      Common Stock, such shares shall be issued at the Conversion Price at the time
      of
      payment.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    g. Legends.
      The
      Buyer understands that the Debentures and the Warrants and, until such time
      as
      the Conversion Shares and Warrant Shares have been registered under the 1933
      Act
      as contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 or Regulation S without any restriction as to the number
      of
      securities as of a particular date that can then be immediately sold, the
      Conversion Shares and Warrant Shares may bear a restrictive legend in
      substantially the following form (and a stop-transfer order may be placed
      against transfer of the certificates for such Securities):

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended. The securities may not be sold, transferred
      or assigned in the absence of an effective registration statement for the
      securities under said Act, or an opinion of counsel, in form, substance and
      scope customary for opinions of counsel in comparable transactions, that
      registration is not required under said Act or unless sold pursuant to Rule
      144
      or Regulation S under said Act.”

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of any Security upon which it
      is
      stamped, if, unless otherwise required by applicable state securities laws,
      (a)
      such Security is registered for sale under an effective registration statement
      filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
      Regulation S without any restriction as to the number of securities as of a
      particular date that can then be immediately sold, or (b) such holder provides
      the Company with an opinion of counsel, in form, substance and scope customary
      for opinions of counsel in comparable transactions, to the effect that a public
      sale or transfer of such Security may be made without registration under the
      1933 Act, which opinion shall be accepted by the Company so that the sale or
      transfer is effected or (c) such holder provides the Company with reasonable
      assurances that such Security can be sold pursuant to Rule 144 or Regulation
      S.
      The Buyer agrees to sell all Securities, including those represented by a
      certificate(s) from which the legend has been removed, in compliance with
      applicable prospectus delivery requirements, if any.

     

    h. Authorization;
      Enforcement.
      This
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized. This Agreement has been duly executed and delivered on behalf of
      the
      Buyer, and this Agreement constitutes, and upon execution and delivery by the
      Buyer of the Registration Rights Agreement, such agreement will constitute,
      valid and binding agreements of the Buyer enforceable in accordance with their
      terms.

     

    i. Residency.
      The
      Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
      name on the signature pages hereto. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to each Buyer that:

     

    a. Organization
      and Qualification.
      The
      Company and each of its Subsidiaries (as defined below), if any, is a
      corporation duly organized and validly existing under the laws of the
      jurisdiction in which it is incorporated, except as disclosed on Schedule 3(a).
      Schedule
      3(a)
      sets
      forth a list of all of the Subsidiaries of the Company and the jurisdiction
      in
      which each is incorporated. Except as disclosed on Schedule 3(a) and except
      that
      the Company is not in good standing in the State of Nevada, due to among other
      things, its failure to pay franchise taxes (“Good Standing Failure”), the
      Company and each of its Subsidiaries is duly qualified as a foreign corporation
      to do business and is in good standing in every jurisdiction in which its
      ownership or use of property or the nature of the business conducted by it
      makes
      such qualification necessary except where the failure to be so qualified or
      in
      good standing would not have a Material Adverse Effect. “Material
      Adverse Effect”
means
      any material adverse effect on the business, operations, assets, financial
      condition or prospects of the Company or its Subsidiaries, if any, taken as
      a
      whole, or on the transactions contemplated hereby or by the agreements or
      instruments to be entered into in connection herewith. “Subsidiaries”
means
      any corporation or other organization, whether incorporated or unincorporated,
      in which the Company owns, directly or indirectly, any equity or other ownership
      interest.

     

    b. Authorization;
      Enforcement.
      (i) The
      Company has all requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement, the Debentures and
      the Warrants and to consummate the transactions contemplated hereby and thereby
      and to issue the Securities, in accordance with the terms hereof and thereof
      except that the Company presently has insufficient shares of
      Common
      Stock authorized
      to permit the issuance of shares upon conversion of the Notes or exercise of
      the
      Warrants (“Share Insufficiency”), (ii) the execution and delivery of this
      Agreement, the Registration Rights Agreement, the Debentures and the Warrants
      by
      the Company and the consummation by it of the transactions contemplated hereby
      and thereby (including without limitation, the issuance of the Debentures and
      the Warrants and the issuance of the Conversion Shares and Warrant Shares
      issuable upon conversion or exercise thereof) have been duly authorized by
      the
      Company’s Board of Directors and no further consent or authorization of the
      Company, its Board of Directors, or its shareholders is required, (iii) this
      Agreement has been duly executed and delivered by the Company by its authorized
      representative, and such authorized representative is the true and official
      representative with authority to sign this Agreement and the other documents
      executed in connection herewith and bind the Company accordingly, and (iv)
      this
      Agreement constitutes, and upon execution and delivery by the Company of the
      Registration Rights Agreement, the Debentures and the Warrants, each of such
      instruments will constitute, a legal, valid and binding obligation of the
      Company enforceable against the Company in accordance with its
      terms.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    c. Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of (i)
      20,000,000,000 shares of Common Stock, of which approximately 12,506,778,155
      shares are issued and outstanding, 0 shares are reserved for issuance pursuant
      to the Company’s stock option plans, approximately 0 shares are reserved for
      issuance pursuant to securities (other than the Notes and the Warrants)
      exercisable for, or convertible into or exchangeable for shares of Common Stock
      and, 860,000,000 shares are reserved for issuance upon conversion of the Notes
      and exercise of the Warrants (subject to adjustment pursuant to the Company’s
      covenant set forth in Section 4(h) below); and (ii) 0 shares of preferred stock,
      of which no shares are issued and outstanding. All of such outstanding shares
      of
      capital stock are, or upon issuance will be, duly authorized, validly issued,
      fully paid and nonassessable, subject to the Share Insufficiency. No shares
      of
      capital stock of the Company are subject to preemptive rights or any other
      similar rights of the shareholders of the Company or any liens or encumbrances
      imposed through the actions or failure to act of the Company. Except as
      disclosed in Schedule
      3(c),
      as of
      the effective date of this Agreement, (i) there are no outstanding options,
      warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
      agreements, understandings, claims or other commitments or rights of any
      character whatsoever relating to, or securities or rights convertible into
      or
      exchangeable for any shares of capital stock of the Company or any of its
      Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
      is
      or may become bound to issue additional shares of capital stock of the Company
      or any of its Subsidiaries, (ii) there are no agreements or arrangements under
      which the Company or any of its Subsidiaries is obligated to register the sale
      of any of its or their securities under the 1933 Act (except the Registration
      Rights Agreement) and (iii) there are no anti-dilution or price adjustment
      provisions contained in any security issued by the Company (or in any agreement
      providing rights to security holders) that will be triggered by the issuance
      of
      the Notes, the Warrants, the Conversion Shares or Warrant Shares. The Company
      has furnished to the Buyer true and correct copies of the Company’s Articles of
      Incorporation as in effect on the date hereof (“Articles
      of Incorporation”),
      the
      Company’s By-laws, as in effect on the date hereof (the “By-laws”).
      The
      Company shall provide the Buyer with a written update of this representation
      signed by the Company’s Chief Executive or Chief Financial Officer on behalf of
      the Company as of the Closing Date.

     

    d. Issuance
      of Shares.
      Subject
      to the Share Insufficiency,
      the
      Conversion Shares and Warrant Shares are duly authorized and, upon conversion
      of
      the Debentures and exercise of the Warrants in accordance with their respective
      terms, will be validly issued, fully paid and non-assessable, and free from
      all
      taxes, liens, claims and encumbrances with respect to the issue thereof and
      shall not be subject to preemptive rights or other similar rights of
      shareholders of the Company and will not impose personal liability upon the
      holder thereof.

     

    e. Acknowledgment
      of Dilution.
      The
      Company understands and acknowledges the potentially dilutive effect to the
      Common Stock upon the issuance of the Conversion Shares and Warrant Shares
      upon
      conversion of the Debenture or exercise of the Warrants. The Company further
      acknowledges that its obligation to issue Conversion Shares and Warrant Shares
      upon conversion of the Debentures or exercise of the Warrants in accordance
      with
      this Agreement, the Debentures and the Warrants is absolute and unconditional
      regardless of the dilutive effect that such issuance may have on the ownership
      interests of other shareholders of the Company.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    f. No
      Conflicts.
      The
      execution, delivery and performance of this Agreement, the Registration Rights
      Agreement, the Debentures, the Security Agreement and the Warrants by the
      Company and the consummation by the Company of the transactions contemplated
      hereby and thereby (including, without limitation, the issuance and reservation
      for issuance of the Conversion Shares and Warrant Shares) will not (i) subject
      to the Share Insufficiency conflict with or result in a violation of any
      provision of the Articles of Incorporation or By-laws or (ii) violate or
      conflict with, or result in a breach of any provision of, or constitute a
      default (or an event which with notice or lapse of time or both could become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture, patent, patent
      license or instrument to which the Company or any of its Subsidiaries is a
      party, or (iii) result
      in
      a violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws and regulations and regulations of any
      self-regulatory organizations to which the Company or its securities are
      subject) applicable to the Company or any of its Subsidiaries or by which any
      property or asset of the Company or any of its Subsidiaries is bound or affected
      (except for such conflicts, defaults, terminations, amendments, accelerations,
      cancellations and violations as would not, individually or in the aggregate,
      have a Material Adverse Effect). Other
      than with respect to the Share
      Insufficiency,
      neither
      the Company nor any of its Subsidiaries is in violation of its Articles of
      Incorporation, By-laws or other organizational documents and neither the Company
      nor any of its Subsidiaries is in default (and no event has occurred which
      with
      notice or lapse of time or both could put the Company or any of its Subsidiaries
      in default) under, and neither the Company nor any of its Subsidiaries has
      taken
      any action or failed to take any action that would give to others any rights
      of
      termination, amendment, acceleration or cancellation of, any agreement,
      indenture or instrument to which the Company or any of its Subsidiaries is
      a
      party or by which any property or assets of the Company or any of its
      Subsidiaries is bound or affected, except for possible defaults as would not,
      individually or in the aggregate, have a Material Adverse Effect. The businesses
      of the Company and its Subsidiaries, if any, are not being conducted, and shall
      not be conducted so long as a Buyer owns any of the Securities, in violation
      of
      any law, ordinance or regulation of any governmental entity. Except as
      specifically contemplated
      by this Agreement 
      and (i)
      subject to the Company’s obtaining shareholders’ and directors’ consents to
      amend its certificate of incorporation to increase the number of shares of
      common stock that it is authorized to issue and (ii) the Company’s regaining its
      good standing in the State of Nevada and as
      required under the 1933 Act and any applicable state securities laws, the
      Company is not required to obtain any consent, authorization or order of, or
      make any filing or registration with, any court, governmental agency, regulatory
      agency, self regulatory organization or stock market or any third party in
      order
      for it to execute, deliver or perform any of its obligations under this
      Agreement, the Registration Rights Agreement, the Debentures or the Warrants
      in
      accordance with the terms hereof or thereof or to issue and sell the Debentures
      and Warrants in accordance with the terms hereof and to issue the Conversion
      Shares upon conversion of the Debentures and the Warrant Shares upon exercise
      of
      the Warrants. Subject to the Share Insufficiency and Good Standing Failure
      and
      except as disclosed in Schedule
      3(f),
      all
      consents, authorizations, orders, filings and registrations which the Company
      is
      required to obtain pursuant to the preceding sentence have been obtained or
      effected on or prior to the date hereof. The Company is not in violation of
      the
      listing requirements of the Pinksheets (the “Pinksheets”)
      and
      does not reasonably anticipate that the Common Stock will be delisted by the
      Pinksheets in the foreseeable future. The Company and its Subsidiaries are
      unaware of any facts or circumstances which might give rise to any of the
      foregoing. 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    g. SEC
      Documents; Financial Statements.
      Except
      as disclosed in Schedule
      3(g),
      the
      Company has timely filed all reports, schedules, forms, statements and other
      documents required to be filed by it with the SEC pursuant to the reporting
      requirements of the Securities Exchange Act of 1934, as amended (the
“1934
      Act”)
      (all
      of the foregoing filed prior to the date hereof and all exhibits included
      therein and financial statements and schedules thereto and documents (other
      than
      exhibits to such documents) incorporated by reference therein, being hereinafter
      referred to herein as the “SEC
      Documents”).
      The
      Company has delivered to each Buyer true and complete copies of the SEC
      Documents, except for such exhibits and incorporated documents. Except as
      disclosed on Schedule 3(g), as of their respective dates, the SEC Documents
      complied in all material respects with the requirements of the 1934 Act and
      the
      rules and regulations of the SEC promulgated thereunder applicable to the SEC
      Documents, and none of the SEC Documents, at the time they were filed with
      the
      SEC, contained any untrue statement of a material fact or omitted to state
      a
      material fact required to be stated therein or necessary in order to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading. Except as disclosed on Schedule 3(g), none of the statements
      made in any such SEC Documents is, or has been, required to be amended or
      updated under applicable law (except for such statements as have been amended
      or
      updated in subsequent filings prior the date hereof). As of their respective
      dates, the financial statements of the Company included in the SEC Documents
      complied as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC with respect
      thereto. Such financial statements have been prepared in accordance with United
      States generally accepted accounting principles, consistently applied, during
      the periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may not include footnotes or may be condensed
      or
      summary statements) and fairly present in all material respects the consolidated
      financial position of the Company and its consolidated Subsidiaries as of the
      dates thereof and the consolidated results of their operations and cash flows
      for the periods then ended (subject, in the case of unaudited statements, to
      normal year-end audit adjustments). Except as set forth in the financial
      statements of the Company included in the SEC Documents, the Company has no
      liabilities, contingent or otherwise, other than (i) liabilities incurred in
      the
      ordinary course of business subsequent to December 31, 2004 and (ii) obligations
      under contracts and commitments incurred in the ordinary course of business
      and
      not required under generally accepted accounting principles to be reflected
      in
      such financial statements, which, individually or in the aggregate, are not
      material to the financial condition or operating results of the
      Company.

     

    h. Absence
      of Certain Changes.
      Except
      as set forth on Schedule 3(h), since December 31, 2004, there has been no
      material adverse change and no material adverse development in the assets,
      liabilities, business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or any of its Subsidiaries.

     

    i. Absence
      of Litigation.
      Other
      than any proceedings that may be brought by the Securities and Exchange
      Commission to revoke the Company’s registration under Securities Exchange Act of
      1934, as amended (“12(j) proceeding), there is no action, suit, claim,
      proceeding, inquiry or investigation before or by any court, public board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the Company or any of its Subsidiaries, threatened against or
      affecting the Company or any of its Subsidiaries, or their officers or directors
      in their capacity as such, that could have a Material Adverse Effect.
Schedule
      3(i)
      contains
      a complete list and summary description of any pending or threatened proceeding
      against or affecting the Company or any of its Subsidiaries, without regard
      to
      whether it would have a Material Adverse Effect. The Company and its
      Subsidiaries are unaware of any facts or circumstances which might give rise
      to
      any of the foregoing.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    j. Patents,
      Copyrights, etc.
      The
      Company and each of its Subsidiaries owns or possesses the requisite licenses
      or
      rights to use all patents, patent applications, patent rights, inventions,
      know-how, trade secrets, trademarks, trademark applications, service marks,
      service names, trade names and copyrights (“Intellectual
      Property”)
      necessary to enable it to conduct its business as now operated (and, except
      as
      set forth in Schedule
      3(j)
      hereof,
      to the best of the Company’s knowledge, as presently contemplated to be operated
      in the future); there is no claim or action by any person pertaining to, or
      proceeding pending, or to the Company’s knowledge threatened, which challenges
      the right of the Company or of a Subsidiary with respect to any Intellectual
      Property necessary to enable it to conduct its business as now operated (and,
      except as set forth in Schedule
      3(j)
      hereof,
      to the best of the Company’s knowledge, as presently contemplated to be operated
      in the future); to the best of the Company’s knowledge, the Company’s or its
      Subsidiaries’ current and intended products, services and processes do not
      infringe on any Intellectual Property or other rights held by any person; and
      the Company is unaware of any facts or circumstances which might give rise
      to
      any of the foregoing. The Company and each of its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of their Intellectual Property.

     

    k. No
      Materially Adverse Contracts, Etc.
      Subject
      to the Share Insufficiency and
      the
      12(j) proceeding, and except as disclosed on Schedule 3(k), neither the Company
      nor any of its Subsidiaries is subject to any charter, corporate or other legal
      restriction, or any judgment, decree, order, rule or regulation which in the
      judgment of the Company’s officers has or is expected in the future to have a
      Material Adverse Effect. Except as disclosed on Schedule 3(k), neither the
      Company nor any of its Subsidiaries is a party to any contract or agreement
      which in the judgment of the Company’s officers has or is expected to have a
      Material Adverse Effect.

     

    l. Tax
      Status.
      Except
      as set forth on Schedule
      3(l),
      the
      Company and each of its Subsidiaries has made or filed all federal, state and
      foreign income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject (unless and only to the extent that
      the
      Company and each of its Subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) and
      has
      paid all taxes and other governmental assessments and charges that are material
      in amount, shown or determined to be due on such returns, reports and
      declarations, except those being contested in good faith and has set aside
      on
      its books provisions reasonably adequate for the payment of all taxes for
      periods subsequent to the periods to which such returns, reports or declarations
      apply. There are no unpaid taxes in any material amount claimed to be due by
      the
      taxing authority of any jurisdiction, and the officers of the Company know
      of no
      basis for any such claim. The Company has not executed a waiver with respect
      to
      the statute of limitations relating to the assessment or collection of any
      foreign, federal, state or local tax. Except as set forth on Schedule
      3(l),
      none of
      the Company’s tax returns is presently being audited by any taxing
      authority.

     

    m. Certain
      Transactions.
      Except
      as set forth on Schedule
      3(m)
      and
      except for arm’s length transactions pursuant to which the Company or any of its
      Subsidiaries makes payments in the ordinary course of business upon terms no
      less favorable than the Company or any of its Subsidiaries could obtain from
      third parties and other than the grant of stock options disclosed on
Schedule
      3(c),
      none of
      the officers, directors, or employees of the Company is presently a party to
      any
      transaction with the Company or any of its Subsidiaries (other than for services
      as employees, officers and directors), including any contract, agreement or
      other arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise requiring
      payments to or from any officer, director or such employee or, to the knowledge
      of the Company, any corporation, partnership, trust or other entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    n. Disclosure.
      All
      information relating to or concerning the Company or any of its Subsidiaries
      set
      forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
      hereof and otherwise in connection with the transactions contemplated hereby
      is
      true and correct in all material respects and the Company has not omitted to
      state any material fact necessary in order to make the statements made herein
      or
      therein, in light of the circumstances under which they were made, not
      misleading. Subject to the Share Insufficiency and Good Standing Failure, no
      event or circumstance has occurred or exists with respect to the Company or
      any
      of its Subsidiaries or its or their business, properties, prospects, operations
      or financial conditions, which, under applicable law, rule or regulation,
      requires public disclosure or announcement by the Company but which has not
      been
      so publicly announced or disclosed (assuming for this purpose that the Company’s
      reports filed under the 1934 Act are being incorporated into an effective
      registration statement filed by the Company under the 1933 Act).

     

    o. Acknowledgment
      Regarding Buyers’ Purchase of Securities.
      The
      Company acknowledges and agrees that the Buyers are acting solely in the
      capacity of arm’s length purchasers with respect to this Agreement and the
      transactions contemplated hereby. The Company further acknowledges that no
      Buyer
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any statement made by any Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Buyers’ purchase of the Securities. The Company further represents to
      each Buyer that the Company’s decision to enter into this Agreement has been
      based solely on the independent evaluation of the Company and its
      representatives.

     

    p. No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales in any security
      or
      solicited any offers to buy any security under circumstances that would require
      registration under the 1933 Act of the issuance of the Securities to the Buyers.
      The issuance of the Securities to the Buyers will not be integrated with any
      other issuance of the Company’s securities (past, current or future) for
      purposes of any shareholder approval provisions applicable to the Company or
      its
      securities.

     

    q. No
      Brokers.
      The
      Company has taken no action which would give rise to any claim by any person
      for
      brokerage commissions, transaction fees or similar payments relating to this
      Agreement or the transactions contemplated hereby. 

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    r. Permits;
      Compliance.
      Subject
      to the
      Good
      Standing Failure, the Company and each of its Subsidiaries is in possession
      of
      all franchises, grants, authorizations, licenses, permits, easements, variances,
      exemptions, consents, certificates, approvals and orders necessary to own,
      lease
      and operate its properties and to carry on its business as it is now being
      conducted (collectively, the “Company
      Permits”),
      and
      there is no action pending or, to the knowledge of the Company, threatened
      regarding suspension or cancellation of any of the Company Permits. Subject
      to
      the
      Good
      Standing Failure neither the Company nor any of its Subsidiaries is in conflict
      with, or in default or violation of, any of the Company Permits, except for
      any
      such conflicts, defaults or violations which, individually or in the aggregate,
      would not reasonably be expected to have a Material Adverse Effect. Since
      December 31, 2004, neither the Company nor any of its Subsidiaries has received
      any notification with respect to possible conflicts, defaults or violations
      of
      applicable laws, except for notices relating to possible conflicts, defaults
      or
      violations, which conflicts, defaults or violations would not have a Material
      Adverse Effect.

     

    s. Environmental
      Matters.

     

    (i) Except
      as
      set forth in Schedule
      3(s),
      there
      are, to the Company’s knowledge, with respect to the Company or any of its
      Subsidiaries or any predecessor of the Company, no past or present violations
      of
      Environmental Laws (as defined below), releases of any material into the
      environment, actions, activities, circumstances, conditions, events, incidents,
      or contractual obligations which may give rise to any common law environmental
      liability or any liability under the Comprehensive Environmental Response,
      Compensation and Liability Act of 1980 or similar federal, state, local or
      foreign laws and neither the Company nor any of its Subsidiaries has received
      any notice with respect to any of the foregoing, nor is any action pending
      or,
      to the Company’s knowledge, threatened in connection with any of the foregoing.
      The term “Environmental
      Laws”
means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
      substances or wastes (collectively, “Hazardous
      Materials”)
      into
      the environment, or otherwise relating to the manufacture, processing,
      distribution, use, treatment, storage, disposal, transport or handling of
      Hazardous Materials, as well as all authorizations, codes, decrees, demands
      or
      demand letters, injunctions, judgments, licenses, notices or notice letters,
      orders, permits, plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii) Other
      than those that are or were stored, used or disposed of in compliance with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company’s
      or any of its Subsidiaries’ business.

     

    (iii) Except
      as
      set forth in Schedule
      3(s),
      there
      are no underground storage tanks on or under any real property owned, leased
      or
      used by the Company or any of its Subsidiaries that are not in compliance with
      applicable law. 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    t. Title
      to Property.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in Schedule
      3(t)
      or such
      as would not have a Material Adverse Effect. Any real property and facilities
      held under lease by the Company and its Subsidiaries are held by them under
      valid, subsisting and enforceable leases with such exceptions as would not
      have
      a Material Adverse Effect.

     

    u. Insurance.
      Except
      as set forth under Schedule 3(u), the Company and each of its Subsidiaries
      are
      insured by insurers of recognized financial responsibility against such losses
      and risks and in such amounts as management of the Company believes to be
      prudent and customary in the businesses in which the Company and its
      Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
      reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business at a cost that
      would not have a Material Adverse Effect. The Company has provided to Buyer
      true
      and correct copies of all policies relating to directors’ and officers’
liability coverage, errors and omissions coverage, and commercial general
      liability coverage.

     

    v. Internal
      Accounting Controls.
      Except
      as disclosed at Schedule 3(v), the Company and each of its Subsidiaries maintain
      a system of internal accounting controls sufficient, in the judgment of the
      Company’s board of directors, to provide reasonable assurance that (i)
      transactions are executed in accordance with management’s general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

    w. Foreign
      Corrupt Practices.
      Neither
      the Company, nor any of its Subsidiaries, nor any director, officer, agent,
      employee or other person acting on behalf of the Company or any Subsidiary
      has,
      in the course of his actions for, or on behalf of, the Company, used any
      corporate funds for any unlawful contribution, gift, entertainment or other
      unlawful expenses relating to political activity; made any direct or indirect
      unlawful payment to any foreign or domestic government official or employee
      from
      corporate funds; violated or is in violation of any provision of the U.S.
      Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    x. Solvency.
      Except
      as disclosed at Schedule 3(x), the Company (after giving effect to the
      transactions contemplated by this Agreement) is solvent (i.e.,
      its
      assets have a fair market value in excess of the amount required to pay its
      probable liabilities on its existing debts as they become absolute and matured)
      and currently the Company has no information that would lead it to reasonably
      conclude that the Company would not, after giving effect to the transaction
      contemplated by this Agreement, have the ability to, nor does it intend to
      take
      any action that would impair its ability to, pay its debts from time to time
      incurred in connection therewith as such debts mature. The Company received
      a
      qualified opinion from its auditors with respect to its most recent fiscal
      year
      end and, after giving effect to the transactions contemplated by this Agreement,
      anticipates that its new auditors will continue to provide a going concern
      qualification in respect of its current fiscal year.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    y. No
      Investment Company.
      The
      Company is not, and upon the issuance and sale of the Securities as contemplated
      by this Agreement will not be an “investment company” required to be registered
      under the Investment Company Act of 1940 (an “Investment
      Company”).
      The
      Company is not controlled by an Investment Company.

     

    z. Breach
      of Representations and Warranties by the Company.
      If the
      Company breaches any of the representations or warranties set forth in this
      Section 3, and in addition to any other remedies available to the Buyers
      pursuant to this Agreement, the Company shall pay to the Buyer the Standard
      Liquidated Damages Amount in cash or in shares of Common Stock at the option
      of
      the Buyer, until such breach is cured. If the Buyers elect to be paid the
      Standard Liquidated Damages Amounts in shares of Common Stock, such shares
      shall
      be issued at the Conversion Price at the time of payment.

     

    4. COVENANTS.

     

    a. Best
      Efforts.
      The
      parties shall use their best efforts to satisfy timely each of the conditions
      described in Section 6 and 7 of this Agreement. 

     

    b. Form
      D; Blue Sky Laws.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary to qualify the Securities
      for sale to the Buyers at the applicable closing pursuant to this Agreement
      under applicable securities or “blue sky” laws of the states of the United
      States (or to obtain an exemption from such qualification), and shall provide
      evidence of any such action so taken to each Buyer on or prior to the Closing
      Date.

     

    c. Press
      Release.
      The
      Company’s Common Stock is registered under Section 12(g) of the 1934 Act. The
      Company shall issue a press release describing the materials terms of the
      transaction contemplated hereby as soon as practicable following the Closing
      Date but in no event more than two (2) business days of the Closing Date, which
      press release shall be subject to prior review by the Buyers. The Company agrees
      that such press release shall not disclose the name of the Buyers unless
      expressly consented to in writing by the Buyers or unless required by applicable
      law or regulation, and then only to the extent of such requirement.

     

    d. Use
      of Proceeds.
      The
      Company shall use the proceeds from the sale of the Debentures and the Warrants
      in the manner set forth in Schedule
      4(d)
      attached
      hereto and made a part hereof and shall not, directly or indirectly, use such
      proceeds for any loan to or investment in any other corporation, partnership,
      enterprise or other person (except in connection with its currently existing
      direct or indirect Subsidiaries).

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    e. Future
      Offerings.
      Subject
      to the exceptions described below, the Company will not, without the prior
      written consent of a majority-in-interest of the Buyers, not to be unreasonably
      withheld, negotiate or contract with any party to obtain additional equity
      financing (including debt financing with an equity component) that involves
      (A)
      the issuance of Common Stock at a discount to the market price of the Common
      Stock on the date of issuance (taking into account the value of any warrants
      or
      options to acquire Common Stock issued in connection therewith) or (B) the
      issuance of convertible securities that are convertible into an indeterminate
      number of shares of Common Stock or (C) the issuance of warrants during the
      period (the “Lock-up
      Period”)
      beginning on the Closing Date and ending on the later of (i) two hundred seventy
      (270) days from the Closing Date and (ii) one hundred eighty (180) days from
      the
      date the Registration Statement (as defined in the Registration Rights
      Agreement) is declared effective (plus any days in which sales cannot be made
      thereunder). In addition, subject to the exceptions described below, the Company
      will not conduct any equity financing (including debt with an equity component)
      (“Future
      Offerings”)
      during
      the period beginning on the Closing Date and ending two (2) years after the
      end
      of the Lock-up Period unless it shall have first delivered to each Buyer, at
      least twenty (20) business days prior to the closing of such Future Offering,
      written notice describing the proposed Future Offering, including the terms
      and
      conditions thereof and proposed definitive documentation to be entered into
      in
      connection therewith, and providing each Buyer an option during the fifteen
      (15)
      day period following delivery of such notice to purchase its pro rata share
      (based on the ratio that the aggregate principal amount of Debentures purchased
      by it hereunder bears to the aggregate principal amount of Debentures purchased
      hereunder) of the securities being offered in the Future Offering on the same
      terms as contemplated by such Future Offering (the limitations referred to
      in
      this sentence and the preceding sentence are collectively referred to as the
      “Capital
      Raising Limitations”). 
      In the
      event the terms and conditions of a proposed Future Offering are amended in
      any
      respect after delivery of the notice to the Buyers concerning the proposed
      Future Offering, the Company shall deliver a new notice to each Buyer describing
      the amended terms and conditions of the proposed Future Offering and each Buyer
      thereafter shall have an option during the fifteen (15) day period following
      delivery of such new notice to purchase its pro rata share of the securities
      being offered on the same terms as contemplated by such proposed Future
      Offering, as amended. The foregoing sentence shall apply to successive
      amendments to the terms and conditions of any proposed Future Offering. The
      Capital Raising Limitations shall not apply to any transaction involving (i)
      issuances of securities in a firm commitment underwritten public offering
      (excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or
      (ii) issuances of securities as consideration for a merger, consolidation or
      purchase of assets, or in connection with any strategic partnership or joint
      venture (the primary purpose of which is not to raise equity capital), or in
      connection with the disposition or acquisition of a business, product or license
      by the Company. The Capital Raising Limitations also shall not apply to the
      issuance of securities upon exercise or conversion of the Company’s options,
      warrants or other convertible securities outstanding as of the date hereof
      or to
      the grant of additional options or warrants, or the issuance of additional
      securities, under any Company stock option or restricted stock plan approved
      by
      the shareholders of the Company. 

     

    f. Expenses.
      At the
      Closing, the Company shall reimburse Buyers for expenses incurred by them in
      connection with the negotiation, preparation, execution, delivery and
      performance of this Agreement and the other agreements to be executed in
      connection herewith (“Documents”),
      including, without limitation, attorneys’ and consultants’ fees and expenses,
      transfer agent fees, fees for stock quotation services, fees relating to any
      amendments or modifications of the Documents or any consents or waivers of
      provisions in the Documents, fees for the preparation of opinions of counsel,
      escrow fees, and costs of restructuring the transactions contemplated by the
      Documents. When possible, the Company must pay these fees directly, otherwise
      the Company must make immediate payment for reimbursement to the Buyers for
      all
      fees and expenses immediately upon written notice by the Buyer or the submission
      of an invoice by the Buyer If the Company fails to reimburse the Buyer in full
      within three (3) business days of the written notice or submission of invoice
      by
      the Buyer, the Company shall pay interest on the total amount of fees to be
      reimbursed at a rate of 15% per annum.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    g. Financial
      Information.
      The
      Company agrees to send the following reports to each Buyer until such Buyer
      transfers, assigns, or sells all of the Securities: (i) within ten (10) days
      after the filing with the SEC, a copy of its Annual Report on Form 10-K, its
      Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within
      one (1) day after release, copies of all press releases issued by the Company
      or
      any of its Subsidiaries; and (iii) contemporaneously with the making available
      or giving to the shareholders of the Company, copies of any notices or other
      information the Company makes available or gives to such
      shareholders.

     

    h. Listing.
      The
      Company will use its best efforts to promptly secure the listing of the
      Conversion Shares and Warrant Shares upon each national securities exchange
      or
      automated quotation system, if any, upon which shares of Common Stock are then
      listed (subject to official notice of issuance) and, so long as any Buyer owns
      any of the Securities, shall maintain, so long as any other shares of Common
      Stock shall be so listed, such listing of all Conversion Shares and Warrant
      Shares from time to time issuable upon conversion of the Debentures or exercise
      of the Warrants. The Company will use its best efforts to obtain and, so long
      as
      any Buyer owns any of the Securities, maintain the listing and trading of its
      Common Stock on the Over-the-Counter Bulletin Board or any equivalent
      replacement exchange, the Nasdaq National Market (“Nasdaq”),
      the
      Nasdaq SmallCap Market (“Nasdaq
      SmallCap”),
      the
      New York Stock Exchange (“NYSE”),
      the
      American Stock Exchange (“AMEX”)
      and the
      Pinksheet and will comply in all respects with the Company’s reporting, filing
      and other obligations under the bylaws or rules of FINRA and such exchanges,
      as
      applicable. The Company shall promptly provide to each Buyer copies of any
      notices it receives from the Pinksheets and any other exchanges or quotation
      systems on which the Common Stock is then listed regarding the continued
      eligibility of the Common Stock for listing on such exchanges and quotation
      systems.

     

    i. Corporate
      Existence.
      So long
      as a Buyer beneficially owns any Debentures or Warrants, the Company shall
      maintain its corporate existence and shall not sell all or substantially all
      of
      the Company’s assets, except in the event of a merger or consolidation or sale
      of all or substantially all of the Company’s assets, where the surviving or
      successor entity in such transaction (i) assumes the Company’s obligations
      hereunder and under the agreements and instruments entered into in connection
      herewith and (ii) is a publicly traded corporation whose Common Stock is listed
      for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE, AMEX or the
      Pinksheets.

     

    j. No
      Integration.
      The
      Company shall not make any offers or sales of any security (other than the
      Securities) under circumstances that would require registration of the
      Securities being offered or sold hereunder under the 1933 Act or cause the
      offering of the Securities to be integrated with any other offering of
      securities by the Company for the purpose of any stockholder approval provision
      applicable to the Company or its securities.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    k. Breach
      of Covenants.
      If the
      Company breaches any of the covenants set forth in this Section 4, and in
      addition to any other remedies available to the Buyers pursuant to this
      Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
      Amount, in cash or in shares of Common Stock at the option of the Buyer, until
      such breach is cured. If the Buyers elect to be paid the Standard Liquidated
      Damages Amount in shares, such shares shall be issued at the Conversion Price
      at
      the time of payment.

     

    5. TRANSFER
      AGENT INSTRUCTIONS.
      The
      Company shall issue irrevocable instructions to its transfer agent to issue
      certificates, registered in the name of each Buyer or its nominee, for the
      Conversion Shares and Warrant Shares in such amounts as specified from time
      to
      time by each Buyer to the Company upon conversion of the Debentures or exercise
      of the Warrants in accordance with the terms thereof (the “Irrevocable
      Transfer Agent Instructions”).
      Prior
      to registration of the Conversion Shares and Warrant Shares under the 1933
      Act
      or the date on which the Conversion Shares and Warrant Shares may be sold
      pursuant to Rule 144 without any restriction as to the number of Securities
      as
      of a particular date that can then be immediately sold, all such certificates
      shall bear the restrictive legend specified in Section 2(g) of this Agreement.
      The Company warrants that no instruction other than the Irrevocable Transfer
      Agent Instructions referred to in this Section 5, and stop transfer instructions
      to give effect to Section 2(f) hereof (in the case of the Conversion Shares
      and
      Warrant Shares, prior to registration of the Conversion Shares and Warrant
      Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
      Shares may be sold pursuant to Rule 144 without any restriction as to the number
      of Securities as of a particular date that can then be immediately sold), will
      be given by the Company to its transfer agent and that the Securities shall
      otherwise be freely transferable on the books and records of the Company as
      and
      to the extent provided in this Agreement and the Registration Rights Agreement.
      Nothing in this Section shall affect in any way the Buyer’s obligations and
      agreement set forth in Section 2(g) hereof to comply with all applicable
      prospectus delivery requirements, if any, upon re-sale of the Securities. If
      a
      Buyer provides the Company with (i) an opinion of counsel in form, substance
      and
      scope customary for opinions in comparable transactions, to the effect that
      a
      public sale or transfer of such Securities may be made without registration
      under the 1933 Act and such sale or transfer is effected or (ii) the Buyer
      provides reasonable assurances that the Securities can be sold pursuant to
      Rule
      144, the Company shall permit the transfer, and, in the case of the Conversion
      Shares and Warrant Shares, promptly instruct its transfer agent to issue one
      or
      more certificates, free from restrictive legend, in such name and in such
      denominations as specified by such Buyer. The Company acknowledges that a breach
      by it of its obligations hereunder will cause irreparable harm to the Buyers,
      by
      vitiating the intent and purpose of the transactions contemplated hereby.
      Accordingly, the Company acknowledges that the remedy at law for a breach of
      its
      obligations under this Section 5 may be inadequate and agrees, in the event
      of a
      breach or threatened breach by the Company of the provisions of this Section,
      that the Buyers shall be entitled, in addition to all other available remedies,
      to an injunction restraining any breach and requiring immediate transfer,
      without the necessity of showing economic loss and without any bond or other
      security being required.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    6. CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.
      The
      obligation of the Company hereunder to issue and sell the Debentures and
      Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
      the Closing Date of each of the following conditions thereto, provided that
      these conditions are for the Company’s sole benefit and may be waived by the
      Company at any time in its sole discretion:

     

    a. The
      applicable Buyer shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Company.

     

    b. The
      applicable Buyer shall have delivered the Purchase Price in accordance with
      Section 1(b) above.

     

    c. The
      representations and warranties of the applicable Buyer shall be true and correct
      in all material respects as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the applicable Buyer shall have performed, satisfied
      and complied in all material respects with the covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by the applicable Buyer at or prior to the Closing Date. 

     

    d. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    7. CONDITIONS
      TO EACH BUYER’S OBLIGATION TO PURCHASE.
      The
      obligation of each Buyer hereunder to purchase the Debentures and Warrants
      at
      the Closing is subject to the satisfaction, at or before the Closing Date of
      each of the following conditions, provided that these conditions are for such
      Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
      discretion:

     

    a. The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    b. The
      Company shall have delivered to such Buyer duly executed Debentures (in such
      denominations as the Buyer shall request) and Warrants in accordance with
      Section 1(b) above.

     

    c. The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to a
      majority-in-interest of the Buyers, shall have been delivered to and
      acknowledged in writing by the Company’s Transfer Agent.

     

    d. The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date. The Buyer shall have received a certificate or
      certificates, executed by the chief executive officer of the Company, dated
      as
      of the Closing Date, to the foregoing effect and as to such other matters as
      may
      be reasonably requested by such Buyer including, but not limited to certificates
      with respect to the Company’s Articles of Incorporation, By-laws and Board of
      Directors’ resolutions relating to the transactions contemplated
      hereby.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    e. No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    f. No
      event
      shall have occurred which could reasonably be expected to have a Material
      Adverse Effect on the Company.

     

    g. The
      Conversion Shares and Warrant Shares shall have been authorized for quotation
      on
      the Pinksheets and trading in the Common Stock on the Pinksheets shall not
      have
      been suspended by the SEC or the Pinksheets.

     

    h. The
      Buyer
      shall have received an opinion of the Company’s counsel, dated as of the Closing
      Date, in form, scope and substance reasonably satisfactory to the Buyer and
      in
      substantially the same form as Exhibit
      “D”
      attached
      hereto.

     

    i. The
      Buyer
      shall have received an officer’s certificate described in Section 3(c) above,
      dated as of the Closing Date.

     

    8. GOVERNING
      LAW; MISCELLANEOUS.
      

     

    a. Governing
      Law.
      THIS
      AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
      LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
      ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
      LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
      UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO
      ANY
      DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
      HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
      IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
      SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
      UPON
      A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
      SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
      SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
      BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
      SUIT
      OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
      BY
      SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
      PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR
      ALL
      FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
      IN CONNECTION WITH SUCH DISPUTE.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    b. Counterparts;
      Signatures by Facsimile.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original but all of which shall constitute one and the same agreement
      and shall become effective when counterparts have been signed by each party
      and
      delivered to the other party. This Agreement, once executed by a party, may
      be
      delivered to the other party hereto by facsimile transmission of a copy of
      this
      Agreement bearing the signature of the party so delivering this
      Agreement.

     

    c. Headings.
      The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement. 

     

    d. Severability.
      In the
      event that any provision of this Agreement is invalid or unenforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any provision hereof
      which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision hereof.

     

    e. Entire
      Agreement; Amendments.
      This
      Agreement and the instruments referenced herein contain the entire understanding
      of the parties with respect to the matters covered herein and therein and,
      except as specifically set forth herein or therein, neither the Company nor
      the
      Buyer makes any representation, warranty, covenant or undertaking with respect
      to such matters. No provision of this Agreement may be waived or amended other
      than by an instrument in writing signed by the party to be charged with
      enforcement. 

     

    f. Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party. The addresses for such
      communications shall be:

     

    If
      to the
      Company:

    

    Globalnet
      Corporation

    2361
      Campus Drive, Suite 101

    Irvine,
      CA 92612

    Telephone:  (949)
      833-9001

    Facsimile:    (949)
      833-8211

    Attention:  President
      and Chief Executive Officer

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    With
      a
      copy to:

    

    Sichenzia
      Ross Friedman Ference LLP

    62
      Broadway

    New
      York,
      NY 10006

    Attention:   Gregory
      Sichenzia, Esq.

    Telephone:  (212)
      930-9700

    Facsimile:   (212)
      930-9725

     

    If
      to a
      Buyer: To the address set forth immediately below such Buyer’s name on the
      signature pages hereto.

     

    With
      a
      copy to:

    

    Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

    51st
      Floor

    Philadelphia,
      Pennsylvania 19103

    Attention:
      Gerald J. Guarcini, Esq.

    Telephone:  (215)
      864-8625

    Facsimile:   (215)
      864-8999

    Email:
      guarcini@ballardspahr.com

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    g. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and assigns. Neither the Company nor any Buyer shall assign
      this Agreement or any rights or obligations hereunder without the prior written
      consent of the other. Notwithstanding the foregoing, subject to Section 2(f),
      any Buyer may assign its rights hereunder to any person that purchases
      Securities in a private transaction from a Buyer or to any of its “affiliates,”
as that term is defined under the 1934 Act, without the consent of the
      Company.

     

    h. Third
      Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    i. Survival.
      The
      representations and warranties of the Company and the agreements and covenants
      set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
      notwithstanding any due diligence investigation conducted by or on behalf of
      the
      Buyers. The Company agrees to indemnify and hold harmless each of the Buyers
      and
      all their officers, directors, employees and agents for loss or damage arising
      as a result of or related to any breach or alleged breach by the Company of
      any
      of its representations, warranties and covenants set forth in Sections 3 and
      4
      hereof or any of its covenants and obligations under this Agreement or the
      Registration Rights Agreement, including advancement of expenses as they are
      incurred.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    j. Publicity.
      The
      Company and each of the Buyers shall have the right to review a reasonable
      period of time before issuance of any press releases, SEC, Pinksheet or FINRA
      filings, or any other public statements with respect to the transactions
      contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of each of the Buyers,
      to make any press release or SEC, Pinksheet (or other applicable trading market)
      or FINRA filings with respect to such transactions as is required by applicable
      law and regulations (although each of the Buyers shall be consulted by the
      Company in connection with any such press release prior to its release and
      shall
      be provided with a copy thereof and be given an opportunity to comment
      thereon).

     

    k. Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    l. No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    m. Remedies.
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Buyers by vitiating the intent and purpose of the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Agreement will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Agreement, that the Buyers shall be entitled,
      in addition to all other available remedies at law or in equity, and in addition
      to the penalties assessable herein, to an injunction or injunctions restraining,
      preventing or curing any breach of this Agreement and to enforce specifically
      the terms and provisions hereof, without the necessity of showing economic
      loss
      and without any bond or other security being required.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      the
      undersigned Buyers and the Company have caused this Agreement to be duly
      executed as of the date first above written.

     

    GLOBALNET
      CORPORATION

     

    
      ____________________________________

    

    
      Mark
        Schaftlein

      Chief
        Executive Officer

    

     

    NEW
      MILLENNIUM CAPITAL PARTNERS II, LLC 

    By:
      First
      Street Manager II, LLP

     

    ____________________________________

    Corey
      S.
      Ribotsky

    Manager

     

    RESIDENCE:  New
      York

    

    
      	
              ADDRESS:

            	
              1044
                Northern Boulevard

            
	 	
              Suite
                302

            
	 	
              Roslyn,
                New York 11576

            
	 	
              Facsimile:      (516)
                739-7115

            
	 	
              Telephone:  
                  (516)
                739-7110

            

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

     

    
      
        	
                Aggregate
                  Principal Amount of Notes:

              	 	
                $

              	
                85,000

              	 
	
                Number
                  of Warrants: 

              	 	 	
                10,000,000

              	 
	
                Aggregate
                  Purchase Price: 

              	 	
                $

              	
                85,000

              	 

      
 

    
      
         

      

      
        22

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